Union Finance Minister Pranab Mukherjee on Thursday said the information and technology (IT) industry might be affected due to the current economic crisis in the U.S., but cautioned that there was no need to press the panic button yet.
“It is too premature to say what the final shape of the downgrading of the U.S. economy would be … there is no doubt that our IT industry may be affected,” Mr. Mukherjee said replying to a debate on the Appropriation Bill that was passed by the Rajya Sabha. Notably, Indian IT sector earns $60 billion from exports of software and services, of which over 60 per cent comes from the U.S. market.
The Finance Minister also noted that the fiscal crisis in the U.S. and Europe could have some impact on exports, though it was yet to find out how much the Indian export industry has benefited from exporting to new locations in the past two years.
“I do not know to what extent we have been able to diversify, but till two years ago, nearly 60 per cent of our export destinations were Japan, the E.U. and United States; all three entities taken together, constituted more than 60 per cent. The macro details, as to what extent we have been able to diversify are not available right now, but it may affect them,” he said. The Finance Minister also assured MPs that he could make a statement on the issue in the current session of Parliament.
Pointing out that domestic demand was the main strength of the Indian economy, Mr. Mukherjee said during the global slowdown in 2008, India still managed 6.8 per cent growth despite negative growth in exports for 11 consecutive months. “But still we have the growth because we generated domestic demand-driven growth scenario and that is one of the strengths of the Indian economy, which other advanced economies do not have.”