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IT sector foresees little impact of U.S. shutdown

M.P. Praveen
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The IT industry in India mostly deals with the private sector in the U.S., and so, hopesto ride out the crisis caused by the shutdown of Federal government withoutmuch of an impact on business.— File photo
The IT industry in India mostly deals with the private sector in the U.S., and so, hopesto ride out the crisis caused by the shutdown of Federal government withoutmuch of an impact on business.— File photo

The IT industry in the State is keeping its fingers crossed as the U.S. Federal government shutdown approached the one-week mark, while hoping that there will not be any direct and long-term impact on its fortunes.

The industry seems to be falling back on the NASSCOM (National Association of Software and Services Companies) assessment of the situation.

The $110-billion IT services and BPO sector will not be immediately impacted by the U.S. government shutdown, as the majority of the business that the industry does is with the private sector, NASSCOM had observed at the start of the shutdown.

Hrishikesh Nair, chief executive officer, Infopark Kochi, didn’t see any major impact on the IT industry in the State from the first Federal government shutdown in America in the past 17 years. “The number of companies directly engaged with the Federal government is very minimal in the State and across the country. Therefore, the impact is also likely to be minimal,” Mr. Nair told The Hindu .

Gigo Joseph, CEO, SmartCity Kochi, echoed a similar sentiment. “Apart from some possible visa restrictions that may affect the movement of staff, there is unlikely to be any serious impact.

Of course, the industry will begin to feel the heat if the shutdown continues for a prolonged period,” he said. G. Vijayaraghavan, member of the State Planning Board and an IT expert, also expected little or no impact on the State IT sector.

“There is the possibility of the dollar weakening and it is good for the country as a whole and it goes to the IT industry as well,” he said.

Mr. Vijayaraghavan dispelled the notion that a surging dollar was good for the IT industry, arguing that any such rise was evened out by corresponding rise in costs. Sanjay Vijayakumar, chairman of the board of governors of Startup Village, felt that there is no need to press the panic button as the impact is at worst going to be short term.

“The drop in IT spending will have a short term effect on the prospects of the industry here. However, it is expected to bounce back within six to nine months,” he said.

Asked whether the shutdown will further fuel the anti-outsourcing sentiments in the U.S., eventually leading to job cuts here, Mr. Vijayakumar said such a threat was there even before.

“That is why we have to move up the value chain into the product sector,” he said.

Joseph C. Mathew, IT adviser to the Chief Minister during the previous LDF government, was of the opinion that the NASSCOM prediction on the U.S. Federal shutdown should be taken with a pinch of salt.

“There may not be an immediate direct impact on the IT industry here. But the fact is that most of the industry’s clients are companies who either deal with the U.S. government directly or respond to its various initiatives. So, the downturn in economic activities will definitely make them sceptical, prompting them to soft pedal on all future development initiatives,” he said. The industry will be in deep trouble if the shutdown prolongs. Besides, the weakening of the dollar suggests that the financial markets in the U.S. have taken it very seriously.

NASSCOM’s prediction, therefore, needs to be seen as an effort to assuage the concerns of share markets here, Mr. Mathew said.


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