Global Economic Crisis Impact on It Industry

Topics: Economics, Subprime mortgage crisis, Financial crisis Pages: 8 (2618 words) Published: January 28, 2012
“Global Economic crisis: Impact on IT Industry in India.” Abstract:
Globalization has ensured that none of the economies of the world stays insulated from the global economic crisis. But there was a general belief that the emerging economies could remain largely apart from the global economic meltdown and provide an alternative engine of growth to the world economy. The effect of the crisis on the Indian economy was not significant in the beginning. The argument soon proved unfounded as the global crisis intensified and spread to the emerging economies. This had a knock-on effect initially on the IT sector all over the world and Indian IT industry could not insulate itself from the adverse developments in the international financial markets. This paper interrogates the implications of the global economic meltdown on the Indian Economy within the framework of a consolidated IT Industry. It also examines measures of global economic crisis which leads to crisis in IT industry. It also provides an overview for tackling the Problems faced by IT Sector. Key words: Economic development, Economic meltdown, global economic crisis and globalization. Introduction:

The late-2000s financial crisis (often called the global recession, global financial crisis or the credit crunch) is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. For the developing world, the rise in food prices as well as the knock-on effects from the financial instability and uncertainty in industrialized nations are having a compounding effect. High fuel costs, soaring commodity prices together with fears of global recession are worrying many developing country analysts. Almost all the industries of the world economy faced the challenges of global economic crisis but the most hampered was the IT industry, because of the recession as a result of financial crisis. Indian IT sector’s derives approximately 61% revenues from the US based clients. The revenue contribution from US clients to the top five Indian IT companies (who account for 46% of the IT industry’s revenues) is approximately 58%. Hence, the impact of the slowdown in the US is likely to have a deep impact on the prospects of the Indian IT sector. Moreover, about 41% of the IT industry revenues in India are estimated to be from financial services. Since this sector has been affected most severely in the current climate, the impact on Indian companies catering to this sector has been (and will continue to be) more acute. The margins are prone to be challenged on account of the slowing growth in the US and European Banking and Financial Services Industry (BFSI) sectors. Objectives :

1) To study and understand the origin of the global economic crisis. 2) To find out the measures of global economic crisis which lead to crisis in It industry. 3) To study the effect of global economic crisis in It industry in India. Significance:

This research will help to understand and analyse the causes of global economic crisis and its effect on the It Industry. It will also help to introspect the effect of economic crisis on world economy and various sectors. Limitation:

As the research is based empirical study the findings...
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