US crisis not to impact Indian IT: NASSCOM

NEW DELHI, INDIA: Responding to the recent development in the US economy, NASSCOM, the voice of Indian IT and BPO industries, said the economic crisis in the US, unfolding over the last few days, does not have any major bearing on the country’s private sector.

Although the global economic environment is a cause for concern, it is not likely to impact the Indian IT industry, in the near-term future, NASSCOM said in a statement.

“In recent developments, there has been a downgrade of Standard and Poor’s credit rating of the United States of America. This has led to a number of projections from analysts and economists indicating the possibility of a double dip recession in the US economy,” it said.

NASSCOM said that the industry is closely intertwined with the global economy, and has a burgeoning domestic market which is equipped to sustain growth.

“Also, the US is, and will, continue to be one of the largest markets for us, and in case of an economic slump, we see the Indian IT industry strengthening its partnership with the US customers to build-in greater business efficiencies,” it added.

NASSCOM also said it will continue to monitor the developments in the US, and hopes that under President Obama’s leadership the US economy will bounce back.

“We are also counselling the Indian IT sector to maintain a cautious outlook going forward,” said NASSCOM.

FICCI's views

Meanwhile, the Federation of Indian Chambers of Commerce and Industry (FICCI) said that though India will be impacted in the short term because of the US sovereign debt crisis, it will also benefit from the economic turmoil.

“One positive fallout of the rating downgrade, we feel, could be the Indian market perception that a possible decline in crude prices may signal a pause in RBI rate hikes, buoying investor sentiments,” the industry body said in a statement .

“Additionally, the spreads between a US sovereign and Indian sovereign paper of comparable duration may decline, thus acting as an enabler to foreign institutional investors inflows into the country. This may have a sobering impact on the current account deficit, even though this may not be exactly desirable,” it added.

RBI tries to lift investor sentiments

Even as the uncertainty over the global economy badly affected the stock markets across the world, including India, the policy makers in the country sought to lift the investor sentiments with assertions that the domestic fundamentals remained strong and resilient enough to ensure robust growth.

“It may be noted that in the worst phase of the recent global financial crisis, the economy grew by 6.8 per cent, suggesting high resilience emerging from domestic factors,” the Reserve Bank of India (RBI) said in a statement.

"While downside risks to growth may have increased in the wake of global developments, they are likely to have limited impact," the apex bank said, cautioning: "As Friday's market behaviour demonstrated, India is not insulated from such developments."

The statement came almost in tandem with another by Finance Minister Pranab Mukherjee, more or less on similar lines, who even said India may benefit on account of the US crises with greater inflows from foreign institutional investors.

"The recent developments in the US and the Eurozone have injected certain uncertainty in global markets. These developments could have some impact on India," he said , adding: "We are in a better position than many other nations to manage the challenge."

He also promised action to tide over the crises such as supporting domestic consumption to drive growth. "The government will also fast-track the implementation of pending reforms and keep a close eye on international developments."

(With inputs from IANS)