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US downturn slows outsourcing stars

India has built an innovative, fast-growing export industry in IT services, software and equipment thanks to a highly skilled, low-cost workforce. However, the US slowdown has hit share prices of Indian IT companies hard and executives fear it could damage their revenues. Others are more sanguine, pointing out that a newly chastened, cost-conscious IT industry in the US will find India’s value-for-money outsourcing proposition even more attractive.


The internationally acclaimed management expert Sumantra Ghoshal told a rapt audience in a posh Mumbai hotel in early February that India had come a long way. In the decade after the dismantling of the licence raj - the maze of controls and licences that governed industry - a transformation had taken place. A straggly bunch of inward-looking, family-oriented Indian businessmen, who thrived on favour and protection, had given way to new capitalists from the information technology sector, offering globally-competitive services. These new entrepreneurs, Ghoshal said, had successfully marketed "Indian human capital as a key strategic resource, not just a factor of production".

Yet, Ghoshal's words - heartening as they were - did not quite dispel the sober and introspective mood at the annual conference of the National Association of Software Service Companies (Nasscom), an industry lobby group. Last year, Indian IT stocks were riding high.

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