A double dip recession in the US is likely to have major ramifications for the Indian IT and textile industries, as US is one of their biggest export markets.
Around 50% revenues of major IT firms in the country come from the US, while it is the single-largest export market for textile and garment firms accounting for a third of every garment exported from India.
“This is a very crucial time for the industry as orders for the spring 2012 season are being booked,” said Sudhir Dhingra, chairman and managing director, Orient Craft, one of India’s largest apparel exports firm.
Dhingra added that a day’s event does not have an immediate impact but there would be concerns if it persists. “…the buying sentiment gets affected as every buyer starts adjusting his purchases and order size get reduced,” he said.
Almost 65% of what Dhingra’s company produces is exported to the US while 30% goes to Europe and UK.
In the first five months this year, apparel exports to the US have increased by almost 20% to $1548.3 million over the same period last year. Overall imports into US had also grown by 19.5% indicating that a revival in demand was taking place.
However, the $76 billion Indian IT industry that has diversified its revenue base across the world is not overly concerned at least for the short term. If the current crisis persists for a long time, then it could spell trouble for the likes of Infosys, Wipro and TCS.
“It is too early to say. There are fears of another recession in the US and a debt crisis in Europe. We were able to react very quickly in the past (2008) when the recession happened. These responses are still fresh in our memory and I believe that the industry will be able to withstand another downturn,” S “Kris” Gopalakrishnan, CEO and managing director of Infosys told Hindustan Times.
Vineet Nayar, vice-chairman and CEO of HCL Technologies had earlier said that the company sees increased opportunity in the churn of existing IT deals. “New IT deals may not increase because of the adverse macro-economic factors. However, the deals of global IT majors that comes up for renegotiation will be available for us,” Nayar had earlier said.