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India’s IT Industry Faces the Prospect of Losing Billions Due to the Pandemic

India’s IT services and software development industry might lose as much as US$3 billion every month throughout the current financial year because of the global economic downturn caused by the COVID-19 pandemic, according to the country’s ratings agency Care Ratings.

The United States and Europe are the main export markets for India’s IT services companies. The United States alone accounts for more than 50% of their revenue, with Europe contributing between 20 and 30%.

With the global economy in doldrums because of the lengthy lockdowns and other social distancing measures, services buyers are likely to cut back on their IT budgets, says the agency.

Moreover, the first half of a year is very important for IT companies because most of the new contracts are signed during this period.

Some clients may even cancel the contracts altogether, analysts say, adding that technology spending is often considered a “discretionary” expenditure. In addition, IT providers may see a delay in payments, as many of their clients are yet to resume operations.

Adding salt to their wound are factors such as President Donald Trump’s protectionist measures and increased restrictions on H1B visas. High visa costs have already turned out to be a drag on the revenue of service providers.

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India’s software services export reached US$77 billion in fiscal 2019, according to the data available provided by the country’s Central Bank. Following the outbreak of the pandemic, analysts have cut the annual growth forecast for the industry from 7.7% to between 3% and 5% in 2020.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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