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Indian IT Will Be Driven By Improving Western Economies

This year, the information technology will be headed towards a positive direction as industry heavyweights announced their fourth quarter and full year earnings. Some industries that announced this were TCS, Wipro, HCL Technologies, and Infosys. Net profits ranged from 59% for HCL Tech to 25% for Infosys.

TCS’s move to merge with Mitsubishi Corp’s IT arm with its Japanese unit is one such example. The impact of this goes beyond the increase of Mumbai-based IT major’s revenues. Head of Private Client Group Research, Kotak Securities Dipen Shah said, “The prospects though, are good and improving. The revival in the US, UK and European economies is promising.” TCS’s discretionary spend towards digital presents a three to five billion dollar opportunity in the distant future. Mr. Shah added, “Globally, consumer-oriented companies are being forced to accept going digital with several of them having to reconfigure their entire organization. This could be the next big wave and demand is picking up fast.” Due to low expenditure and poor demand, the last few years were challenging.

The global annual revenue of Accenture stood at twenty-eight billion dollars in 2012. This is more than twice compared to what TCS generated. Accenture is the world’s second biggest technology and consulting firm by sales. That same year, IBS generated around sixty billion dollars from global technology and business services.

According to Moody’s Investors Service, the country’s banking system is well-positioned to cope with the financial impact of the reduction in monetary stimulus. The Moody’s report painted a good picture of Asian banks, and they will benefit from an economic environment that is supportive, and this will be continuous. However, the report warned that negative financial market adjustment will lead to mark-to-market losses on their bond investments. Also, if their domestic currencies fall substantially, banks will see higher stressed loans on their corporate books, retail books, and foreign currency loans. Due to tapering, it was also stated that interest rates are likely rising in the US and the rest of the Western economies and capital flows. Because most banks display low levels of foreign borrowings, funding will not be a key risk.

Back to the relationship of all this to India.  Indian IT firms are now making concerted efforts to move up the value chain in the high-margin markets, and this will benefit economies all around the world. Daljit Singh Kohli, Head-Research of IndiaNivesh Securities, said, “Indian business will continue to hinge on the poll prospects, as government spending has been slacking, but a clear mandate will shore up IT spend.”

[Image Attribute: seeveeaar via Compfight cc]
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