WHY IT MAJORS FRET OVER FY24

AS US RECESSION LOOMS LARGE, INDIAN IT SERVICES COMPANIES ARE BRACING FOR A HARD LANDING

- RUKMINI RAO

IN HIS LATEST letter to shareholders, Jamie Dimon, chairman and CEO, JPMorgan Chase & Co., one of the world’s biggest financial companies, warned of ‘storm clouds ahead.’ The reference was to rising macroeconomic worries in U.S. and Europe following the collapse of big financial institutions such as Silicon Valley Bank and Credit Suisse. “And while this is nothing like 2008, it is not clear when this current crisis will end. It has provoked jitters in the market and will clearly cause some tightening of financial conditions as banks and other lenders become more conservative,” he wrote.

This is bad news for India’s information technology (IT) sector. Large Indian IT services companies generate more than half their revenues from North American markets. And nearly one-third of those come from banking, financial services and insurance (BFSI) sector, which has been in the eye of the global storm, triggered by rising interest rates as central banks fight soaring inflation. The slowdown in U.S. also threatens to derail India’s target of $2 trillion exports by 2030. In FY23, services exports rose 30.48% to a fresh high of $320 billion, up from $255 billion in FY22, helping India reach its target of $750 billion exports. IT services accounted for $194 billion of this, according to Nasscom.

However, this growth seems a distant memory now going by the latest commentary from leading IT services companies.

Growth Worries And Deal Momentum