US Slowdown Hits India's IT Sector Hard

Economic slump adds challenge for industry pondering next steps
By Jim O'Neill,  Newser User
Posted Aug 20, 2008 10:00 AM CDT
Among the moves Tata Consultancy Services and CEO S Ramadorai are trying amid the economic downturn is a lab aimed at improving airlines' customer-service woes.   (AP Photo)
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(Newser) – The credit crunch that has shifted the US economy into neutral has slowed the growth of India’s tech sector, which once boasted growth rates of 40% in the overall strong economy, the Wall Street Journal reports. The slowdown comes as the sector faces increasing competition from abroad and rising labor costs at home, and a weak dollar eating into profit margins.

And while analysts still predict 20%-25% growth for the sector in the next decade, India’s tech companies—like Tata Consultancy Services, Winpro, and Infosys—already are looking for new outlets to maintain their revenue growth. Executives are aiming to shift their outfits from merely sources of cheap, outsourced labor into hubs of innovation.