OUTSOURCING TO INDIA may soon become a thing of the past for small to mid-sized technology firms, due to the increasing costs of rent, salaries and a looming end to the government’s tax holiday.
India’s technology, and especially software industry, has seen spectacular growth over the last few years, tripling in size to reach an astounding $52 billion. But it seems that the bubble may be about to burst.
The slowing US economy is having a big impact on India’s future as a market for outsourced business, with foreign firms tightening their belts as India’s currency strengthens, and operational costs soar, not to mention the fact that skilled manpower is becoming scarcer, and those available are demanding higher salaries. To add to tech companies’ concern, the government tax policy is also looking a bit uncertain.
Sankaran P. Raghunathan, president at the IT SME Association, an umbrella for 3,200 small to mid sized IT firms, told the WSJ's Marketwatch, "operating in India has become extremely difficult because of the government's fiscal policies."