Obama’s Victory To Have Scant Impact On Indian IT

Cutting tax breaks for companies that outsource jobs to the overseas market and visa administration going erratic were part of Barack Obama’s administration, as much as using anti-outsourcing advertisements was part of his election campaign. Firm on curbing outsourcing and emphatic about bringing jobs back to spur growth, Obama was a relatively lesser hoped for US President by the Indian IT industry, which depends on the Americas for more than 50 per cent of its revenues. Romney’s pro-business approach combined with lesser interference would have safeguarded the industry from additional velocity to the existing headwinds.

However, Obama has been re-elected as President, and the implications for the coming years take on importance. The changes that could take place would strongly lean in favour of compliance and regulations. These amendments would, to a certain extent, shift work onsite and move IT requirements to be fulfilled by captives rather than third parties. However, industry stalwarts believe that these regulatory changes would be restricted to the tightly-regulated sectors like Banking, Financial Services & Insurance and Healthcare. Other sectors would be relatively unaffected due to their operations being free market.

Although these changes seem to alter the trend of tech companies’ American operations, there are larger factors resulting in more dynamic changes. Factors that are changing the way IT companies operate include high growth coming in from the emerging economies, the promising nature of disruptive technologies (social, mobile, analytics and cloud) and the nature of work shifting from vanilla application development and maintenance to complex projects. The mantra for growth has also started transitioning to a non-linear model, leading companies to adapt to these drivers. Companies that have been able to position themselves well to sync with these changes have already started seeing high growth and the development of a strong base for future execution.

Overall, we think that policy changes would definitely have a negative impact on the Indian IT industry, though the impact would be miniscule as compared to that caused by larger global developments in technology. Though global demand has seen some moderation lately, we maintain a positive outlook on companies that are well-positioned in terms of the services they offer and the verticals they cater to.

IT stocks seem unmoved by the outcome of the US Presidential elections as the impact has already been discounted for in the markets. Hence, going forward, we do not expect any further downward impact on Indian IT companies.