Says Vinnie Mehta, director, Manufacturers’ Association for Information Technology (mait): "On a pessimistic note, growth could be about 30 per cent", instead of the 40 per cent predicted earlier and the 53 per cent achieved in 2001-02 Q1. That’s about as bold as you can get. Nasscom says a clearer picture will only emerge by October-end when the Q2 results come in. Nasscom had predicted total earnings of Rs 40,000 crore (compared to last year’s Rs 37,760 crore, a 55 per cent growth) and this estimate could be formally scaled down then.
A recent study by Morgan Stanley Equity Research, North America, puts it succinctly: "Besides the immediate replacement costs, the events at wtc are largely negative for technology spending. Now, significant uncertainty and risk normally delay decision-making. Coming in the last three weeks of the September quarter, large commitments may get deferred. Executives will want to assess the environment for a month or two.... The consulting costs could slow down since projects will be cancelled or deferred and new projects may be pushed out as well.... The immediate spend would be for replacement computers, storage, and network equipment which would account for 45 per cent of the external spend. We estimate the need for $500 million in replacement spending on computers (servers and PCs), storage, and network equipment and about $165 million for new network equipment."
Agrees Arjun Malhotra, chairman, Techspan Inc: "In the technology sector, we should be prepared for delayed decision-making, deferment of large commitments and reluctance to resume normal closing assertiveness. With the three most technology-intensive industries in the US—brokerage, financial services and insurance—brought to a temporary standstill, there will be delay in new project spending." Adds international trade economist Bibek Debroy: "Software exports were doing reasonably well even when there was a downturn in India. But now, with a clear slowdown in the US, it will be affected."
Says Mehta: "It will take time to assess the exact damage. It’s more like a transient phase now. In the long run, things are likely to be normal." But Pradeep Gupta, ceo, Cybermedia India, differs: "Exports to the West will be down by a fourth. Our companies, half of which were involved in software maintenance in US, must find new pastures like defence, aviation, infrastructure and security, the new areas of priority."
There is, however, a silver lining for companies specialising in disaster recovery, back-up, data storage or security. Continues the Morgan Stanley report: "Replacing the destroyed networking equipment at the wtc could add 1-1.5 per cent to industry growth in Q4 2001 and Q1 2002." Explains Mehta: "Looking at the US government’s resolve to increase spending to recover losses, we may stand to gain as the US is still our biggest market." Hardware makers could benefit from the replacement, though the Indian players don’t have a direct market in the US. But most agree that if the Indian economy gets affected generally, the overall domestic sales could take a beating.
What’s sure though is that the bottomlines will be hit badly if the crisis escalates into a war. According to Nasscom chairman Pheroze Vandrevala, this will deeply impact all Europe and Asia-Pacific markets. Agrees Mehta: "The spectre of war is already scaring many new projects. If it’s short and sweet, we’re safe but if the war prolongs, it’s anybody’s guess."
