What next

Is the Indian economy going through a bad phase? In other words, are we in the midst of a general recession? There are no clear-cut answers to that as
the signals, which are coming, are pretty confusing. 

However, if you go by the figures of the first six months of the current financial year, the answer would have been no. On the other hand, the results of the OND quarter and the market reports of the current JFM quarter are none too encouraging--they point squarely towards a recession.

The IT industry grew by a healthy 25 odd percent in H1 of 2000-01. In fact, despite a small dip in the overall growth rate, IT remained one of the fastest growing industries in the country. And the growth rate is expected to rise to almost 40 percent in the next fiscal.
Until recently, the performance of the IT industry used to be strongly dependent on economic and political factors. This was because the corporate and the government spending accounted for a major share of the IT market. In addition, these segments in general, tend to be affected by any kind of economic downturn and political turmoil in any country much earlier than the other segments.

However, this trend would not hold true for long as the performance of the IT industry may not be as closely linked to the overall economic performance as it used to be in the past. This would be primarily driven by extremely strong growth in the home and SOHO segments. Coupled with this is the general realization amongst corporates that IT is a powerful strategic initiative, which cannot and should not be junked at any cost.

Although the growth rate of 25 percent is quite low as compared to the good 35 odd percent growth achieved in 1999-2000, the overall outlook is positive. This is primarily because of the fact that software exports are booming and at the same time the domestic market is also showing a healthy growth rate. 

In fact, the general hope in the air is that the industry is poised for a takeoff. However, the only thing, which may cause some hindrance, is the threat of the downturn in the US economy, which can make a dent in the growth rate of software exports. If this threat does not become a reality, there is no reason why the IT industry cannot return back to its former glory.