Flat or negative growth for Indian IT this year, says former Infosys CFO

India’s information technology sector is expected to post either flat or negative growth in 2020 due to the impact of the Covid-19 pandemic, a former chief financial officer of Infosys Ltd. said.

“Look at the economic activity. Worse than what you have seen in 2008. So, clients are not going to increase spending or even maintain the current spending,” V Balakrishnan told PTI. There will be spending cuts and possible pressure on pricing as all the major industries including have been adversely impacted, he said, also noting surging unemployment rate in the U.S.

“Economies are doing badly. Spending is not going to happen. I think this year is going to be tough for the IT industry,” Balakrishnan said. The Covid-19 pandemic is like a force majeure, and no amount of business continuity planning will help in this situation, he claimed.

“They (Indian IT companies) have to work closely with their clients, figure out how much they can extract; at the same time, they have to keep the cost under control, and manage the current year because in current year if they have a positive growth, that will be a surprise,” Balakrishnan said.

“It will be either flat or negative growth this year because everything is happening in the first two quarters, when growth is always good. This year is going to be very tough. They have to plan their costs in such a way that margins they can (hold on to) so that they can reduce the impact,” he said.

Even in 2008 after the global financial crisis, Indian IT companies had some growth because at that time, recovery happened very fast.

“This time nobody knows because unless you find medicine for this, this is going to keep coming back; look at Singapore, initially they managed and now they are saying full lockdown,” Balakrishnan said.

“Even U.S. is similar; nobody knows how long this is going to prolong; economies are like titanic ship, everything is frozen now, for you to restart and start the engine kicking is going to take a long time. This year is going to be very tough for IT industry,” Balakrishnan added.

―Bloomberg Quint