India’s outsourcing industry, long regarded as the country’s largest white-collar employer, is facing a prolonged slowdown as growth stalls and structural challenges mount.
Dollar revenues at the country’s top five software services exporters have expanded by less than 3% for ten consecutive quarters, a sharp contrast to the double-digit growth seen over the past two decades. Analysts say the sector is grappling with weakening global demand alongside the disruptive impact of artificial intelligence, which is prompting companies to cut back on hiring.
Recent earnings reports highlight the strain. Infosys Ltd. has projected slower-than-expected revenue growth, while HCL Technologies Ltd. reported a quarter-on-quarter decline in revenue for the March period.
Investor sentiment has also been hit. The sector has seen a $115bn market value erosion over four months, raising concerns about the sustainability of a business model built on India’s large pool of relatively low-cost engineering talent.
Beyond the companies themselves, the ripple effects are spreading across the wider economy. The outsourcing boom historically generated around a million middle-class jobs annually and supported sectors such as real estate, retail and financial services, according to Marcellus Investment Managers.
With hiring slowing and growth uncertain, the industry’s broader economic impact is now under increasing scrutiny.
