Sun, 03 Mar 2013 15:48:44 GMT | By The Hindu Business Line

Barring market, India may be spared pain

Experts feel the Indian outsourcing industry is unlikely to bleed much from the $85-billion spending cuts in the US budget, as it will be mainly in the government sector


Barring market, India may be spared pain (© Reuters)

New Delhi: Indian economy is unlikely to bleed much from the $85-billion spending cuts in the US. As most of the cuts will be in the government sector — around Defence and other public spend areas such as schools — the effect on Indian economy or the outsourcing industry will be minimal, said Samiran Chakraborty, Head of Research-India, Standard Chartered Bank.

“India’s exports will not be impacted by the sequester cuts that would amount to 0.6 per cent of US’s GDP. The spending cuts will result in some growth slowdown in the US. But it will not be large enough to have any significant impact on India,” Chakraborty said.

But the same cannot be said of the global financial markets, according to economists. “If the US slowdown concern pushes the global financial markets to risk off mode, then possibly Indian financial markets will be impacted,” Chakraborty said.The American Chamber of Commerce in India (Amcham-India), when contacted, said it was too early to come to any conclusion on how the US spending cuts will impact the Indian IT industry or the economy.

Economy watchers also felt the US spending cuts will not impact foreign portfolio flows into India. In calendar 2012, foreign portfolio inflows into India stood at about $24 billion. Going by the trend so far this year and the Government’s intention to encourage foreign investments, analysts said, the foreign portfolio inflows this year are expected to exceed the level achieved in 2012.

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