U.S. interest rates shadow India’s outsourcing sector
NEW YORK, UNITED STATES — Rising interest rates in the United States (U.S.) have slowed demand for services from Indian IT firms like Infosys and Tata Consultancy Services (TCS).
Revenue from North America dropped 4.9% at Infosys last quarter, while TCS saw a 3% decline in the same region due to macro headwinds. Both companies have cut over 12,000 jobs since September.
Bloomberg Opinion columnist Andy Mukherjee said this downturn shocks India’s youth who sought coding careers. Graduate unemployment in cities already stands at 45% for ages 20-24. Slower U.S. demand threatens to worsen prospects.
Industry analysts link these falling outsourcing deals to U.S. financial clients tightening belts amid inflation and last year’s banking crisis. Hopes for a quick rebound fade with sticky inflation.
Fewer American contracts through 2024 may also hit India’s stock market, which anticipates Indian Prime Minister Narendra Modi’s reelection. While IT troubles likely won’t immediately impact his prospects, prolonged youth joblessness can stall consumption-led growth.
Mukherjee added that while low-end coding jobs are already at risk from generative artificial intelligence, higher-for-longer U.S. interest rates could make this problem worse for India and its wide outsourcing talent pool.
