India’s IT Market Could Be Significantly Impaired By U.S. Economic Sanctions, According To IDC

FRAMINGHAM, Mass., May 20, 1998 — On May 13, 1998, President Bill Clinton enacted economic sanctions against India in response to nuclear testing that was carried out at the Pokhran site on May 11 and 13. While full details on the breadth of these sanctions have yet to be announced, there is the potential for strong impact on the Indian information technology (IT) market, as well as for U.S. IT vendors with operations in or exports to India, as discussed in new International Data Corporation research.

The United States, India's largest trading partner, was joined by Japan, Germany, and Australia in announcing tough economic measures. The Indian government believes it will be able to weather this storm, but a number of sectors will be affected. In danger of stalling is an agreement with Boeing to sell 737s to Air India, power plant construction by Enron and General Electric, and imports of American computers and technology, which could be used for military application. Potentially the most important sanction will be the U.S. opposition to loans from international institutions such as the IMF and the World Bank.

"How it will affect India's IT market is heavily tied into the duration of the sanctions and the definite possibility that they could extend to high-technology materials," said Lisa Cosmas, Senior Analyst, IDC Asia/Pacific. "In that instance, not only will the Indian economy suffer, but its IT market will experience a considerable slowdown in growth. U.S. IT vendors that have been increasing their investments in this market will also feel the repercussions of these sanctions."

India represents the second-fastest growing market in Asia/Pacific. Prior to the imposition of economic sanctions, IDC Asia/Pacific had predicted from 1997-2002 India would experience a compound annual growth rate of 15.6 percent and domestic IT spending would reach US$5 billion by 2002. Additionally, computer software and services exports contributed US$1.14 billion to the IT industry in the financial year 1996-1997. Today, approximately 60 percent of software services sourced from India are by U.S. companies. Digital, Dun and Bradstreet, General Electric, IBM, and Oracle represent just a few companies that have significant software development facilities located in India.

More information on how these sanctions may affect the Indian economy and its IT market are available in a new IDC bulletin, The Impact of US Economic Sanctions on India on US IT Vendors. It is available for purchase at a list price of US$500. For more information or to purchase this bulletin, please contact Cheryl Toffel at 508-935-4389.

About IDC

Headquartered in Framingham, Mass., International Data Corporation provides IT market research and consulting to more than 3,900 high-technology customers around the world. With a global network of 375 analysts in more than 40 countries, IDC is the industry's most comprehensive resource on worldwide IT markets, products, vendors, and geographies.

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