Little change likely to Indian offshoring: Gartner

Gartner has advised service providers to keep an eye on Indian politics, although no drastic changes to  IT in the world's largest democracy are expected despite the ousting of India's tech-friendly government.

The Bharatiya Janata Party (BJP) lost the Indian general election to Sonia Gandhi's Congress Party on 13 May after a six-year reign. It would have been BJP leader Atal Behari Vajpayee's fourth term in office.

In Vajpayee's third term, he headed a multi-party coalition government credited with making India a global power in IT, business process outsourcing and biotechnology considered -- rightly or wrongly -- by Western nations as something of a threat to their own IT sectors. Four days after Vajpayee's loss, the Indian stock markets crashed.

However, Partha Iyengar, an India-based analyst at Gartner Research, said it was business as usual for Indian IT. No "drastic" shifts were expected.

"The one ancillary change might be if there were to be a roll-back of the liberal foreign exchange usage policies followed by [Vajpayee's] government, which help Indian companies invest extensively in overseas acquisitions and development plans," he said.

Companies such as Expert IS, which was recently bought by Indian offshoring giant Infosys, would be at risk in such a shift, Iyengar suggested.

"However, given India's strong foreign currency reserves at this point, this is unlikely to happen. It just bears watching," he said.

Service providers and customers of service providers that could be affected should continue with any plans in progress but keep an eye on Indian politics. Prior to making any firm moves to implement plans or invest, companies should add an additional review step in the due diligence process, Iyengar suggested.

"Companies should have some on the ground inputs ... keeping them informed over the next three months, which will be extremely fluid," he said. "A certain amount of political turbulence is likely."

Iyengar said the IT minister role in the new government could dictate which parts of India get preferential treatment with regards to IT investment. Current hot favourite is Dayanidhi Maran, from Tamil Nadu's capital city Chennai.

India under Vajpayee massively invested in technology in four key states -- Maharashtra, Andra Pradesh, Karnataka and Tamil Nadu.

However, commentators have suggested that the BJP lost partly because it was perceived to have paid too much attention to high-tech causes, ignoring many of India's one billion people in favour of the bourgeoisie. India has the world's largest middle class, numbering some 300 million souls, yet 25 percent of Indians still live below the poverty line and 70 percent live in rural areas.

Every political win in vast, diverse India is controversial. The rule of Vajpayee's Hindu nationalist BJP was marred by terrible riots in Gujarat state in 2002, when some 1000 people -- mainly Muslims -- died, and by coming to the brink of war with Pakistan more than once.

India's new government will be headed by economist Manmohan Singh after Congress Party leader Gandhi declined the office. Gandhi is the Italy-born widow of former PM and Congress party leader Rajiv Gandhi, who was assassinated by a Tamil Tiger suicide bomber in 1991.

Singh hasn't much of a political track record or power base but has been credited with launching India's economic reform program. He is reportedly popular with the markets and regarded as relatively uncorrupt. Corruption has been reported as a key concern of Indian voters.

Gartner's Iyengar said the Congress-led coalition should have similar positions on economic reform and IT industry policies to the BJP. Leftist parties in the new coalition have also implied support of IT as a key driver of growth, he said.

"The wave of losses on the Indian stock exchanges were largely caused by the misconception that left-wing parties will join the government and pursue anti-business policies," Iyengar said.

Australia's IT sector could expect India to continue investing in infrastructure such as power, roads and airports, special economic zones similar to those in China and general economic and IT reforms both at federal and state levels. However, if those altered then some companies here should consider changing their own plans accordingly, he said.

"Some additional areas to watch for, with the caveat that we don't foresee major discontinuities here, are ... the pace and nature of disinvestment of public sector companies -- something that Australia can empathise with, I think! – and the pace of labour reforms," Iyengar added.