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Outsourcing During Slowdown


The ECRI Indian Leading Index, designed to anticipate Indian economic recessions and recoveries, fell to 178.5 in March 2003 from 180.3 in February and 183.6 in January. Its growth rate also slipped to a one-year low of 5.6% in March from 9.3% in February and 15.4% in January 2003. The past few month's decline in the growth rate of the leading index suggests that Indian economic growth will ease further in the coming months.

The key to the international gloom is not just that there is global industrial over-capacity in the aftermath of the late nineties boom and the bust that followed, but that there is now an accelerated shift of industrial capacity to China. As a result, investment and hiring are likely to stay subdued in most industrial economies. Hence, most industrial economies are likely to experience tepid job growth, at best, while the emphasis on cost-cutting within firms continues. To the extent that outsourcing to India serves this purpose, even a subdued economic outlook can be made to work to India's advantage.