Indian outsourcing prices slump

rupee300The cost of outsourcing to India has plummeted after the rupee slipped to below 100 against the British pound.

According to the India Express  it also has fallen significantly against the US dollar too.

A recent report by Bank of America Merrill Lynch said that Indian outsourcing had been hit hard by the country’s high current account deficit and a lower import cover which had kept the cost of currency high.

While the weaker rupee sent the stock prices of many Indian companies on a slide, it boosted the market performance of IT companies like Tata Consultancy Services (TCS).

In a recent interview with the Business Standard, TCS Chief Financial Officer Rajesh Gopinathan said the weakening rupee allows the company to be more “adventurous” than usual in pursuing business and to win outsourcing deals with lengthier terms.

This is good news for India’s outsourcing companies, particularly as their rivals, China and South Korea,  have a stronger currency and their prices will be higher.

It is also bad news for non-Indian competitors like IBM and Accenture.  A weak rupee allows Indian providers to offer lower rates that cannot be matched.

There is a fear amongst outsourcers that the pressure to match Indian prices might result in a declining standard from non-Indian suppliers.