'The US slowdown impact will be short-term'

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Delhi-born Promod Haque is better known as “the man with the Midas touch”, ever since he topped Forbes magazine’s list of venture capitalists in 2004. Haque is the managing partner of Norwest Venture Partners (NVP) and, according Forbes, has remained among the world’s top deal- makers for the past decade and a half.

NVP manages investments worth over $2.5 billion across 400 companies globally, including 22 hybrid investments in India. Its first direct India investment happened in 2005, in Pune-based Persistent Systems, and has since funded four other Indian companies across the Internet, travel, BPO and mobile entertainment space. In an exclusive interview with FE’s Reema Jose, Haque said a slowing US economy spelt more outsourcing business for Indian vendors in the long-run. Outsourcing was only expected to increase with time. He continues to bet big on the hybrid or cross-border model, which allows companies to establish development centres in low-cost countries, while setting up front offices in the market. Excerpts:

With the US economy in a slowdown mode and probably getting into a recession, Indian IT companies have started facing the heat. How will the slowdown impact the investor sentiment and the IT industry in India?

There is always some impact. I hear that the consumer confidence index in the US is on a five-year low currently. That is of some concern. About 70% of the economy is driven by consumer spending and when there is a five-year low at that, there is obviously some reason for concern that these consumers are going to cut back and then corporations have to cut back on spending. When corporations do that, they obviously look at the low-hanging front, which in many cases are the IT budgets. It obviously has an impact on the IT companies, especially in India.

But the issue according to me is the short-term effect. When you talk of the impact of a slowdown, it depends on what horizon you look at. The next three to six months’ horizon would be challenging for the Indian IT companies because there would be instability in the market. In the long-run, I think a slowdown will lead to more outsourcing, which will be beneficial for the Indian IT companies. A couple of quarters before that would be the challenge for the IT companies.

What, in your opinion, should the Indian IT players do so that they can maintain their growth momentum?