Emerging Markets: India

Roundup

 

By Aaron Chaze

 

Regulars_EM_Roundup_02
India faces water shortages as summer rains fail

India’s farmers face another tough year as it becomes clear that the southwest monsoon, which usually provides 70%-80% of India’s annual rainfall, has failed this year. India’s meteorological office says 253 out of 600 districts in India are suffering from drought. Failure of the summer rains will severely affect India’s economic growth as agriculture accounts for 17% of GDP and employs 57% of the total workforce. The impact has already been seen on some agricultural commodities globally, particularly sugar, as India produces some 15% of the world’s crop. India is now expecting a 4 million ton shortfall in its sugar output this year. The Indian crop failure and the possibility of a global sugar deficit have contributed to global sugar prices rising 84% since the beginning of the year.

 

While there may be a slowdown looming in India’s agricultural sector, the infrastructure and industrial sectors are powering ahead. Larsen & Toubro, the country’s largest private sector engineering and construction company, said that it obtained $2 billion in orders in July-August 2009 from a variety of industries and expected another $2 billion to $2.5 billion by October.

 

There was good news for the IT sector, too, as BP, Europe’s second-largest oil and gas company, awarded an IT services contract worth $1.5 billion over five years to Indian outsourcing giants TCS, Infosys and Wipro, along with global consulting firms Accenture and IBM. The BP pie is split between infrastructure and software services. IBM captured the largest slice, with 40% of the contract. ExxonMobil is also said to be in talks over a contract worth up to $1 billion. BP expects to save $500 million a year by reducing the number of IT vendors it works with from 40 to five.

The BP contracts are part of a growing trend as Indian outsourcing companies increasingly bid for contracts in Europe and Asia-Pacific, given the decline in business in North.

 

America. When Telstra of Australia awarded a five-year outsourcing contract in June this year, Infosys and EDS (part of Hewlett-Packard) shared the $355 million software services piece.

 

 

 

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