Trend That Could be Threat To Indian Economy

Tuesday, January 10, 2012

Trend That Could be Threat To Indian Economy

While browsing through various business and economy related news, one news headline caught my eyes which could have serious impact on India's growing and new middle class "consumer base" and consumption story. And of course the consumption story related sectors and stocks such as realty/property, FMCG and many more as such.

As the news says, many medium size IT/ITeS companies are shifting their operations and bases from Hyderabad and Bangalore to Philippines! This is mainly because of concerns pertaining to infrastructure, cost of doing business and availability of skilled labor.

Check the news article in Economic Times "Medium companies IT/ITeS may shift base from Hyderabad, Bangalore to Philippines"

This could be just a beginning and as these jobs landed in India 10 - 15 years back, they might start flowing out of India to countries such as Phillipines and Vietnam and it is a growing trend. These jobs came to India only due to lower costs of labor and operations which is not true anymore in India.

This trend, if grows further in future, could seriously dent consumer related sectors in India such as Realty/property, FMCG, auto, processed food and entertainment to name a few. IT/ITes workers are one of the big spenders when it comes to realty, FMCG, food and entertainment. So when these type of high paying jobs would go out of India to some other countries, IT/ITes workers and their growth would be stalled in terms of income and their disposable income would be lower and lower. Also the number of IT/ITes jobs itself would lower.

And where would this impact? Companies relying on such "consumer base"! Companies which are trying to sell flats/apartments to this consumer, fast and processed food, FMCG, auto companies who are selling bikes and small cars. These are a few to name. If not big, this development would certainly have some impact on growth of such companies and then of course on stocks of these companies. Certainly, there would be more sectors impacted indirectly due to demand supply chain.

I will publish more of my understanding and analysis on this topic here on Indian Stocks News. Let me know what do you think using below comment form.