Sports Calendar

India's IT industry, which is worth about £32 billion a year, relies on the US for more than half its revenues.

The banking sector is by far its largest customer.

Amid the immediate aftermath of the sub-prime crisis, India's software houses had argued that they would benefit from cost-cutting moves by their clients as more work was moved from the West to the sub-continent, where labour is cheaper.

By contrast, it now appears that the flagship Indian IT industry is suffering in tandem with its customer base.

TCS recently said that two of its ten largest clients — thought to be Citigroup and Merrill Lynch — had scrapped major projects due to start this quarter.

Last week Infosys and Wipro, India's second- and third-largest IT groups, posted the steepest falls in earnings growth in at least five years.

Both had complained of banking clients delaying spending decisions.

Last week Infosys, the only Indian IT group to give a full-year forecast, which relies on banks for a third of revenues, confirmed that it expected earnings growth to slow sharply.

It forecast that annual revenue growth would slow to between 19 per cent and 21 per cent, from 35 per cent last year.

Wipro, which has a broader customer base and is relatively insulated from the fortunes of its financial clients, said that it expected earnings to be flat in the first quarter of its current financial year.

It is betting on an uptick in the global economy to lift earnings in the second half.

The slump on Wall Street has come at a bad time for India's IT industry, which was already battling the effects of the rupee's sharp appreciation against the dollar and annual wage inflation running at between 12 per cent and 15 per cent.

The sector will soon face an estimated $1 billion-plus bill when a holiday on Indian export taxes on software lapses.

There are also fears that a debate over outsourcing will play a part in the upcoming US presidential elections to give rise to more protectionist policies.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax