India’s IT sector much-awaited moment has arrived: the US Fed’s rate cut
Subscribe to enjoy similar stories. The US Federal Reserve’s steeper-than-expected interest rate cut augurs well for India’s $254-billion information technology services sector, as lower borrowing costs could prompt companies to increase their spending on technology. The US is the biggest market for India’s IT services sector.
The US Fed cut its benchmark lending rate by half a percentage point early Thursday, marking its first interest rate cut in more than four years. Fed chair Jerome Powell said the rate cut was prompted by indicators suggesting that US “economic activity has continued to expand at a solid pace." But what does this mean for India’s IT services companies? Fortune 500 companies that are clients of India’s IT services providers have clamped down on discretionary or non-essential tech spending in recent years due to various factors, including growth-related, macroeconomic uncertainty, and high borrowing costs. However, the Fed’s 50 basis point rate cut is expected to prompt a revival in demand from IT services companies.
“The rate cuts were long-awaited and wished for. The interest rate cuts will allow US businesses to borrow and spend more, which means there will be more discretionary spends available for IT services," said Ashutosh Sharma, vice president and research director at Forrester Research. Also read | Wipro, Infosys March quarter results paint gloomy outlook for FY25 US clients of Indian IT services companies can now borrow from banks at a cheaper rate to fund technology projects that they had put on ice.
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