George W Russell investigates how Indian law firms are faring in the economic downturn
India is bracing itself for a tough year. For the past few months, both the government and private sector had expected the country to dodge the worst effects of the global downturn. It might still do so, but there’s no doubt a storm is gathering. The governor of the Reserve Bank of India, Duvvuri Subbarao, warned in late April that the economic recession would continue through 2009 and could well extend until mid-2010.
While the country’s heavily regulated banking industry looks set to weather the worst effects of the storm, corporate India is taking a beating. A survey by Mumbai-based ET Intelligence Group of 169 major companies reporting first-quarter results showed an overall 6% fall in revenues, the first decline since the downturn began last year.
The International Monetary Fund (IMF) expects India to be cushioned by domestic consumption, which accounts for about 65% of GDP. “India has much less of a need to do any rebalancing, as there is already a significant contribution to growth from consumption,” says Kalpana Kochhar, deputy director of the IMF’s Asia and Pacific department.
Hopeful but cautious
While India’s financial services sector has been relatively unscathed, lawyers are concerned that the contagion could spread to India’s core service industries. “The economic crisis is beginning to impact the information technology sector,” says Pavan Duggal, head of Delhi-based law firm Pavan Duggal Associates. “Technology companies are now being very careful of what they are spending.”
Indian law firms have so far avoided the carnage that has struck their US counterparts, but lawyers are keeping an eye on current events. “It is a time of uncertainty for all and a period of concern for most,” says Shrikant Hathi, a partner at Brus Chambers (formerly known as LEX Nexus) in Mumbai. “The global financial crisis is taking its toll in all sectors.”
In spite of the uncertainty, there are no signs that an across-the-board slump is imminent. “Our country’s economy has been largely independent and self-reliant and the economic crisis has not affected us the way it has affected the rest of the world,” says Germaine Pereira, a lawyer with Solomon & Co in Mumbai.