The global economic downturn has slowed the growth of India’s technology and business services industry, but beyond the current crisis the industry faces a changing global environment that will probably cut into the country’s worldwide market share.

McKinsey analysis suggests that there is little immediate risk to India’s dominance of the market for offshore technology and business services. But the country’s share could sink to 40 percent by 2020, from just over 50 percent at the end of 2008, primarily as a result of increased competition from other countries, talent and infrastructure constraints, and an unhelpful regulatory environment. But changes in the global market could also give India opportunities, especially if its companies become more innovative and rely less on low labor costs.

The revenues of India’s business and technology services companies have grown to about $58 billion at the end of 2008 (including about $46 billion in exports), from $4 billion in 1998. In 2005, India’s National Association of Software and Services Companies (Nasscom) suggested that export revenues could reach $60 billion a year by 2010, but the global downturn will probably delay the achievement of this goal by three or four quarters.