The last thing the major IT services firms in India needed, was the terrorist attacks that occurred over the past 48 hours in Mumbai. Unlike previous attacks in Bangalore and New Delhi, this one is taking center stage with respect to media coverage. Pretty much what the terrorists are looking for.

Companies such as Wipro, InfoSys, Satyam, and Tata Consultancy Services are going to have more challenges to secure existing business let alone win new business with these recent events. India isn't the only game in town with respect to IT services, as countries like the Philippines, South America, and even smaller firms within the United States sprinkled across the likes of Utah, and Idaho present options for firms to spread their risk. These options aren't new, but their popularity may increase.

Even with such dire circumstances, some of these companies aren't going away. India will still continue to produce engineers at a ferocious pace compared to other countries around the world. IT work still still find its way there. Time to keep tabs on these companies for possible investments in the future.

India did well in 2004-2008, thanks largely to the reforms carried out by the Bharatiya Janata Party (BJP) government of Atal Bihari Vajpayee in 1998-2004. However, the current Indian National Congress-I (Congress) Party-dominated government has made almost no further reforms, and the Indian economic machine is showing clear signs of running down.

While 2009 growth is still expected to be around 5%, estimates of the consolidated budget deficit range as high as 12% of GDP. India is not China: It does not have the huge foreign exchange reserves to finance such a deficit. Thus, the rating agencies are considering downgrading India’s debt to “junk” status.

Given the financing difficulties India is likely to run into, it must be probable that growth will once again be thwarted by lack of foreign exchange, so that India reverts to the traditional “Hindu rate of growth” of 3 to 4% - a growth rate that’s nowhere near enough to lift its rapidly growing population out of poverty. Another election is to be held in the spring, but it seems unlikely that the BJP will win a government majority (Vajpayee has in any case retired) – in which case the government overspending and opposition to reform of the last five years will continue. India would then remain an enormously frustrating enigma, a country with huge growth possibilities that is shackled by a corrupt and incompetent government.

India is fundamentally a services based economy. With global recession, this demand for services will be hit and will further impact the future corporate earnings. Domestic demand is not sufficient to offset this. To top this, yen carry trade which contributed to asset bubbles in indian infrastructure and stock mkts are getting pulled out due to appreciating Yen. Indian financial system is not much impacted by the financial meltdown, but its after effect, credit crisis is bringing lot of struggle to corporates who were looking to raise capital for expansions.

India’s exports continued falling in February, but at the fastest pace in at least 13 years, according to government figures. Merchandise shipments fell 21.7% from the year earlier. “India essentially only started feeling the pinch of the global downturn in the December quarter and the worst is yet to come,” Sherman Chan, an economist at Moody’s Economy.com in Sydney, told Bloomberg.