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Thursday, 6 June, 2002, 15:28 GMT 16:28 UK
Indian companies face war jitters
Computer user in India
India's software industry is under threat

The military stand-off between India and Pakistan has begun to cast a shadow over the region's economy.

The first alarm has been sounded by India's software industry.

Prolonged talk of war is bad news for business

Narayana Murthy, Chairman, Infosys Technologies
The National Association of Software and Services Companies (NASSCOM) says that software exports could be hurt if tension between Indian and Pakistan did not ease soon.

Those exports constitute nearly 16% of India's total, and reached $7.5bn last year.

"There are indications already of new orders drying up, as Western business leaders are cancelling their visits to India and would prefer not to do business in a country which is seen as a high-risk zone by the rest of the world," Vijay Kalantarii, president of the all-India Association of Industry, told the BBC.

"Several joint ventures and technology transfer agreements between Indian and Western companies have already been deferred," according to Mr. Kalantari.

Bad for business

Similar concerns have been expressed by other leaders of the Indian IT industry.

"Prolonged talk of war is bad news for business," according to Mr. Narayana Murthy, chairman of one of India's best known software services firm, Infosys Technologies.

Most Indian software companies are located in southern Indian cities like Bangalore, Madras and Hyderabad, all more than 1000 miles from Kashmir, but they are still readying contingency plans to meet any eventuality.

India's largest software services firm, Tata Consultancy Services, which employs nearly 19,000 people and serves 1,000 clients across 55 countries, has said while existing business has not been affected, there have been instances of potential clients cancelling their visits to India in the last couple of weeks.

According to S Ramadorai, chief executive of Tata, the company needs to be very focussed, especially about its preparedness in the event of a crisis.

A large percentage of its employees are based overseas, and the company plans to move key personnel out of India at short notice to client locations.

Disaster management plans

According to a spokesperson for India¿s largest private sector company, Reliance Industries, it is business as normal as of now, but the company is ready with a disaster management plan in case of war.

One focus of concern is the company's huge oil refinery located at Jamnagar in the western state of Gujarat, not far from Pakistan border.

The Indian subsidiary of Anglo-Dutch Unilever - Hindustan Lever - is the country's biggest consumer goods company employing 41,000 people.

"We have only six Westerners in senior management positions and all of them have decided to stay as of now despite travel advisories issued by their governments," Shubbu Bhattacharya of Hindustan Lever told the BBC.

He also said the ongoing tension has not affected their business so far.

"Though war is bad news for any economy and most companies, our business may not be affected much even if the situation deteriorates. We are in the business of soaps, detergents, toothpastes and other consumer items and whatever happens people will continue to buy and use these products," he added.

Exports hit

Companies like Hindustan Lever and Reliance largely cater to the domestic market.

But any sector connected with either imports or exports is bracing itself for a hard summer.

The textile and clothing sector makes up nearly a third of India's total exports of $44bn.

A number of buyers have cancelled their visits to India this month, normally the time they come to place orders for the spring season.

The Indian apparel exports promotion council told the BBC that while no orders have been cancelled so far, they were worried about an international garment trade fair which has been scheduled for Delhi next month.

See also:

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