Mumbai attacks could hurt India’s outsourcing sector

On Wednesday last week, militants armed with machine guns and hand grenades took control of multiple locations across the city, including several hotels and restaurants. Although full details are yet to emerge, it is widely reported that up to 172 people lost their lives.

Speaking with India’s Business Standard​, Shetty said that, in addition to the obvious human tragedy, there may be considerable damage to the country’s reputation as a place for international firms to do business.

He suggested that: “The drug industry could see short-term setbacks, especially in the field of outsourcing,​’’ adding that ''executives of global companies may be asked to refrain from coming to India and many planned visits have been cancelled​.’’

The Indian outsourcing market, which has over 80 US Food and Drug Administration (FDA) approved facilities, was worth $1.27bn last year and, prior to the attacks, was expected to generate revenue of $3.33bn by 2010.

While it is too early to say if international drugmakers will turn to the country’s main outsourcing rival China long-term following the attacks, for 2008 at least Indian firms have lost out on contracts that would otherwise have been won at the shelved tradeshows.

Furthermore, although the main impetus for outsourcing is the reduction of costs, supply chain stability is also a major factor in the selection of outsourcing partners. As a result, long-term political strife and social unrest may be enough to tip the scales in favour of a contractor operating in a country where such concerns are not a factor.