The forecasts for the world economy are getting gloomier by the week. The IMF, which in October last year somehow predicted 2009 world output to grow by 2.2 percent, now estimates it to be 0.5 percent.
The US won’t grow this year. The Irish economy is no longer the poster child of Europe. Iceland’s government has recently resigned for economic reasons. And the UK is estimated to shrink by 2.8 percent, the worst among industrialized nations.
India, similarly, has been rocked by lower foreign investment, the reverberations of Mumbai, and more recently, the fiasco at Satyam.
But one sector seems to be steaming on. Legal process outsourcing (LPO), whereby corporations and law firms outsource some of their legal services to cheaper counterparts in other countries, is growing.
The LPO sector in India reported a 200 percent growth in the last 12 months. By 2010, it’s estimated to grow to $640 million, from $225 million in 2007. The top LPO firms are hiring people by the hundreds.
What’s driving this? Interestingly, a boom in legal services related to bankruptcies. I guess that’s one silver lining to a recession.
But the broader underlying reason is cost-cutting. As competency grows in India, Western firms need to explore this option much more. But they also need to do their due diligence and obtain independent advice before proceeding, keeping the Satyam implosion in mind.