Ukraine crisis to benefit Indian IT
Aiming at reducing dependence on Russia for petrol, natural gas, the EU exploring alternative renewable energy options, which may result in high spend on R&D boosting demand for technology applications
Bengaluru: Ukraine crisis is likely to drive more investment in emerging concepts like renewable energy, Industry 4.0 and electrical vehicles in coming years. Analysts are of the opinion that Europe is expected to pursue strategies which will reduce their energy dependency on Russia which is argued as the main reason behind some difference in opinion with regard to Russian invasion in Ukraine and how to counter such attack within NATO.
"This crisis will definitely lead European nations to reduce their dependency on Russia for their energy needs. Therefore, higher spend on R&D for harnessing renewable energy, on electrical vehicles among others is likely in the medium-term. This will help Indian engineering services companies and IT firms to get more projects in these emerging spaces in coming years," said Pareekh Jain, an engineering services expert and Founder of Pareekh Consulting.
Currently, most European nations depend on Russia for their energy needs, which is critical for running of their economies. The EU is the largest importer of natural gas in the world with the largest share of its gas coming from Russia of around 41 per cent, according to the Directorate-General for Energy (DGE) for the EU. One of the largest economies of European Union, Germany receives 55 per cent of its natural gas supply from Russia. Italy gets 43 per cent of its gas from Russia, and France, a little over 16 per cent.
Other smaller countries, however, such as Czech Republic, Hungary and Slovakia are almost fully dependent on Russia for their requirements of natural gas, while Poland gets 50 per cent of its gas from Russia. Gazprom, Russia's natural gas producer largely controlled by the Kremlin, is responsible for supplying gas to Europe under its long-term contracts.
However, if the crisis in Ukraine is not resolved soon, these contracts are under risk as many European nations put sanctions Russia opposing its invasion on its neighbouring country.
Currently, most engineering services companies are betting big on emerging areas like electrical vehicle, green energy, autonomous vehicles, and connected space among others. These companies will be the major beneficiaries of higher spend by European nations, which is expected in coming years. Europe has been the region of focus for Indian IT companies with most firms investing heavily to diversify their revenue sources. While large IT firms are drawing around 20-30 per cent of their revenues from Europe, it is also fast emerging as a key delivery centre for Indian technology firms.