Instead India somewhat fortuitously made an opportunity out of adversity. Last week as the Satyam saga unfolded, the Lok Sabha passed the critical Information Technology (amendment) Bill 2006, that will correct some of the typical potshots taken at the domestic IT sector. Basically the bill gives the government the power to tackle data theft. For the anti-outsourcing lobby the possibility of data leaking from the Indian BPO companies was their strongest weapon to deny business to them. The sting operations involving Indian call centre employees were really beginning to hurt. But now the IT companies can use the umbrella provided by the bill to source business with confidence. Sure, the bill does have some debatable features like giving the government too much power to block websites in the name of national security, and they need to be revisited. But those are not germane to the issues here.

Both the developments will have an impact on the Indian IT sector but my bet is that as the days progress the deleterious impact of the Satyam saga will recede, whereas the beneficial impact of the bill will become evident.

So as 2009 nears, with possibly the largest baggage of gloom quotient seen in several decades across countries, India can take heart that its chief success story for the past two decades, the IT sector, will not come unstuck. Not at least from the Satyam episode.

Yet it could have easily been otherwise. When the Satyam board met on December 16 to take the decision to use $1.6 billion to buy a 51 per cent stake in Maytas Infrastructure and 100 per cent in Maytas Properties, the two firms run by Satyam Chairman Ramalinga Raju’s family members, there was a clear sense the reputation of the Indian sector would take a body blow. Subsequent developments like the decision by the World Bank to impose an eight-year ban on the company from accessing any software business with it have only deepened the impression that the reputation of the sector from India was at stake. There is a reason for this. Abroad, the reference to the Indian IT is always as a group. At the annual brand awards in Taiwan last year, the world’s largest computer hardware manufacturing country, I noticed very frequent references to India. But there too the speakers, including ministers and leaders of companies like Acer, Asus or BenQ, referred to the big four as a common group. So an association by default among the investors was quite possible. This is pertinent in the present economic condition, where the travails of any leading company in any sector can inevitably scar other companies in the same space.

Leafing through the transcript of the back and forth between the Satyam management and the investment companies, it was easy to see this sense of chagrin among the fund managers. They were seething with the argument made by the company in its defence for using its cash reserves to make the aborted deal, that growth opportunities in the IT sector were secularly drying up. The India funds had made substantial losses. The value of their combined holdings in Satyam Computers dropped by about Rs 1.8 billion in a single day, as the firm’s shares lost nearly a third of their value. As many as 135 funds had a collective exposure of 26.42 million shares or 3.92 per cent in India’s number four software exporter. For the mutual fund industry the Satyam stocks were among the top fifteen at the end of November as per data from credit rating agencies.

But if this were the only measure, the outlook for the sector would be grave plus or minus Satyam. However, as industry analysts and chiefs of the rival companies say, the picture is different. A week later, another Wednesday, as the ADR prices of Satyam continue to fall by as much as 18 per cent for instance, in reaction to the developments regarding the World Bank news, that of Wipro rose by 3 per cent as it announced its acquisition of Citigroup’s technology unit.

So obviously reputation issues have not got clubbed in a catch-all. The World Bank ban was already industry knowledge for some time, so it did not surprise too many of the decision-makers. There will be questions no doubt. These would mostly centre on whether other IT companies too believe opportunities in the sector are really drying up. In this context decisions like Wipro’s to buy Citigroup’s technology unit restate the continuing strength of the Indian IT story. In the new year, as Barack Obama’s administration takes a look at the outsourcing story and India, it is therefore not Satyam but the passage of the IT (amendment) Bill 2006 that would be more keenly tracked.

The other fallout of the Satyam episode is on corporate governance. This will be trickier to sort out. Indian company leaderships, like their counterparts in other parts of Asia, are known to be family affairs. The Indian IT companies had prided themselves on having dissociated from that model. The Satyam episode has clearly shaken that somewhat. Going ahead, this is one aspect the sector will have to battle out again.

But all said, not a bad call, compared with the potential of the disaster that lurked. As I said, there is reason to welcome 2009 for India’s sunrise sector with more self-belief than one could have thought possible a week ago.

subhomoy.bhattacharjee@expressindia.com