According to this story on Economist , Indian IT is facing some severe challenges which
needs immediate attention and changes in the outlook and operations http://www.economist.com/business/displaystory.cfm?story_id=10286436

The major challenges faced by India IT are
1. Shortage of skilled labour and IT schools . Though India churns out 200,000 engineers per year, only less than 25% are immediately useful for IT jobs.
2. Direct operations from Majors like IBM , Accenture, Oracle etc.,have increased their head count to match the natives. due to which India IT companies may now has face competition from within India.
3. India IT did not graduate to higher end money making skills like consulting or designing, due to which India will have to survive with lower end jobs which means lower end pays.
4. Severe Infrastructure problems.
5. Rising salaries. Salaries are rising 10-15% per year for the past five years. Means less profits for IT companies every year.
6. Emerging competitions from countries like Vietnam, Thailand , Russia and other parts for Europe.
7. High rate of Attrition. Which is a major factor for projects getting delayed or cost overruns.
8. Rapid appreciation of the rupee against dollar is killing profits for IT Companies. 16% over past 5 years.

There could other factors like the Difficulty of Market Entry in India by foreign companies, due to the maze of legal hassles and complex taxation system, double taxation and other legal difficulties. Unstable Government, constantly changing Tax rules and benefits for companies, Stock Market shooting for stars. Tension with neighbors and terrorist problems.

Thoughts aside :

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