NEW YORK, Dec 27: Defusing of war tensions between India and Pakistan has started paying dividends for Bangalore based information technology industry (IT) which saw business erode last year as the American businesses stop outsourcing fearing a nuclear war in the region.

While India is reaping the dividends for easing border tension, Pakistan which is the front-line ally, is still under another cloud of alleged export of nuclear technology to North Korea.

Many investment and business initiatives put forward by the Pakistan-American businesses have bogged down as the US State Department which ultimately approves such projects is weary. As a consequence Pakistani-American IT initiatives have been put on the back burner.

In December of last year India amassed troops on Pakistan border threatening war to end the infiltration by Pakistan based militant groups in Indian held Kashmir.

But in May of this year when the tensions reached a climax with nuclear war talk between the two nations, the US State Department asked most of its 60,000 nationals to leave India, the Indian information technology industry nearly collapsed.

It prompted the leaders of Indian IT industry to seek intervention with Indian Prime Minister Atal Bihari Vajpayee to diffuse tension with Pakistan or they will lose up to $60 billion dollars a year. In July a New York Times columnist credited America’s energy giant General Electric (GE) for being an unwitting protagonist in stopping a war in South Asia by withdrawing its billions of dollars contracts with Banglore IT industry if a war breaks out.

But with the war clouds lifted for now the New York Times reported on Wednesday that the outsourcing business between American corporations and India based IT industry has picked up.

The new contracts span the technology-related spectrum, going well beyond the software code writing of the last decade to include chip design, product development, call centres, consulting and other support services. They give Indian companies the opportunity to expand their repertory with work that holds much promise for future growth. And they account for a significant chunk of business in India, especially here in Bangalore and the country’s other high-technology cities, the paper said.

In just the last few months, dozens of Indian concerns have garnered contracts from big American companies to take over pieces of their operations. A unit of the Bangalore-based Wipro, India’s third-largest software and services exporter, will be handling some of the worldwide reservation services for Delta Airlines, a move that Delta expects will save $12-$15m annually.

The Times says that India’s top software company, Tata Consultancy Services (TCS), part of India’s Tata conglomerate, has signed up Lehman Brothers in a $70 million-a-year deal shared with Wipro as well as JP Morgan-Chase Fidelity Investments and GE Medical Systems. The local unit of Cognizant Technology, a custom software developer and services provider in Teaneck, New Jersey, has contracts for projects from MetLife, to upgrade its human resources administration system and streamline some computer applications, and from the United Health Group and Sallie Mae, the student loan provider.

For the American companies, which account for more than two-thirds of the work coming to India, the country has several advantages. Though wages in India have been rising, they still tend to be much lower than in the United States. That is particularly attractive in the current global economy, cost-sensitive executives say, as they follow the outsourcing path set in the early 1990s by technology companies from Silicon Valley seeking cheaper software coding operations, the Times said.

Bill Gates, Microsoft chairman, who visited India last month has given his approval. Microsoft is setting up its development centre in the high-tech city of Hyderabad and is outsourcing some back office work to Wipro.