Chennai: Growth in India’s software and back office service exports will slow to a single digit rate this year, and while the domestic market is expected to expand, the country could still miss a 2020 target for the business.
India’s software and back office service providers saw export growth stutter to 16.3% in 2008-09. That figure is likely to more than halve this year, in what can be compared to a bungee jump for a sector that for close to a decade saw a 30% average annual growth rate.
However, revenue from domestic IT and back office services is expected to grow 15-18% this year, double the 7% by which it grew last year.
The National Association of Software and Service Companies, or Nasscom, an industry lobby, said on Wednesday that Indian software and back office service providers will see exports—their biggest revenue contributor—crawl up 4-7% to $48-50 billion (Rs23,280- 24,250 crore) in 2009-10, compared with a 16.3% rise to $46.3 billion in 2008-09. It also said domestic revenue would grow to $14.4-14.8 billion from $12.5 billion last year.
India’s software and back office service providers saw export growth stutter to 16.3% in 2008-09. That figure is likely to more than halve this year. Sandeep Bhatnagar / Mint
If the trend of slowing export growth lasts, India will miss by a significant margin Nasscom’s forecast of $225 billion in IT and back office services revenue by 2020, unless growth in domestic market accelerates.
The main reason for slowing growth is a steep drop in business from key markets such as the US, where corporations cut back on technology spending during the downturn.
“Decision making is starting to happen but buyers remain cautious and large deals are missing,” Nasscom stated.
India’s top software exporter, Tata Consultancy Services Ltd said earnings for the first quarter grew 19%, beating estimates, but largely due to cost cutting and a hiring freeze.
Infosys, India’s second-largest software exporter and a bellwether for the industry, said its quarterly profit rose 17% but forecast a 3.1-4.6% fall in revenue to $4.45-4.52 billion in 2009-2010. It expects earnings to decline 11.1-12.3% in dollar terms.
Rajarshi Sengupta, executive director of Deloitte and Touche Consulting India Pvt. Ltd, said in an email response it is important for Indian IT companies to “move up the value chain…Domestic projects will grow in size, with donor agency funding and eGov implementation initiatives.”
“About 80% of growth will come from non-traditional markets and by that I mean geographies, verticals and customer segments,” Som Mittal, president of Nasscom, told Mint in a telephone interview.
The numbers for 2008-09 were slightly lower than the trade body’s revised forecast earlier this year, when it said exports will climb 16-17%.