Bangalore: India’s software exports might grow slower by four percentage points in the current fiscal year that began on 1 April as clients in the US, the largest market for local firms, delay decisions on outsourcing back-office and information technology (IT) services, industry body National Association of Software and Services Companies, or Nasscom, has said.
“We are lowering the growth rate, but it is still a high growth,” Nasscom president Som Mittal said at a two-day BPO (business process outsourcing) industry summit. “It is a challenging environment due to oil inflation, economic slowdown and lower growth.”
The industry body expects growth to slow to 25% for fiscal 2009 as clients in the US and Europe are cautious on the back of a global economic slowdown and galloping crude oil prices.
Som Mittal, president of Nasscom. Oil inflation and the economic slowdown are expected to affect growth of software exports (Photo by: Hemant Mishra / Mint)
In the fiscal year that ended on 31 March, the industry had grown by about 29% to touch an estimated $40.3 billion (Rs1.73 trillion), Nasscom said. It will release the final growth and revenue numbers for 2007-08 next month.
Software firms such as Infosys Technologies Ltd and Wipro Ltd, India’s second and third largest software exporters, respectively, have projected flat growth for the first quarter to June, citing slower growth in customer demand for services such as application development and maintainence, and consulting.
They, however, expect growth to pick up in the third and fourth quarters as customers are likely to decide on their technology spending by then.
“The fundamentals of the Indian IT and BPO industry is good. We need to look at medium and long-term growth and not just (of) a year,” said Nasscom chairman Ganesh Natarajan.
The industry body expects outsourcing of technology services to increase further, as companies in high-cost markets such as the US, Europe and Japan look at India to find ways to cut costs in a challenging business environment.
“We have to tighten our belts. That means we will emerge stronger,” said Pramod Bhasin, president and chief executive of Genpact Ltd, a back office firm. He expects more firms to set up captive units and outsource to Indian firms to take advantage of the low-cost talent in India.
Nasscom said improving people’s skills and infrastructure was a major concern for the industry than the “myth” of increasing wages for professionals employed in the sector.
“We will remain competitive,” said Bhasin, who is also the vice-chairman of Nasscom, “It is not so high if you give 10-15% increase on a salary of $4,000, compared with a person who sees 5% jump on a salary of $30,000 to $40,000.”
India’s IT secretary Jainder Singh said earlier in the day that the government was setting up investment regions for the IT sector that will be like the integrated townships built by public sector undertakings such as Bharat Heavy Electricals Ltd. “There will not be any tax benefits,” said Singh on the townships planned with state governments and private firms in smaller cities and towns. However, “it will decongest the big (IT) cities”, he said.