Bangalore: India’s IT industry expressed serious concern on Wednesday, 6 June 2007, over the impact of the rupee’s surge on export-dependent software exporters, already struggling with high costs.
Any hope for the industry lies in the US economy performing better than expected and the US tweaking interest rates to prop up the dollar, said Kiran Karnik, president of the National Association of Software and Service Companies, or Nasscom.
“We have had an 8-9% increase in the rupee in just the last three-to-four months,” Karnik told reporters in Bangalore.
“This is something about which the entire industry is greatly concerned about.”
The US accounts for two-thirds of India’s sales of software, and any rise in the rupee trims the profit margins of companies such as Tata Consultancy and Infosys Technologies that are at the vanguard of the $48 billion industry.
Nasscom has estimated India’s software exports at $31 billion in the year ended March 2007.
Indian IT companies are already reeling under wages that are rising an average 15% a year in the face of a shortage of skilled engineers, while competition is increasing from emerging rivals in countries such as China.
Wages typically account for half the costs of IT companies, but there are warnings that more rises will blunt India’s competitive edge.
“We have been so far able to manage them,” Karnik said. “But if wage costs increase and on top of that there is dollar depreciation, we are going to have a problem.”