New Delhi/Mumbai: India’s software companies estimated a 5.5% growth in exports in the current fiscal year, reaffirming a growth trend that signals their emergence from a slump triggered by the global meltdown that saw overseas customers slashing technology budgets.
Nasscom expects exports to rise faster, by as much as 15%, to $57 billion (Rs2.6 trillion) in the year to March 2011 from $49.7 billion in the year earlier, it said in Delhi on Thursday. Nasscom said exports were $47.1 billion in fiscal 2009.
The estimate for the current year is in line with Nasscom’s projected growth of 4-7%, but shy of the $50 billion mark that the industry body had estimated earlier.
Graphic: Ahmed Raza Khan / Mint
The growth came in the face of a 3% cut in worldwide technology spend, estimated to have crossed $1.5 trillion in 2009.
“This milestone confirms the value delivered by the IT-BPO industry of India to its customers and stakeholders, and reaffirms the strength of the business model,” said Manish Dugar, chief financial officer at Wipro Technologies. Wipro Technologies is the IT services arm of Wipro Ltd, India’s No. 3 software exporter.
To be sure, the FY11 estimate is lower than the previous estimate of $60-62 billion, which was made at a time when the industry enjoyed much higher rates of growth. The pace was as much as 32% five years ago.
Nasscom chairman Pramod Bhasin attributed the revision to a slow recovery from the slump as well as the earlier projection not being an exact estimation.
Following the global slump triggered by the collapse of Lehman Brothers Holdings Inc. in September 2008, Indian IT companies faced reduced demand for services from the US and Europe.
However, for the quarter ended December, the country’s largest IT exporters—Tata Consultancy Services Ltd (TCS) and Infosys Technologies Ltd—reported robust revenue growth on the back of increasing demand.
Even as clients are finalizing budgets for the next fiscal, commentary from the management of TCS and Infosys indicated an increasing number of deals on the table.
Still, “the economic environment will take another two to three quarters to stabilize”, Bhasin said.
The projections look realistic and are definitely not conservative, said Krishnakumar Natarajan, chief executive at mid-sized IT firm MindTree Ltd. “A quarter down the line, when IT budgets are finalized, I believe these numbers would be validated if not revised upward.” For fiscal 2009, MindTree had a revenue of Rs1,012 crore.
T.V. Mohandas Pai, director, human resources, and an Infosys board member, expects more clarity in the next few months.
“The current estimates are based on a poll of exporting companies, so it is fair to say that the numbers are realistic,” Pai said. “However, I am still very cautious. Closer to April, I expect to have better visibility about the next fiscal.”
Analysts aren’t yet ready to put a number on the growth potential as the demand scenario is still evolving.
“We are seeing a stronger rebound of demand in the global IT services market, especially in the financial services industry, manufacturing and to a certain extent, in retail,” said Sid Pai, managing director at the Indian arm of outsourcing advisory TPI.
Pai said that one possible dampener in the short term could be protectionist laws in the US aimed at keeping jobs at home, preventing companies from offshoring jobs—the mainstay of most Indian IT exporters.
“The protectionist sentiments we are seeing in the US will likely mean Indian players have to increase their local presence in that country,” TPI’s Pai said.