New Delhi: India’s exports of software and services in the fiscal year to March will miss an earlier forecast by at least one-third as recession in key markets forces overseas clients to trim spending on technology.
Click here to watch video
The latest forecast by the National Association of Software and Service Companies, or Nasscom, effectively means it expects the industry’s export earnings to grow in a single-digit range in the second half of the fiscal year.
The trade body said on Wednesday that growth in export earnings will slow to about $47 billion (Rs2.29 trillion), or 16-17%, instead of touching $50 million, or 21-24%, it had forecast in July.
“The first half of 2008-09 posted a growth of 24% as per the industry estimates,” Nasscom chairman Ganesh Natarajan said. “In the second half, we have seen a rapid decline.”
Future prospects: Nasscom president Som Mittal and chairman Ganesh Natarajan (left) at a press conference in New Delhi on Wednesday to announce the body’s outlook on the performance of the industry. Subhav Shukla / PTI
The industry’s export earnings posted a growth of 29% to $40.4 billion in the fiscal year ended March, Nasscom said.
It now expects overseas revenues to clock $60-62 billion only in the fiscal year to March 2011, a year later that it had earlier predicted.
“IT (information technology) is a support industry and is seen more as a cost part of the business by organizations across the world. In the downturn scenario that we are in, most companies are looking at bringing down their cost and are specifically looking at sectors that are not as essential as maybe security is. This has led to a drop in the estimations,” said Diptarup Chakraborti, principal research analyst with IT research firm Gartner Inc. “Many companies have either shelved or deferred expansion and investment plans due to the downturn.”
Nasscom expects revenues from software and outsourcing services to reach $71.7 billion, accounting for 5.8% of India’s gross domestic product. Revenues from software and back-office services is expected to be about $60 billion, down from its July forecast of $62-64 billion.
The industry lobby group also predicted that the domestic market would be worth around Rs111,000 crore by March this year, growing at nearly 20%.
Nasscom vice-chairman Pramod Bhasin said the industry will remain a net hirer in the current fiscal. “The industry will continue to hire and if performance is good, then all is fine,” he said. “Companies also need to keep their profitability in mind.”
On employment, Nasscom estimated that direct employment in Indian IT and business process outsourcing will reach nearly 2.23 million and indirect jobs eight million.
“Every direct job created leads to around three-four more downstream. With time, this will go lower, but will still remain significantly higher than other sectors,” Som Mittal, president of Nasscom, said.
The economic downturn has made the future less predictable, Bhasin said. “Spending has come down and buyers are trying to get more out of the dollar. But the Indian IT sector will be the fastest growing industry in the world,” he said.
Nasscom has estimated BPO exports to grow at 17.5% to around $12.8 billion, while IT exports are estimated to grow at 16.5% to $26.9 billion.
Indian software firms such as Tata Consultancy Services Ltd, Infosys Technologies Ltd and Wipro Ltd provide solutions such as system integration, application development, supply chain designing and back-office services.
The firms are expanding in Europe, Asia and West Asia to lower their dependence on the US which accounts for more than half of the sector’s export revenue.
Reuters contributed to this story.