IT sector exports to grow 13-15% in FY15, says Nasscom
Software exports in 2014-15 are forecast to rise to as much as $99 billion on increased spending by clients like GE and Citigroup
Mumbai: India’s information technology (IT) lobby made its most optimistic forecast for software exports in three years, estimating a 13-15% increase in the next fiscal year with top clients such as General Electric Co. (GE) and Citigroup Inc. expected to spend more on farming out back-office software projects to cut costs.
As was widely expected, Nasscom on Tuesday said software exports in 2014-15 would rise to as much as $99 billion, from about $86 billion estimated for this fiscal year ending March.
Including the domestic market, the Indian IT industry is currently pegged at $118 billion.
The latest guidance is Nasscom’s highest forecast since it estimated a 16-18% growth in software exports for 2011-12, when top companies such as Infosys Ltd and Wipro Ltd saw a slowdown in fortunes as clients tightened technology spending amid tough macroeconomic conditions in the US and Europe.
Actual growth in software exports in 2011-12 was 16.5%, according to Nasscom data.
The latest forecast will reassure investors and bodes well for the Indian software services exports sector, which recorded its strongest performance in 2013-14after more than two years, with Infosys and US-based Cognizant Technology Solutions Corp. enjoying healthy double-digit growth.
Nasscom said the Indian IT industry would add incremental revenues of $13-14 billion in 2014-15. Incremental revenue is a measure of market share growth that has evolved as the new benchmark for the IT sector.
“What’s driving the exports is discretionary spending,” newly elected Nasscom president R. Chandrashekhar told reporters at a conference. “Companies are now opting to spend on IT and are not just confined to absolute essentials. That’s a good sign and portends well for the future.”
For the current fiscal year ending March, Nasscom said the country’s software exports will grow at about 13%. It had earlier forecast a 12-14% range for exports in fiscal 2013-14.
For the domestic market, however, Nasscom forecast slower-than-expected growth of 9-12% at Rs.125-128 crore in 2014-15, mainly due to uncertainty on spending by the government.
Nasscom said the depreciation of the rupee and delayed decision-making on government projects hurt the prospects of the domestic IT market. The domestic market witnessed slower-than-expected growth in 2013-14, growing at barely 10%, compared with Nasscom’s guidance of 13-15%.
A “13-15% (estimate) for exports looks like a good number,” said Sudin Apte, founder and chief executive officer (CEO) of outsourcing advisory Offshore Insights. “App modernization and transformation, as well as cloud and infrastructure management should drive most of the growth.”
“However, I think the polarization at the top will continue—I don’t expect Infosys and Wipro to see the same kind of growth as Cognizant and TCS (Tata Consultancy Services Ltd),” he added. TCS is the country’s largest software exporter.
At least 78% of the clients feel confident of spending more on technology projects in 2014, Nasscom said.
The higher forecast for exports comes amid a recovery in macroeconomic conditions in North America, which is the largest market for Indian software services exporters. Demand from Europe, where companies have increased outsourcing to save costs amid a tough economic environment, is also expected to boost the fortunes of Indian IT firms.
In January, Chandrashekhar said he expected the 2014-15 fiscal year to be stronger for the Indian IT sector, indicating that the growth forecast for software exports would be slightly higher compared with that for the current fiscal year.
In the December quarter, Infosys posted strong results and raised its guidance for 2013-14, while both TCS and Cognizant said they expected to perform even better in 2014 compared with last year.
On a recent conference call, Cognizant CEO Francisco D’Souza said that the discretionary spending momentum seen in 2013 would continue in 2014 as well.
Nasscom recently projected that the Indian IT industry would grow to about $300 billion by 2020, and created different verticals that would focus on specific areas such as the domestic IT market, software products and e-commerce.
Technology researcher Gartner Inc. has forecast that global IT spending will touch $3.8 trillion in 2014, up 3% from last year.
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