No discrepancy in IT exports data: Nasscom’s Rishad Premji3 min read . Updated: 07 Dec 2018, 12:26 PM IST
The divergence in the $136 billion in India IT exports penciled in by Nasscom against $77 billion estimated RBI is primarily on account of how the two groups classify the revenue, says Nasscom chairman Rishad Premji
New Delhi: Nasscom chairman Rishad Premji dismissed any talk of inflating the size of India’s information technology (IT) sector and said the divergence in the $126 billion in IT exports penciled in by the industry body against $77 billion estimated by the Reserve Bank of India (RBI) is primarily on account of how the two groups classify the revenue.
Nasscom’s denial came after a report by a JPMorgan Chase analyst attributed the widening gap between Nasscom’s IT export estimates and software exports in balance of payments (BoP) on both classification and inflating industry size.
“There is no discrepancy," Nasscom chairman Rishad Premji said in an interaction with journalists at Mint’s newsroom in Delhi on Wednesday. “We are not claiming to reconcile the BoP and exports. We (Nasscom’s member companies) have subsidiaries in the US, and all over the world, that would account for 60-70% of the difference between RBI and Nasscom."
Sangeeta Gupta, senior vice president and chief strategy officer at Nasscom, said: “Please understand that balance of payments is a very different terminology from what we term as exports."
“What Nasscom publishes is the exports data, and our exports definition is 100% owned subsidiaries overseas as well as on-site exports. What RBI counts is money that flows in the country through authorized foreign dealers in the country," she added.
A 26 November note by JPMorgan Chase and Co. analyst Viju George said that according to RBI’s BoP numbers, software exports have grown from $50 billion in FY10 to $77 billion in FY18, as against Nasscom’s estimates of exports growing from $50 billion to $126 billion during this time.
This 63.6% divergence in the two data sets was first discussed by Mint columnist Siddharth Pai, in his column dated 4 December, who said for calculating software exports, beginning 2011, RBI started using banking channel data from receipts through the Foreign Exchange Transactions Electronic Reporting System.
“[T]here are both classification & industry-size estimation issues—these two together account for ~75% of the absolute gap," wrote George at JPMorgan in his note titled Dissecting the widening gap between Nasscom’s India IT export estimates and software exports in India’s BoP.
“~50-60% of the absolute gap arises due to overseas income generated by foreign affiliates (subsidiaries, associates, branches, etc.) of India IT firms, which bypasses BoP. Then there is some level of over-estimation by Nasscom of revenues from GICs/MNCs/others resulting in likely over-sizing industry by 8-10%, which explains ~20-23% of the gap," wrote George.
This is probably for the first time in the last two decades when an analyst has questioned Nasscom’s estimates.
Significantly, this development also comes at a time when Nasscom is looking to align itself with the sweeping changes impacting the industry: higher share of digital business has made many of the old metrics redundant, and for this reason, Nasscom is looking at both qualitative and quantitative parameters to reflect the changes.
Finally, Nasscom’s annual growth forecast too has been questioned by many analysts and executives, who have argued that since Tata Consultancy Services Ltd (TCS), Infosys Ltd and Wipro Ltd now account for 23% of country’s $167 billion IT industry, it is not accurate and correct to expect these companies to grow at a pace similar to that of smaller firms.
“Our estimation is conservative rather than being over the top. We take numbers on the lower side for a lot of these companies," said Gupta.
Nasscom said many of the GICs and other private firms share their numbers with Nasscom although these firms do not make their numbers public.
“Please remember RBI data was prepared with onsite ratio of 20%. The on-site percentage has moved to 40%. So these are just many of the sub nuances," said Gupta of Nasscom.