IT exports growth down to a third

The National Association of Software and Service Companies (Nasscom) has predicted a gloomy 5.5% growth in the India’s software and service exports this fiscal to $49.7 billion, down from a growth rate of 17.5% during the previous one and 52% in the year before.

It also said the number of new jobs created by the sector will fall to just around 0.9 lakh during the year, compared to around 2.3 lakh during the last year and 3.75 lakh during the year before.

The domestic software and services sector grew industry 12.2% to Rs 66,200 crore ($14 billion). While the growth was not far below the 13.5% rise during last year, it fell well short of the 30% growth posted by the domestic industry in 2007-08.

The prediction of 5.5% growth has come in the wake of Nasscom member firms such as Infosys revising their earlier guidance of a possible dip in full-year revenues and guiding towards a slight increase in the topline.

Hit by the global economic downturn, frontline IT companies had posted revenue declines during the first two quarters of the financial year, but managed to climb back into year-on-year growth during the December quarter.

Pramod Bhasin, Nasscom chairman and CEO of Genpact, India’s
largest BPO company, said the  association expects the industry to post stronger numbers during the coming year.

“It has been a tough year, but we did not waste it,” he said, pointing to structural adjustments made by most of the big members. “We think export growth will increase from 5.5% this year to 13-15% during the next and the Indian market should grow its revenues by 15-17% next year,” Bhasin added.

Against the 90,000 jobs added this year, Nasscom expects to add 1.5 lakh members to its existing base of around 23 lakh workers next year.

The association also pointed out that profitability indicators have improved during the last one year, whether measured in terms of employee utilisation, revenue per employee or profit margins.

According to the numbers put out by the group, utilisation rates of employees have gone up from 70.8% during the December quarter of 2008 to 74.2% during the last quarter and attrition rates are down from 12.9% to 11.8%.

However, Bhasin pointed to the resurgence in anti-outsourcing rhetoric from the US President Barack Obama, whose party has been dealt major electoral reverses in the last few months. “We expect there to be more noise around outsourcing, but at the same time, we believe the leaders of the world realise that such moves will invite swift retaliation,” he said.

Bhasin said the removal of tax privileges mooted by the Obama administration will largely affect manufacturing companies rather than the American IT firms.

Nasscom, however, warned that perceived “injustices” such as shipping jobs abroad can have an impact on the business climate in countries like the US. “If the unemployment is very high, it can start affecting consumer behaviour as well... So it won’t be right to pooh-pooh it or be complacent,” Bhasin added.