Bangalore: In spite of being one of the favorite places for BPO and IT services, India may face challenges as new places have been discovering to do such business. Newer destinations like China, Philippines and Eastern Europe are offering services for cost lesser than of India.

According to Everest Research institute's latest report on Global Sourcing- Market Vista Q1 2008, the cost inflation in Indian cities is exceeding the 2007 levels. Report stated that players are still expanding and the competitive intensity for talent remains unabated. That apart, high consumer prices 'at their highest level since 2004' are also creating inflationary pressures on wages.

Moreover Nasscom, a trade body and the chamber of commerce of the IT-BPO industry, foresees a three to four percent dip in growth in export revenues in IT services and BPO in fiscal 2008-09

However, the government and the industry itself, have been planning certain measures to resolve these problems that will help the IT and BPO sectors to be on a growth path. As a part of this move, the government has recently extended the STPI scheme by a year which could bring some help to the IT sector.

Some of the BPO players are now getting attracted to tier III and tier IV cities to do business because of the low expense of the operation when compared with the big cities. For instance, Genpact, a business solution provider has recently signed a MoU with the Meghalaya government to open centres in the state.