Global slowdown, oil price hike to hit Indian IT growth

Bangalore: The booming Indian information technology (IT) sector is set for a slower growth in the current fiscal due to global economic slowdown, surge in crude oil prices and lower technology spending in the US, a top industry official said here Monday.

"The Indian IT industry is projected to grow at 23-24 percent this fiscal as against a robust growth of 29 percent in the last fiscal in dollar terms," National Association of Software and Services Companies (Nasscom) chairman Ganesh Natarajan told reporters here at a technology event.

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This was a result of economic slowdown worldwide, rising oil inflation and tightening of outsourcing budgets by US firms, he said.

As the US accounts for about 61.4 percent of Indian software and services exports, lower technology spending and rising unemployment rate there will lower the export growth rate by 5-6 percent, Natarajan said.

Europe accounts for 30 percent and rest of the world for 8.5 percent of the IT exports.

"Feedback from our members is a flat export growth in the first two quarters and slower pick-up in the later half due to recession and US presidential elections by this year-end," Natarajan said, adding that rising crude oil and commodity prices were also putting pressure on spending and lowering budgets.

According to Nasscom, Indian IT exports increased to $40.3 billion in FY 2008 from $31.3 billion in FY 2007, registering year-on-year growth of 29 percent in dollar terms and accounting for 64 percent of the aggregate revenue.

Exports comprise software, IT-enabled services (ITES), business process outsourcing (BPO), engineering services and research and development (R&D) and software products.

"Though there are signs of revival in the US economy, we have to see what impact rising food prices and oil inflation will have on the growth prospects, especially with respect to outsourcing of IT services," Nasscom president Som Mittal said on the sidelines of the 10th Nasscom BPO strategy summit being held in India's IT hub.

Nasscom vice-chairman Pramod Bhasin said the IT-BPO industry would treat the challenging year as an opportunity to maintain the growth momentum and leverage the competitive advantage to increase its market share in the global IT industry, which was $1.7 trillion in 2007.

"The Indian IT-BPO industry is at an inflection point. More than labour arbitrage, talent, service quality, productivity and time-to-market have become key differentiators in a competitive world market," Bhasin noted.

In spite of a 12 percent rupee appreciation against the dollar in the last fiscal, the Indian IT industry was able to sustain high growth rate due to cost arbitrage, competitive pricing and optimal utilisation of its skilled resources vis-�-vis its competitors worldwide.

With the Indian economy growing at nine percent and domestic firms investing in technology across verticals, the Indian IT industry rode software and hardware exports plus domestic sales to post $64 billion in FY 2008 as against $48 billion in FY 2007, registering a 33 percent year-on-year growth.

Of the total revenue generated in FY 2008, software services contributed $31 billion, ITES-BPO $12.5 billion, engineering services and software products $8.5 billion and hardware sector $12 billion.
Source: IANS