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Nasscom lowers sales growth prediction for India’s IT industry

Nasscom lowers the rate at which it expects revenues for the Indian IT services industry as a whole to grow, citing domestic and global issues in its revision

The trade body representing India’s IT services sector has lowered its sales growth expectation by 2% for its financial year as a result of global and domestic factors.

Nasscom now predicts between 8% and 10% revenue growth for the current 12-month period.

However, the organisation’s president, R Chandrashekhar, said he is confident the industry will reinvent itself to overcome the challenges it faces.

Chandrashekhar said the industry is going through a transient phase with various domestic and global factors affecting its performance. “While the effect of various short-term factors may show for a couple more quarters, the worst is behind us,” he said.

“Global projected growth for the industry is high and our share remains strong. We are confident that the sector will continue to reinvent itself by investing in digital technologies and competencies to drive consistent and sustained growth.”

This follows are warning from Gartner analyst Arup Roy that the IT services sector globally will be hit by the protectionist policies of the US president-elect Donald Trump, with India-based suppliers to be hit the hardest. “The Indian IT sector must now brace for further troubled times ahead,” said Roy.

Roy said Indian companies, for example, should not expect double-digit sales revenue growth in 2017, adding that “a sub 10% growth for 2017 is certain”.

“Trump’s protectionist views would have further dampening effect on growth prospects, if the views were to crystallise into some serious policy implementations,” said Roy.

Ashish Gupta, European head at tier one Indian supplier HCL, told Computer Weekly that there are short-term challenges facing Indian suppliers following Trump’s election and the UK’s decision to exit the European Union.

He said if this had happened 10 years ago, it would still have hit the Indian firms hard but today these companies are deeply entrenched in western enterprises and have invested heavily in the countries where their customers are.

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For example, 65% of HCL staff in the US are US citizens, while Europe the company has 19 delivery centres and 10,000 staff serving 280 customers.

“There are political issues that are going to effect the progress of globalisation in the next five years, but in the technology industry there are much bigger impacts being created by technology change,” said Gupta.

He said Brexit and Trump’s election are “monumental changes, but they are still smaller – in the context of the technology industry – than the changes the industry is going through itself”. These changes include developments around cloud computing, automation and artificial intelligence.

Indian IT companies grew fast through providing lower cost IT and business process staff to carry out work for western organisations, but now much of the work can be automated.

Artificial intelligence is also beginning to make ground in business process outsourcing (BPO) and IT. Robots are even providing customer services for banks, which is a direct replacement for offshore BPO, of which Indian firms are big players.

Chandrashekhar at Nasscom said: “To stay globally competitive, Indian firms [must] invest in the future and enhance their digital capabilities. This entails a mix of re-skilling, domain and platform capabilities coupled with acquisition-led competencies.”

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