Nasscom or National Association of Software and Services Companies, the domestic IT services and BPO industry body, has for the first time in its 25-year history deferred issuing growth projection for the next fiscal year (2017-18). Nasscom President R Chandrashekhar said the association will come out with its guidance in the next quarter, most probably in May, once it is done with "deeper interactions" with customers and other stakeholders. The deferment of growth guidance comes at a time when the Indian IT industry is facing multiple headwinds - changing technology landscape, global events like Brexit and concerns over tightening of H-1B visa regime by the Trump administration.
The IT industry body had in November cut its growth estimate for the sector to 8 to 10 per cent in constant currency terms for the fiscal year ending March 2017, lower than an earlier forecast of 10 to 12 per cent. Now, it estimates the growth to be at 8.6 per cent, which would take the Indian IT industry's revenues to over $155 billion.
Some industry observers expressed surprise over the Nasscom's decision to defer its FY2018 outlook. "We are surprised that growth projection has not been given for FY18 as we believe the uncertainties indicated are unlikely to be as severe as the ones witnessed in February 2009 post the global financial crisis - despite which it gave a two- year growth forecast of 15 per cent CAGR (compound annual growth rate) over FY09-FY11," domestic brokerage Nirmal Bang said in a report.
So what has led to the deferment of growth outlook? Nirmal Bang said probably the big players are "uncertain in their outlook on growth".
"One thing that has to be understood is that Nasscom's growth projection is based on a bottom-up aggregation of revenue growth projections of its individual members with Tier-1 India-based players likely having a significant sway. Probably, they are uncertain in their outlook on growth," the brokerage said.
The brokerage does not expect Nasscom's growth projection to be higher than the 6-8 per cent range. "This growth includes expansion not only of India-origin IT services and BPO players, but also of global in-house captives (GICs) of some large customers. We expect Tier-1 players in our coverage universe to increase their revenues organically by 3%-6% in US dollar terms in FY18," Nirmal Bang said.
Nasscom's Mr Chandrashekhar conceded there are headwinds on factors like change in policies in the largest market of US under a protectionist Donald Trump regime. He, however, was quick to add that there are positives as well like analyst estimate of a near doubling of global IT spends to 5 per cent from 2.6 this fiscal year.
Nasscom chairman CP Gurnani asserted the sector is still a "growth industry" and has a "good future". He dismissed notions of a jump in uncertainties but said "the rate of change is unprecedented" which is causing the deferment of the outlook for next fiscal year.
Mr Gurnani, who heads the fifth largest firm Tech Mahindra, said the industry body could have given a wider target between 6 and 10 per cent but has chosen to arrive at a better picture. He said the target will be given by May and added that areas like BPM (business process management), product companies, platforms and digital are still growing. He said the revenue stream which may reduce is traditional outsourcing.
Mr Gurnani said the number of direct employees has grown 5 per cent to 3.8 million this fiscal year as against a 8.6 per cent revenue growth. Due to the digital disruption taking place in the technology sector, a massive re-skilling exercise will have to be undertaken and up to 1.5 million employees will have to be re-skilled over the next two-three years, the industry body said.
Mr Gurnani maintained that for the industry, digital revenue is growing at 1.5 times faster and now constitutes 14 per cent of the total revenue stream.
(With PTI inputs)
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