The Hindu Business Line : Software, services revenue to grow at 21-24% to $62 b

Overcoming challenges: Mr Som Mittal, President, Nasscom, and Ms. Sangeeta Gupta, Vice-President, at a press conference, in the Capital on Wednesday. –

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New Delhi, July 9 India’s software and services revenue is poised to grow between 21 and 24 per cent during 2008-09 to touch $62-64 billion. The growth rate projections for FY09 are a tad lower than 28 per cent growth achieved in FY08, on account of a possible slowdown in decision-making on new projects and also due the fact that the industry now operates on a much larger base.

Within the FY09 revenue targets, exports are expected to account for $50 billion while the domestic revenue would be close to $13 billion. “While almost 70 per cent of the IT spend is on existing projects, about 30 per cent is on new projects which is a discretionary spend. The decision-making on new project gets affected in a challenging environment,” Mr Som Mittal, President of Nasscom said at a conference here.

Mr Mittal said that while the US economic slowdown was a concern, the indicators suggest a revival in tech spending during the second half of 2008. “Overall the CIOs expect the tech spending growth in calendar 2008 to be similar to 2007, although the budget allocations will be more back-end loaded in 2008…The expected slowdown in banking and financial services continues, but clients in other sectors like manufacturing and healthcare are indicating a higher growth,” Mr Mittal pointed out.

The growth story

Software and services exports surged 29 per cent during 2007-08 to garner $40.4 billion revenue — overcoming the strong headwinds such as an impending slowdown and a severe financial sector crisis in the US, as well as currency fluctuation — to meet the targets set at the beginning of FY08. The domestic market continued to gain momentum, growing 26 per cent to register revenue of $11.6 billion in FY08. This took the overall IT industry revenue — exports and domestic combined — to $52 billion, a growth of over 28 per cent compared to the previous year; and the overall IT sector direct headcount touched 2 million professionals.

Within the export segment, geographical diversification and maturity in services and operating efficiencies helped the IT services exports to jump 28 per cent to $23.1 billion, while the BPO exports were up 30 per cent to $10.9 billion. Engineering services and product exports clocked revenue of $6.4 billion, an increase of almost 29 per cent over FY07.

“The last year was difficult, with currency fluctuations and the sub-prime crisis shaking the industry, but the IT sector has shown resilience. Given that we are well on our way to achieve the target of $60 billion in exports by 2009-10, the industry is focusing on improving productivity, efficiency, as well as opening up new markets such as Continental Europe and Japan,” Mr Mittal added. The industry has seen a 33.7 per cent CAGR over the last eight years, and would therefore need a 21.9 per cent growth to hit the FY10 targets, Nasscom said.