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An internal government assessment is worried that any deceleration in software exports due to the Euro zone debt crisis and the poor economic conditions in the US will affect GDP growth. The economy growth is estimated to grow at 8-8.5 per cent during current financial year.
The assessment note, a copy of which is available with Business Line , says: “In 2009-10, the US alone accounted for 61 per cent of India's total software exports. European countries (including the UK) followed with as much as 26.5 per cent. If these two regions are the first to be hit by the recession, it is unlikely that software export revenue would remain unscathed.”
Over the period 2004-05 to 2009-10, services accounted for 66 per cent of the increment in India's GDP. Revenues from software services amounted to 9.4 per cent of this (excluding public administration and defence), the assessment adds.
According to balance of payment data, gross revenue from exports of software services amounted to as much as 24 per cent of the gross revenue from merchandise exports.
Talking about the merchandise exports, the note says that markets accounting for about a third ( see chart ) of India's export are already stagnating or in recession. Only two regions counter this trend: Parts of Asia (excluding China) and the OPEC countries.
Although worst affected EU economies such as Portugal, Greece and Ireland have very little impact on Indian exports, the problem will be more significant if the crisis spreads to Italy and Spain, the assessment notes.
In 2010, Portugal and Greece had a share of about 1.3 per cent each in India's exports to the EU and Ireland had about 0.7 per cent. Italy and Spain had 11.5 per cent and 6.8 per cent respectively.
Ministry optimistic
Meanwhile, according to the note, “The Finance Ministry is still maintaining that the Indian economy is not likely to be very adversely affected by the current round of global volatility. The Indian economic growth story is so robust that the current uncertainty will raise no more than a minor blip in its confident trajectory.”
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