NEW DELHI: Unprecedented uncertainty due to political and macroeconomic factors, continuing deceleration in job growth and reduction in the traditional outsourcing business were the key factors underlining the growth prospects of the $155-billion software industry as the IT industry body Nasscom announced its annual review for the year 2016-17.
Though in an unexpected move, Nasscom refrained from giving out an annual growth guidance range for the industry for the coming fiscal, deferring it to the next quarter, it sounded off a few notes of optimism by saying that projections indicate an upturn in IT spending in the coming year.
On the sidelines of its flagship Nasscom India Leadership Forum event, the industry body said that the industry is expected to grow by 8.6% in the current fiscal 2016-17 – which is in line with its guidance of 8-10% to touch revenues of $155 billion. In November, Nasscom had revised its guidance downwards from 10-12% after factors such as Brexit, the US elections and the stress in financial services spending weakened the industry prospects.
“There are huge uncertainties in the market which include macroeconomic factors, the currency fluctuations and the political volatility. With the new government in the US settling in, the discretionary spend has not really been firmed up,” said R Chandrashekhar, president of Nasscom.
He added that on the positive side, there is a possibility of an uptick in the US economy. “Projections indicate spending could increase anywhere between 5-5.3% this year from 2.8%.” The industry grew by 12.3% in FY 16 as compared to the expected 8.6% in FY 17.
CP Gurnani, chairman, Nasscom said that a lot of changes are taking place in the world and the rate of change is unprecedented. “The industry is getting disrupted and the rate of disruption is much higher,” he added. Gurnani said that employee growth for the industry was 5% while the industry growth came at 8.6%.
“This means that we will need less people for the same revenues but automation also creates new types of jobs for which we require reskilling of employees,” he added.
While the IT-BPO exports from India is expected to reach $118 billion, India’s domestic IT-BPO market is expected to grow by 12% year-on-year to reach Rs 2,54,500 crore.
The industry currently employs over 3.86 million people, an addition of 1.7 lakh people over FY2016. Malcolm Frank, chief strategy officer of Cognizant, said that the year 2017 is looking to be better than 2016.“There was a lot of political uncertainty last year due to Brexit and the US elections, which has ended now,” he said.
Frank added that one of the reasons which makes him optimistic is the growth in the digital business which is no more restricted to small value deals.
Nasscom also said that there has been a four-time growth in digital spends and almost 12-15% share of the industry’s revenues now come from digital.
Source: Economic Times