India Expects Software and Services Revenue Growth to Fall

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India's National Association of Software and Service Companies (Nasscom) forecasts revenue from the domestic and export markets for software and services in India will grow more slowly this year, at between 21 and 24 percent.

The country's software and services revenue grew by 28 percent in the Indian fiscal year to March 31, to US$52 billion, the association said Wednesday.

There are however some concerns whether this growth can be sustained this year, particularly on account of fears of a recession in the U.S. and the impact of rising oil prices on both the domestic and export markets.

The downturn in the global economy is in the short term slowing down offshore outsourcing, said Siddharth Pai, a partner at outsourcing consultancy Technology Partners International (TPI) of Houston, Texas. Although the Indian domestic market for software and services is robust, this market is still very small, Pai added.

The data for the fiscal year ended March 31 includes revenue from both domestic and export markets. Revenue from exports grew 29 percent to $40.4 billion during this period, while revenue from the domestic market grew by 26 percent to $11.6 billion.

In the export sector, exports of IT services have grown by 28 percent in US dollars to revenue of $23.1 billion, while exports from business process outsourcing (BPO) are up by 30 percent to post revenue of $10.9 billion. Exports of engineering services and products grew to $6.4 billion by 29 percent.

The growth rates in exports are likely to have been lower in Indian rupees because of the near 13 percent depreciation of the U.S. dollar against the rupee during the year, which pushed down rupee realizations from exports.

Revenue from exports includes revenues by Indian outsourcers and local subsidiaries of multinational companies that outsource software development and BPO work to India.

Indian outsourcing companies are announcing their quarterly results this month, starting with Infosys Technologies later this week. The results are expected to give an indication of the impact of the economic problems in the U.S. and other markets on the revenue and profit of Indian outsourcers. The U.S. is the largest market for Indian outsourcers, accounting for about 60 percent of revenue. The second and third quarters of this calendar year are likely to be difficult for Indian outsourcers, with higher uptake from customers abroad coming after that, according to analysts.

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