US downgrade not to impact Indian IT cos in short term: Nasscom

Downgrade by credit ratings agency Standard & Poor’s last Friday has triggered concerns that the USD 60-billion software services industry

PTI | August 9, 2011



The Indian IT industry will not be impacted in the near term by the uncertain global economic environment, the software services body Nasscom on Monday said, exuding confidence that the sector will "sail through" the crisis, which has been intensified by the downgrade of US credit rating.

The downgrade by credit ratings agency Standard & Poor’s last Friday has triggered concerns that the USD 60-billion software services industry -- which gets more than 60 per cent revenues from the US market -- will be hit.

"Although the global economic environment is a cause for concern, it is not likely to impact the Indian IT industry in the near-term future. Business is still growing well for our customers and they continue to invest in IT," Nasscom President Som Mittal told reporters in the Capital.

He added, "I think the industry will be able to sail through this crisis (uncertain economic situation) as well." IT companies are facing a string of concerns including, debt crisis in euro zone nations, inflation at home and currency fluctuations.

"We need to watch the currency, be cautious and see which way the economy is going over the next two quarters. There are many other economic factors like Europe is an issue, there is an issue of food prices, inflation, oil. "So I think it is will be a combination (of all)," Mittal said.

Meanwhile, shares of the top three IT exporters -- TCS, Infosys and Wipro -- declined nearly 5 per cent on the Bombay Stock Exchange on Monday.

"We do not see any material impact from the sell-off in global markets. We are watchful of the evolving global situation but do not see any changes in the business demand environment in North America and Europe," TCS CEO and MD N Chandrasekaran said. TCS is India's largest software exporter.

iGate Patni CFO Sujit Sircar agreed. "Nothing has fundamentally changed with the downgrade except for the sentiments in the economy and short-medium range uncertainty," he said, adding that in the short term, there could be uncertainty related to currency fluctuation.

"Certain volatility is evident in the international exchange rate and we expect dollar to depreciate further. This will impact the bottom line of the outsourcing industry specially smaller BPOs that operate on narrow margins," said BPO firm Firstsource Deputy MD and CFO Rajesh Subramaniam.

Appreciation of the domestic currency is not beneficial for exporters as they get less rupees per dollar.  CEO (IT Business) and Director T K Kurien of Wipro said, "The structural weakness in the economy offers opportunities to IT services companies."

He expressed confidence that the industry is far more prepared for any change in the negative macroeconomic environment now than it was "in 2008." Another software major HCL today said in its assessment, the S&P downgrade of US would not have an impact on the outsourcing market.

Infosys CEO and MD Kris Gopalakrishnan had said yesterday that the industry needs to wait and watch the situation in the US and other markets.
 

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