NASSCOM’s New President Expects To See Pick-Up In Indian IT

R Chandrashekhar, former Union Telecom Secretary, has recently joined as the new President of IT industry body NASSCOM. Chandrashekhar indicated a positive outlook for the Indian IT sector for the coming fiscal.

For FY14, NASSCOM has forecasted 12%-14% revenue growth for IT exports. The industry is slated to reach USD 84 billion and the domestic revenues to touch USD 20 billion. The favourable forecast is a result of an expected increase in the demand from the US, the sector's primary market that accounts for about 60% of the sector's overall revenues. Britain and Australia are the next two biggest markets for Indian IT firms such as TCS and Infosys.

During FY13, most of India’s top IT firms including TCS, Infosys, Wipro and HCL Technologies notched up a strong performance in terms of profitability, and this is reflected in the price appreciation in their stocks in CY13.

Recently, NASSCOM had forecast a target of USD 300 billion for the Indian IT sector by FY20. However, a big risk in achieving this target is the new immigration bill for H1-B or L-1 visa holders which is being considered by the US government. These are the two categories of visas used by Indian IT firms for their employees. As per the bill, which is expected to get approval by the end of this year, H1-B visa holders would need to pay higher visa fees. This will directly increase the costs for employers and in turn pull down the profits and hence the margins of the IT companies.

There are also some other challenges that the industry in facing at present like competition from the emerging markets (China, Philippines etc.) and dependence on exports (especially on the US market). However, the IT industry players are focused on improving the services segment provided by them by upgrading the technology. Also, INR depreciation in addition to the improvement in economic conditions in the US and Europe are expected to boost the demand for IT firms and up their profits.