Nasscom, the apex association of companies in the information technology (IT) sector, has unexpectedly postponed issuing a growth projection for 2017-18, a first in 25 years, in the wake of uncertainty due to regulatory changes in the US and the macroeconomic outlook.
Nasscom said growth for the current financial year (2016-17) was expected to be 8.6 per cent, within the earlier estimate of eight to 10 per cent but at the lower end. It had made the revision to 8-10 per cent last year, from the earlier 10-12 per cent.
“Quantifying the guidance (forecast) still requires some work. If we wanted to give a guidance, we could have for six to 10 per cent growth but due to political uncertainties and the state of our own industry due to digital transition we have deferred giving one till the next quarter,” said C P Gurnani, chairman of Nasscom and chief executive at Tech Mahindra, at the Nasscom India Leadership Forum here.
The industry body added it has not seen a revival of discretionary spending by clients in the banking, financial services and insurance (BFSI) segment.
“We have nothing new at this point to add but given the huge set of uncertainties, whether in terms of macro economic outlook or some of the currency fluctuations or political volatility with the new government in the US, discretionary spending by BFSI clients have also not gone up,” said R Chandrashekhar, president, Nasscom.
On a positive note, he said the global sourcing market was growing and India’s share was robust. “While there are some uncertainties in the short term, the initial data from global analysts on tech spending in 2018 is promising. Global IT spending is expected to grow by five per cent and 5.3 per cent for 2017 and 2018, much higher than the 2.8 per cent in 2016,” he added.
Gurnani says the delay in giving a growth outlook is also due to faster change in technology. “The rate of change is unprecedented.” Nasscom says for FY17, almost 14 per cent of revenues for the sector came from the digital area. Digital deal volume grew 1.5 times faster than traditional deals.
“The trend shows that we will remain a growth industry. They (Nasscom) also believe it is time to transform and rejuvenate. We are looking at a few million reskilling, skilling, creating the capabilities to become ready for the future. The leadership also needs to go through a reboot. Growth is coming from BPM (business process management) companies, it is coming from platform services, from anything that is digital, whether data or analytics,” said the Tech Mahindra chief.
Indian IT is facing a challenge due to the shift towards digital technology from legacy services. While traditional IT services have seen a decline in demand, the growth in cloud-based services or robotic process automation is not adequate to offset dip in the core business. Nasscom, however, says digital adoption by Indian IT services entities have picked up pace in the past couple of years.
“The move towards digital is happening faster than we predicted. We are seeing a four-time growth in digital spend between 2014 and 2016. Digital constitutes 12-15 per cent of the total revenue ...if you look at the fact that Indian firms are looking at CDO (chief digital officer) roles and BFSI deals have 30 per cent of digital components, these are clear indicators of the directional change that is happening on a continuous basis,” said Chandrashekhar. – Business Standard