The National Association of Software and Services Companies (Nasscom) has said that the domestic IT industry is likely to meet the lower end of its growth forecast of 11-14% for this fiscal as customers tread cautiously on technology spending due to global economic uncertainty.
The statement, made for the second time since September, comes after several IT firms gave guidances which was lower than the industry body’s forecasts.
“For fiscal 2013, a year marked by significantly varied trends, the industry is expected to meet the lower-end of its growth guidance and at least achieve a double-digit growth,” Nasscom said.
Industry export revenues are estimated at $75 billion to $77 billion for the year, it said.
Ashish Chopra, IT analyst with Motilal Oswal Securities, said the Nasscom announcement comes after considering the recent growth guidance of all the companies combined.
“Even companies such as Cognizant, TCS and HCL, which have been outperforming Nasscom guidance, have witnessed a slowdown in actual growth numbers. They are just growing faster comparatively due to being aggressive and thus winning more deals. Also, certain sectors such as retail and manufacturing are growing faster than BFSI and telecom.”
The pace of growth slowed in the recent quarters for India’s top outsourcing companies, including Infosys and Wipro, as western clients curbed spending in a difficult business environment.
With customers such as Citigroup, Wal-Mart, BP and Volkswagen, the Indian outsourcing sector relies on the US and Europe for three quarters of its revenue.
Dipen Shah, analyst with Kotak Securities, said since the first two quarters have seen lower growth, the remaining two quarters will have to log higher growth even to meet the lower end of Nasscom’s guidance.
“While there has been a slowdown in verticals, such as BFSI and telecom, retail and manufacturing have been growing and companies such as TCS and HCL, which continue to outperform, have been more successful due to the breaking down of large deals into smaller one,” he said.
Sid Pai, partner and managing director of TPI, an IT research firm said, the companies’ growth numbers have reduced significantly in recent times due to economy headwinds and because IT companies have gained increasing maturity, which makes it difficult to manage broad-based growth while still growing at the same level.
“However, H2 of fiscal 2013 is expected to be better than H1 due to the uncertainty in the European economy slowly blurring and the US elections out of the way,” he said.