“The demand side underpinning recovery remains weak and there are 30-40% chances of relapse of recession in 2010 and in 2011,” Stephen Roach, chairman of Morgan Stanley Asia, cautioned a packed audience at the 18th Nasscom Leadership Summit in Mumbai on Tuesday.
And caution is the watchword in the IT industry these days, with Nasscom’s targets being seen as optimistic. In its recent report, Nasscom said IT export revenue growth, which is seen at 5.5% in the current fiscal, will achieve a growth rate of 13-15% in FY11.
Analysts see the projections to have been done in a hurry.
Diptarup Chakraborti — principal research analyst at Gartner India, said, “I would say we have to be cautious. The projections have to be viewed in two aspects — one is the base effect, meaning that when the base revenue was low during recession, any growth on top of that would suddenly look to be impressive. Second, on an actual basis that growth may be just meagre. See, the US economy grew 5.7% as per the latest numbers. On a base level, it might look good, but actually, it meant very little.”
As another example, Chakraborti cited that most top IT firms posted impressive Q3FY10 numbers in financial targets, especially profits. But that happened on the back of the previous quarter’s lacklustre performances. So Q4FY11 may not appear to be as good as Q4FY10, because then, the base would be larger.
Chakraborti accepted that growth is happening, a major indicator of which is that firms are beginning to hire in large numbers.
Ganesh Natarajan, CEO of Zensar Technologies, had recently said the projections may be a bit ambitious, but that going by the order-book of IT firms, they look achievable.
Advisory firm KPMG said in a report that India’s IT-BPO market, including exports, could touch $285 billion in 2020 from the current $71.6 billion at an average growth rate of 15%.
“There is tremendous opportunity which will mean two things — one, both the topline and bottomline will grow. Secondly, there is clear cut demand for offshoring and to my mind, companies may be bold and increase offshoring in a massive way soon,” said Viral Thakkar executive director, advisory services, KPMG.
Thakkar too, however, cautioned that a relapse of recession may
occur, and that there are worries.
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