India's software services sector sees slowdown

Industry body Nasscom is revising down its growth projections to 11 percent for 2012 to 2013 due to slower growth of local companies servicing multinational corporations.
Written by Kevin Kwang, Contributor

India's National Association of Software and Services Companies (Nasscom) has scaled down its growth expectations of the domestic software services sector for 2012 to 2013 due to slower growth from local software companies servicing multinational companies (MNCs).

The Economic Times reported Tuesday that Nasscom is now predicting the industry to grow 11 percent instead of the earlier 11 percent to 14 percent range. Based on this revised projection, export revenues are expected to hit between US$75 billion and US$77 billion, it added.

The slowdown in growth was attributed to the slower growth of local companies providing outsourcing services to MNCs as these businesses embark on increasing their productivity and efficiency, Nasscom noted.

President Som Mittal said in the report: "The global in-house centers are going through huge efficiency improvement. They are on a cost-plus model."

The double-digit growth remains an encouraging projection given the tough global economy, particularly since the U.S. and Europe--which consume about 80 percent of the services exported by domestic companies--have suffered the most.

Nasscom chairman N Chandrasekaran added in the report: "Growth rate has picked up in September and many companies have indicated that the second half will be better than that of the first half. Based on that, we are pretty confident we will meet the lower end of the guidance."

A separate report by The Hindu Tuesday cited Mittal as saying emerging verticals such as retail, healthcare and utilities were providing double the growth of mature verticals.

He also said the European market was bouncing back fast. "The European companies are now far more open to outsourcing," Mittal noted.

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