Som Mittal, president of the National Association of Software and Services Companies (Nasscom), agrees the uncertainty surrounding the business has increased, but despite that he believes the goal of a $225-billion industry by 2020 is achievable. Nasscom will kick off its 20th annual Nasscom India Leadership Forum on Tuesday, and see participation from over 1,000 delegates from across 25 countries. In an interview with Shivani Shinde, he talks about the industry challenges, the next big disruption for the IT industry and more. Edited excerpts:
Nasscom said it would review growth guidance for the industry mid-year. What are the chances that this might be revised upward?
We have said we will review our guidance this October. Currently, given the uncertainty around, the industry has clarity only for the next two quarters. But I think things will get clearer as we go forward. The silver lining in this uncertainty is the effort that several economies around the world are putting to get back in shape. However, at this point of time, given the economic and political situation in many of the countries, our best estimate of growth is between 11-14 per cent, which is still a good growth target. It’s almost $8-9 billion of additional business.
Is it just the euro uncertainty that has pulled down the growth target?
There are other non-economic factors that are impacting our industry. There are companies and sectors that would differentially grow and the speed of this growth will be faster. The other issue is currency. Many who compute their price in rupees will see depression.
Third, we are now doing a lot of platform-based delivery and in some cases, the benefits are passed on to the customers as well.
The other impact is on the transaction volume not going up as economies are under pressure. In turn, impacting the BPO industry. Hence, you will see the BPO industry not growing well.
...and the visa issue?
The higher rejection rates in visas means companies are not able to complete projects on time. We are still not sure as to why some visas get rejected. US guidelines must be clear on why the visas are being rejected. It also seems that this activism is largely against India. I think this is a serious matter and hope that the efforts of our government are fruitful.
Besides, visa rejections are not because of any regulatory issues or any Congress order. These issues can be resolved without any political connotation. We are not asking for a new visa category or to increase the cap.
Analysts say the industry needs to re-look at its business model and innovate to maintain a double digit growth.
An enormous amount of innovation has happened. If today you are delivering a 16 per cent growth with a 10 per cent increase in manpower, that’s not possible without innovation. We are doing a lot of design and engineering work for customers. That is process innovation.
If you look at innovation that transfers into saleable IP, today we have 3,000 companies doing product design and development. Over the last five years, companies have gone up the value-chain. We are much closer to customers. If you analyse the performance of companies, we have had inflation, salaries have gone up, and prices have seen moderate increase, but the margins of these firms are steady. You cannot do this without innovation.
The Strategic Review says India’s share in global sourcing has gone up to 58 per cent, but our growth rate is coming down.
I don’t think our growth will come down. This is one of the worst years in terms of uncertainty. In the US, you have elections, EU has its challenges, China had a change in leadership, and India too has elections. We had given a forecast of being a $225-billion industry by 2020. We need 13-14 per cent average growth over eight years. I think we can maintain that.
Though the growth looks subdued from an India perspective, we have been growing faster than other markets. Our market share has gone up despite our growth slipping last year.
How much of the domestic economic paralysis has impacted the industry? And, what are the key policy changes that the industry is asking for?
We have had some delay in the UID projects, there have been delays in sign-offs in some projects. But if India needs inclusive growth and financial inclusion, then technology will be crucial. We hope that Sam Pitroda’s infrastructure plan kicks off this year. We want the minimum alternate tax on SEZs to be removed. It was never an intention to tax SEZs. On tax administration, we need incentives to promote tier-II and tier-III towns and also to support SMEs.
One of our major concerns has been on transfer pricing. The huge demands that are being made and litigation create concerns among multinationals and captive units which are on transfer pricing in India. In 2009, the finance minister had committed that he will introduce a safe harbour provision and for that commissioned a dispute resolutions process, but this has not worked.
