Re-hit IT, BPO sectors may see low margins

The National Association of Software & Services Companies (Nasscom) President Kiran Karnik said information technology and business process outsourcing industry in India was beginning to see an "opportunity loss" on account of the rupee appreciation against the dollar.

"The worry is that there is too much appreciation in too short a time," he said. A one per cent rise in the rupee value would affect the bottomline of IT and BPO companies by 30 to 40 basis points, he added.

Consequently, he said, India as a destination for outsourcing may not be "extremely attractive" in the future as it is today. "There is a feeling that the future growth of this industry is being sacrificed," he said.

Though the industry would achieve the export growth target of 26-28 per cent this year, he said it was difficult to predict whether the same growth would continue five years down the line. "I have a sense that we will hit the 2010 target. But looking beyond that, I am concerned," he said.

According to Karnik, IT and BPO companies are more affected than any other sectors such as textiles on account of the rupee appreciation. "Our input prices are increasing rapidly, while our output price is stable," he pointed out.

Addressing a press conference at the Nasscom's 'Information Security Conclave 2007' today at Hyderabad, he said medium and small IT and BPO companies were the worst hit by the rupee appreciation.

The margins of these companies were lower than big companies and hence "they have taken a hard hit while the bigger companies handled the situation extremely well," he said, calling for the continuation of the Software Technology Parks of India (STPI) scheme. The number of start-up companies could decline in the absence of the STPI scheme, he said.