Indian IT industry can bounce to double-digit growth: Infosys (Interview)

BANGALORE - As the global economy recovers fully, the resilient Indian information technology industry can bounce to double-digit growth again, Infosys Technologies chief executive S. Gopalakrishnan has said adding that his own company will expand in Brazil, Mexico and China.

“If we go back to normal conditions after the world economy recovers, a double-digit growth in the range of 10-20 percent is possible for the Indian IT industry,” Gopalakrishnan told IANS in an interview here.

In the aftermath of the global financial crisis, the Indian software services sector, led by bellwethers like Tata Consultancy Services, Infosys and Wipro, have to contended with single-digit growth this fiscal, as their global clients put spending on new projects on hold, be they for services or products.

“We have to wait and see what type of recovery takes place because many believe we will not go back to the level of activity seen in 2007. That was an unprecedented period of economic activity, driven by enormous leverage, which in turn created significant risks in the economy,” the co-founder of the global software major said.

After the tech, or the dot.com, meltdown in 2002-03, the Indian IT industry staged a major recovery to boom over the next five years, registering 30 percent annual growth till fiscal 2008, but declined sharply to 16-17 percent in fiscal 2009.

The industry’s representative body, the National Association of Software and Services Companies (Nasscom), also estimated that the Indian IT-BPO (business process outsourcing) services sector will grow by a mere 4-7 percent this fiscal.

In fiscal 2008-09, the Indian software industry posted revenues of $59 billion, including exports valued at $46 billion and domestic business at $13 billion. Nasscom estimated software exports at $48-50 billion and domestic revenues to grow 15-18 percent this fiscal.

Constrained by regulations to forecast his company’s prospects when the world economy recovers and tech spending bounces from mid-2010, Gopalakrishnan said with the worst-ever crisis behind, the Indian software industry would come out strong to seize the opportunities, as it was better prepared to face challenges and compete with peers.

“The momentum our company has seen in the second quarter (July-Sept) will continue to give us better growth in the third and fourth quarters of this fiscal. From a flat growth year-on-year or marginal growth quarter-on-quarter till now, the annual growth has been projected to be on the higher side,” he asserted.

But the extreme volatility in the currency market continues to haunt the company’s top management as erratic fluctuations in the exchange rates vis–vis the US dollar can make or mar its revenue guidance.

“Currency movement will have an impact on our guidance and operations. Depending on how the rupee, dollar or other currencies fare in the second half of this fiscal, we may end up with more revenue or less, as we have assumed the rupee to be at $47 for this quarter,” Gopalakrishnan pointed out.

“We are sharpening our focus on research and development, intellectual property-based solutions and new engagement models that offer flexible pricing and greater operational control and efficiency to our global clients,” Gopalakrishnan noted.

In line with its global delivery model, the company is investing in building new capacity to expand in regions such as Brazil, Mexico, China and India.

(Fakir Balaji can be reached at fakir.b@ians.in and biz@ians.in)