IT Sector Bets Big On Modi And His Team
The IT industry in India has already welcomed the new BJP government led by Narendra Modi with many expecting that the winds of change can put the sagging economy back on tracks to achieve 8- 8.5% growth by 2016-17. In 2013, IT companies saw a decline in the domestic demand and garnered more revenues from the global market. India’s biggest outsourcer TCS for example, which earned over 50% revenue from North America, but revenues from India was just 6.7%, a small part of the company’s overall business.
“I expect that the new government will adopt technology very significantly. Our nation will adopt digital technology much more than ever before so I expect lot of growth, but these are early days so we should wait for some time for the new government to be formed,” N Chandrasekaran, CEO and managing director of TCS told NDTV Profit in an interview.
Some however believe, as days of large upsides in margins seem to be limited, most IT companies, which reported rising profitability through the last fiscal, will be under pressure as the rupee gains strength.
The rupee is expected to rise on the back of increased foreign inflows into assets such as stocks, bonds. Already, foreign investors have pumped in over Rs. 1 lakh crore in the domestic securities market since September 2013, when Modi was announced as the BJP’s prime ministerial candidate, says a report.
Experts believe, while, such a sharp rise in the rupee is unlikely in the short term, IT companies will have to devise new processes to preserve their margins. Some of the key problems have been the unorganized market place and issues related to taxation, which the new government has to sort out.
Anand Rao Balluru, President, Federation of information technology associations, Karnataka, states with rupee value against dollar gaining significantly, the import prices will drop, resulting in lowering of prices of IT hardware. This may be transformed into more of IT spend by SMB & Enterprise. So channel business will start looking up. Also there is an indirect set back becasue the software exporters face a new challenge. Like many other exporters, IT firms earn a major portion of revenues in dollars and a stronger rupee will hit margins
Nityanand Shetty, Spokesperson, ISODA believes the government has in front of it the mammoth task to win the war on corruption, poverty and improve infrastructure, economy and aim to become a robust democratic country for the World to emulate. “As Entrepreneurs, we expect that we can concentrate and put all our energies into our business and be more productive to help the economy of the country rather than worry about multiple taxation and other issues, which are detrimental to any business,” he says.
Similarly BSA, The Software Alliance believes that they hope to see significant advancement in the regulatory and policy framework of India to promote cloud computing, which represents a tremendous evolutionary leap in information technology. “We believe that to take advantage of the inherent benefits that cloud computing offers along with its efficiencies of scale, there must be legal and regulatory cohesion in the international marketplace, so that companies can provide services across borders and customers can choose from the best solutions the world has to offer,” says a statement.
Nasscom’s long list of requirement hopes to present the new government from streamlining transfer pricing rules to making it easy for failed start-ups to wind down their operations. Changing laws to better regulate the nascent e-commerce sector is also on the list. Nasscom also wants the government to offer incentives to boost domestic IT adoption.
Likewise, Ficci president Sidharth Birla hoped to see measures on mitigating inflation and restoring confidence, besides roadmaps for job creation and national competitiveness. Expecting “mission mode actions and bold decisions for tangible outcomes over 6-24 months,” Ficci came out with a 40-page agenda to boost manufacturing, remove infrastructure bottlenecks, clean up the tax system, including implementation of DTC and GST, revisit subsidies and revamp rural employment programme to put the fiscal house in order.
Other industry bodies are also prompting the new government to bring in positive changes in ICT. Industry body IAMAI recently stated that the new government should give importance to India’s Internet growth. It should ensure that Internet growth in India is not hampered by rules that create additional challenges for telcos, internet and web-hosting service providers and search engines, it says.
As the country’s $100 billion IT industry is pinning high hopes on the new government, the question now remains whether the Modi-led government will live up to their expectations. This is something the industry has to watch out in the next couple of months.
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