Rising Rupee worrisome for IT, BPO sectors

Mumbai, Dec 5: Nasscom, India's premier software industry body, raised concern over the adverse impact of Rupee appreciation on Information Technology and Business Process Outsourcing sectors and said that it can affect their long-term prospects.

''There is too much Rupee appreciation in a short time span. As a result, the small and medium companies are being hit hard,'' Nasscom President Kiran Karnik told the sources on the sidelines of a seminar here on Dec 4.

If this trend continued, India may not retain its position as an attractive destination for IT outsourcing in future, he added.

The Rupee has risen almost 12 per cent against the Dollar in 2007, hurting goods and services exports. Indian IT companies derive a large portion of their revenue from the US and a strengthening Rupee has eroded their margins.

The IT industry is about exports and there are no imports or raw materials. The input prices are going up rapidly and the output remains the same. The small and medium enterprises and BPOs are bearing the brunt, Mr Karnik said.

Though the industry may manage to reach the software exports target of 60 billion US Dollars by 2010, the long-term scenario is far from encouraging, Mr Karnik said and added, ''I am concerned about the long-term prospects. I do not know where things are going.'' He said that the IT and BPO sectors in India were beginning to see an ''opportunity loss'' on account of Rupee appreciation. Mr Karnik further continued that one per cent rise in the Rupee's value would affect their bottomline by 30 to 40 basis points.

Mr Karnik said that large companies are handling the situation extremely well. ''The SMEs and BPOs have small margins and are usually a single market company. They are taking a real hard hit. The situation is emerging where a company instead of having 100 employees in India, is considering if one could employ 60 in India and 40 elsewhere, such as at Philippines,'' he explained.

The Nasscom Chief said that most companies have had small beginnings, today if the small companies are pained, the future growth of this industry is being sacrificed.

''There is no expansion of Software Technology Parks of India, which means they have to start paying taxes from 2009 onwards. It looks troublesome,'' he added.

UNI