Indian call centres looking at lower growth in 2001-02, says report

Prachi Verma in New Delhi

The slowdown coupled with recent attacks on the US has shaken the Indian call centre juggernaut. After a healthy growth of almost 112.5 per cent in 2000-01, the Indian call center industry is likely to grow by a mere 35 per cent in 2001-02.

According to a “flash report” conducted by ICRA, the Indian call center industry which grew from Rs 400 crore (2000) to Rs 850 crore (2001), is further likely to grow sluggishly to Rs 1047.5 crore by 2002.

The United States is estimated to constitute over 90 per cent of the total outsourcing demand from India thus making India vulnerable to the economic uncertainty in the US economy since fiscal 2001.

“The Indian call center industry is thriving on the US which has recently been severely hit and for this reason we expect it to slow down further in the next year,” ICRA executive director Amul Gogna said.

According to him, call centers were bound to show a healthy growth in the 2000 and 2001, as they were the initial years for this budding industry.

India is the second largest outsourcing market for call center services after Australia and New Zealand in the Asia Pacific region. India accounted for nearly 16.3 per cent of the call center market in the region in the financial year 2001 up from 15.11 per cent during the previous year, the report says.

The share of revenues from call centers in the overall IT-enabled services increased from 19.11 per cent in fiscal 2000 to 20.73 per cent in fiscal 2001. IT-enabled services revenues in India have grown almost 71 per cent from around Rs 2400 crore in fiscal 2000 to Rs 4100 crore in fiscal 2001.

In the Asia Pacific region, Australia and New Zealand are highly mature markets for call center outsourcing services, accounting for around 43 per cent of the total outsourcing revenues of the region.

However, the expected growth rate for these countries is likely to be below the average for the region (average for the region estimated at 25 per cent per annum) on account of market saturation. India, on the other hand, accounts for about 15 per cent of total call center outsourcing revenues in the region followed by Korea and China with 9 per cent and 8 per cent respectively, according to ICRA.

Further, the report states that China is likely to experience the highest growth rates in call center outsourcing revenues. “In coming years, China is likely to experience higher growth rates than the average growth for the Asia Pacific region in the call center market. The government’s commitment to economic liberalisation is one of the prime factors which is in favour of the Chinese call center industry,” the report added.

Other countries in the region such as Malaysia, Thailand and Phillipines have been experiencing sluggish economic growth rates since the South East Asian currency crisis.

This situation is further worsened by the fact that many economies in this region are highly export dependent, especially to the North American region, according to IDC.

With the continuing global uncertainty and economic slowdown, these economies (even though they may enjoy some of the benefits that India has) are not likely to experience significant levels of investment in call center services.