With the Indian IT industry witnessing some improvement in spending, Som Mittal, president of Nasscom, says that the 12-14% growth in the coming financial year is not too bullish. In an interaction with FE?s Rachana Khanzode, he points out how the industry continues to hire, and his take on the latest European Union (EU) tax reforms. He adds that for the engineering services industry, $50 billion is achievable by 2020. Excerpts:
Is the Nasscom?s recent prediction of a 12-14% growth in the coming financial year too bullish considering we are not witnessing any high discretionary spending?
In our communications with the CIO’s of the large companies, we see that the focus of discussion is now changing. It is now more towards transformation, coming over the gross deficiency within the company and change in the business models. You need to understand that the discretionary spending by the BFSI clients has improved only by 1% from what it was in the same period last year. So companies that were not spending discretionary budgets are now forced to use those funds. But, the funds are no longer being used as discretionary but in the areas of transformation. We see technologies lead to the economic recovery. Moreover, we did see a sudden breakdown with Q3 and Q4 declining for the first time and then a flat Q1 and the vector going up in Q2. So, a marginal increase of 4-7% in FY10 is reasonable while the rest would come in the second quarter of the next fiscal.
Does the Indian IT industry remain attractive enough to the globe? What about the hiring aspect?
Yes, it still remains attractive to the globe though we cannot say that it will grow like the way it did for the last ten years. The Philippines, Vietnam and China among others will continue to give competition but India will continue with its unique capabilities. The facts remain that growth is happening, hiring has already taken place and most companies are now looking at laterals as well. So these firms have already made offers to about 70,000-80,000 students who will anyway join in the coming year. And the 18,000-20,000 lay-offs that happened last year have been absorbed by the industry.
Does that mean the industry should start looking at high-end areas ?
We have come a long way and I think the industry should do what it is best at. We should leverage these capabilities to grab more of the bottom of the pyramid, which has a larger market share. Consulting is at the higher end but it has a smaller pie too.
What is your take on the EU?s new value-added tax reforms?
I think they have just harmonised the entire tax format. The EU had a lot of confusion with different tax process for different companies. There was no clarity on who will be taxed–the destination where the service is originated or the destination where service is provided. Now it is clear that it is at the destination provided. So, it removes a lot of complexity and we see no impact of this move.
How has Nasscom set the target of $50 billion for the engineering services industry in India by 2020 ?
The industry is currently at $ 6-7 billion. But we have factored in the demographic changes, markets shifting towards India, product development, new areas like climate change, need of developing complex new ways, etc.
