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Indian software exports up 28% in April-Dec

Priya Ganapati in Mumbai | February 11, 2003 16:59 IST

Software and services exports have grown 28 per cent between April and December 2002 to clock revenues of Rs 34,000 crore or $6.9 billion.

For the corresponding period during the previous year, the industry showed a growth of Rs 26,600 crore or $5.6 billion.

The IT services grew at 20 per cent to touch Rs 25,800 crore ($5.4 billion), while the IT-enabled Services segment grew at 61 per cent to reach Rs 8,200 crore ($1.8 billion).

Together they provided the Indian IT industry a consolidated growth of 28 per cent.

In effect, the ITES and the business process outsourcing industry have turned out to be the star performers for the year, compensating for the massive slowdown that dragged down the performance of the services segment.

"The ITES-BPO segments are the ones sustaining the growth in the industry," acknowledged Arun Kumar, chairman, Nasscom.

Last year, most of the big IT services companies either acquired or set up BPO subsidiaries that could service their existing customers even while helping the companies extend their portfolio.

For instance, Wipro acquired a stake in Spectramind, while Infosys increased its attention on its subsidiary, Progeon and Satyam formed its own BPO outfit called Nipuna.

In the ITES-BPO segment, apart from consolidating their presence in traditional areas such as customer care, finance and HR, Indian vendors are trying to move up the value chain by addressing segments such as engineering design, animation and R&D services.

Nasscom's survey indicates that banking and financial services industry (BFSI) continues to be the biggest vertical with a share of 36 per cent, up one per cent from last year.

Manufacturing has shown a marginally better growth to end at 14 per cent in 2002-03, compared to 12 per cent for the same period last year.

Indian IT vendors are getting into new service lines such as IT and network consulting, packaged software installation and support and systems integration.

Systems integration and the custom application development and maintenance are the two segments that have shown the highest growth in the sector.

New verticals such as healthcare, retail and utilities in the IT services sectors are expected to lead future growth in exports.

The retail sector that currently had a share of 4 per cent in 2001-02 is expected to increase to 5 per cent in 2002-03.

Utilities, which has a share of 2 per cent in 2001-02, is expected to grow to 3 per cent in 2002-03 and telecom service providers, who have a share of 3 per cent in 2001-02, are estimated to grow to 5 per cent in 2002-03.

"The industry did face pressure on pricing in the first half of the financial year but this has stabilized in the last quarter. There has been good growth in volumes but profitability has been affected due to increased investment by Indian vendors in sales and marketing. While this may affect the bottomlines in the short-term, it would help in strengthening the long term prospects of the company," said Kiran Karnik, president, Nasscom.

According to Nasscom, customers are now preferring scale players such as Wipro and Infosys who can offer end to end services.

India's software exports have continued to grow towards the high-value offshore development model. There has been a growth of over 50 per cent in the offshored IT services contracts to India over last year.

Onsite services, which contributed Rs 16,500 crore ($3.45 billion) to India's export revenue during 2001-02, is expected to reach Rs 18,500 crore ($3.9 billion) in 2002-03.

Off-shore activity meanwhile notched up a higher growth rate during the same period, with contributions growing from Rs 18,500 crore in 2001-02 and expected to reach Rs 27,500 crore ($5.8 billion) in 2002-03.

The Nasscom survey reveals that North America continues to be the prime destination for IT Services and ITES-BPO segment followed by Europe, Japan, APAC and rest of the world.

While growth in North America increased from 66.9 per cent in 2001-02 to 67.7 per cent in 2002-03, Europe saw a decline from 23.7 per cent to 21.2 per cent for the same period.

In terms of contribution to the overall exports, software and services exports are expected to increase from 4.9 per cent of total export revenues in 1997 to 20.4 per cent in 2002-03.

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