The Reading’s Not Right, NASSCOM!
Having to predict the IT sector’s growth rate in such a scenario is a very precarious task, writes Niraj Shah.
Indian information technology services industry body NASSCOM has released its growth guidance for 2017-18, pegging IT services growth for the year at 8-9 percent, the same pace as the previous financial year.
At the start of every financial year, the Indian IT sector seems to be either at the cusp of an inflection point or trying to swim against the strong tide of uncertainty. This time is no different, with the Donald Trump-led U.S. and a stronger rupee as the key headwinds, and a relatively stronger European Union economy and a revival in the American banking, financial services and insurance space providing the tailwind.
The two projections made by NASSCOM on Wednesday were:
- FY18 export revenue growth seen at 7-8 percent;
- FY18 domestic revenue growth seen at 10-11 percent.
The overall growth estimate number (for domestic and export combined), as per BloombergQuint’s calculation, is likely to be about 8-9 percent. Remember, Infosys’ guidance for FY18 is 6.5-8.5 percent in constant-currency terms.
Without getting into a very detailed analysis, we thought it best to try and see if NASSCOM has been on the mark every time and whether large-cap IT has managed to meet the guidance.
The charts clearly show that the sector’s actual growth or the revised guidance by NASSCOM has been way lower than the first forecast. It is not the industry body’s fault because this is a very volatile environment that the sector is operating in.
CEO after CEO has indicated that it is becoming very difficult to predict business performance 12 months forward.
Having to predict the industry growth rate in such a scenario is a very precarious task. It’s possible that a number of people may not believe that the industry can grow at the pace projected by NASSCOM. Investors, though, would hope that the skeptic’s view is wrong.
The data analysis in the article has been done by BloombergQuint’s Agam Vakil.
Niraj Shah is Markets Editor at BloombergQuint.