The Hindu Business Line : Software receipts post slower growth: RBI

This could be due to one or more of three reasons: that the industry is earning lesser revenues than it used to; that it is converting lesser revenues from dollars to rupees; or that it is spending more abroad.

Our Bureau

Chennai, Jan. 2

Welcome to the great Indian puzzle. The Indian IT sector, the pride of Indian exports, is recording expected dollar revenue growth. But dollars that come into the country through the sector are growing slower.

Software receipts, in the latest balance-of-payments data compiled by the Reserve Bank of India, have grown slower at 15.2 per cent to reach $16.3 billion for the period April-September 2007, compared to a growth of 37.2 per cent in April-September 2006.

In absolute terms, the growth in April-September was lower at $2.15 billion compared with $3.83 billion in the same period previous year.

In the context of a looming US economy slowdown, slowing growth in software receipts assumes significance.

While top Indian companies have consistently ruled out any cause for concern on the slowdown front, the likes of IBM and Cisco Systems have dwelt on the possibility at length in the recent past.

Growth rate

Revenue growth rate for the top five Indian IT services firms ranged between 35 per cent and 45 per cent in the six months ended September 2007. In conformity with those numbers, industry captains do not see a pattern here yet that explains the slower growth in receipts.

Captains’ view

Dismissing the theory of lesser dollar-to-rupee conversions, Mr S. Mahalingam, CFO, Tata Consultancy Services, says, “If anything, we should be converting dollars to rupees immediately, for fear that the rupee may strengthen further.”

Mr T.V. Mohandas Pai, Chief of HR and Director, Infosys, said: “The industry’s growth is as per plan. This looks like an aberration. You might see this kind of lumpiness every 2-3 years. The December quarter numbers would throw more light on this.”

One perception in the industry is that software companies could be spending more on marketing their services abroad and that could cause a lower growth in receipts.

Mr Mahalingam ruled that out saying, “We have not reached that level of maturity yet. Lower growth cannot be explained at the moment with higher spending abroad.”

Mr N. Ramachandran, CFO, iGate Global Solutions, sought to explain the slowing growth due to the appreciating rupee.

“The RBI gets these figures from the industry in rupees and converts them to dollars. So, the rate of exchange could be different now compared to the earlier period.”

When asked if the 13 per cent appreciation of the rupee in this time frame fully explains the slowing growth in absolute dollar value, he said, “The rupee’s appreciation significantly explains the difference.”

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