The Indian IT, ITES and BPOs, the emerging industries of Indian economy which are expected to offer millions of jobs to the Indian youth, now appear to be trailing due to the impact of rupee appreciation against dollar. When the major Indian IT companies TCS, Infosys, Wipro and Satyam are grappling with the appreciating rupee eating into their profits, not much is needed to say about the medium and small IT firms. Not only are the IT firms witnessing a potential erosion of their profits but are also finding it hard to retain their employees which witnessed an exodus of about 10,000 people in the first quarter of the current fiscal itself.
Attrition is neither a new phenomenon nor an unusual one for this emerging sector. But the new thrust on the current rate of attrition is the result of rupee appreciation against dollar. The appreciation reduces the rupee equivalent of every dollar earned overseas by software firms whose expenses are almost all incurred in the local currency. The rupee, currently at 40.32 to the dollar, climbed 6.8% against the dollar in the three months ended June 30. It's the biggest gain in more than three decades.
Rising crude oil prices, huge capital inflows, especially through External Commercial Borrowings (ECBs) and uncertainties in the global economy during the fiscal will have a cascading effect on the rupee. The biggest beneficiaries from the rupee appreciation are importers, as the dollar now has less worth for every rupee or to put it in different terms, fewer rupees can buy more dollar denominated assets/commodities. Besides companies, rupee appreciation is also a positive for the technology-deficient government's financials and capital goods sector as most of the equipment are imported. This article shows the implications of rupee appreciation on IT industry in India, especially in the front of human resource management.
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