If one goes back one and a half decades in history, one would find that India's economic situation was absolutely contrary to what it is today. We were yearning to get dollar inflows into the country to prevent the overtly depreciating rupee against the major currencies of the world. A number of policy decisions taken at the helm of affairs since then utterly transformed the image of India globally. The country was spotted as a low-cost provider of software services and the Indian IT companies became major exporters of software and Business Process Outsourcing (BPO) services to their customers dispersed around the world. Today, there is no dearth of dollar inflows into the country. In fact, the huge flow of dollars and the appreciating rupee have become a topic of the day. This article attempts to analyze the impact of appreciating rupee on the margins of the major Indian IT companies and the possible measures that the companies can take up in the current market conditions.
The performance of the Indian IT industry has been a success story all over the world. The revenue growth of the industry has been very impressive. The National Association of Software and Services Companies (Nasscom) is estimating that the industry will report a growth rate of 24 to 27% with total revenue of $49 to 50 bn for the current financial year.
Apart from the impressive growth rate, the IT industry is much talked about for the employment opportunities it has created for the younger generation (Refer Table 1). Also, the industry has been successful in triggering for the growth of other sectors: Real estate, auto, steel, cement, financial services, travel and tourism. Being a nascent industry, its contribution to the nation's Gross Domestic Product (GDP) stands around 5.5%. It is likely that the IT sector will be a trillion-dollar business in the next 15 years, which will be as large as India's present economy. |
