Slowing economy, weak global cues hit IT sector

The information technology (IT) sector appears to be heading for a storm and is likely to hire fewer people this year, while salary hikes may not come easily, industry body Nasscom said on Wednesday.

The National Association of Software and Services Companies (Nasscom) cited rising concerns over slowing economy and weak global cues as the reason for this downturn. "The hiring will be good this year. There is a strong hiring pipeline of over one lakh offers. This will, however, be lesser than around 1,20,000 jobs projected to be witnessed in the ongoing fiscal," Rajendra S. Pawar, chairman, Nasscom said.

On the salary hike front , Nasscom said the growth could be in the range of eight to 10 per cent in 2012-13 as compared to 10-14 per cent in the current fiscal. Most of the IT companies, such as TCS and Infosys, have already warned of slowdown amidst uncertainty in Europe and the US markets, which is likely result in a further slump in demand. These two markets alone account for nearly 90 per cent of IT firms' revenues.

"Both global as well as domestic economic indicators are weighing down on the overall sentiment of the sector. There is lack of clarity in the policy part and the demand environment is still uncertain. Almost all economic indicators went down south this fiscal year.We find much lower clarity in the year than we had in a long time," Pawar said.

"We will revisit this forecast in October. The mood is more sombre now and these uncertainties are forcing us not to look at the whole year," Pawar said.

Nasscom estimates that India's IT and IT-enabled services sectors will cross the $100 billion-mark this fiscal. As per the estimates by Nasscom, total revenue of the sector will be $101 billion out of which $69 billion will be from exports and $32 billion from domestic market. INDIAN IT export revenues are expected to grow by 11-14 per cent and domestic revenues by 13-16 per cent in the coming fiscal, Nasscom said.

"The current environment has become uncertain due to a variety of factors such as the elections in the US, Euro zone crisis and India's own policy paralysis, among others. For the fiscal 2012-13, the industry is expected to grow between 11-14 per cent," Som Mittal, president, Nasscom, said.

"There is no road map on DTC, GST and SEZ issues. Also there is increased tax activism and sometimes we feel we are soft targets," he said, citing examples of issues like 'body shopping' and transfer pricing under which IT firms are made to pay more taxes.