IT-ITeS industry body Nasscom has said the continuing instability in the rupee, which breached the 68-mark against the US dollar on Wednesday, is affecting IT firms in signing new contracts with foreign clients.
The rupee
has declined over 20 per cent since April on concerns about the country's widening
current account deficit (CAD), slowing economic growth and capital outflows.
"It is a real problem. We don't know where to hedge, our customers don't know where to hedge," Nasscom President Som Mittal said. "Now the questions is when I'm going to sign contracts, I don't know what the currency rate is going to be. My problem is shall I do it at Rs 60, Rs 65 or Rs 70 to the US dollar. So I have a problem is if I don't see stability at what basis do I price. What do I tell my customer, what is the rate?"
On the
question of rupee becoming cheaper against the US greenback, which helps exporters, Mittal said it does help some small contracts depending on what has not been hedged, but in most of the long-term contracts, which are spaced over a period of 4-5 years, the amounts are hedged.
Explaining, he said: "We have severe competition. In our case there is no elasticity of demand. So the exports doesn't go down, it gets depressed in dollars. So if I was selling my services at $50 and I think I'll pass on the benefit to the client at $45, my top line came down."
Mittal said the
industry needs a stable currency as it helps in signing contracts. "So actually, we want a stable currency," he added.
Nasscom expects the $108 billion Indian IT industry to clock export revenues of $84-87 billion maintaining a growth rate of 12-14 per cent in the current financial year.
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