India outsourcers predict 18% growth

August 23, 2011 by Penny MacRae

India's flagship outsourcing sector is still expected to post 16 to 18 percent export revenue growth, despite fears of a fresh slump in its key US and European markets, an industry body said.

The National Association of Software and Services Companies, or Nasscom, in February projected the sector would notch up annual export revenues of $68 billion-$70 billion in the financial year which began April 1.

"Our conversations with companies make us believe 16 to 18 percent revenue growth is still achievable," Nasscom president Som Mittal told AFP on the sidelines of an outsourcing event Tuesday.

"We're not changing our forecast," Mittal said, adding this year's target was framed "conservatively."

Other leading Indian outsourcing companies are also bullish over continued growth.

"Up to now, we've seen no signs of a slowdown in our operations," Matthew Vallance, chief executive of Firstsource Solutions, told AFP.

Outsourcing companies' shares have been under pressure recently on concerns about revenues slowing amid fears of a double-dip recession in the United States and Europe and analysts have been downgrading the sector.

But on Tuesday, stocks of India's largest outsourcing company, TCS, rebounded 6.7 percent to 981.6 rupees ($21) while India's second-largest software services firm, Infosys, strengthened almost four percent to 2,276.95, as investors were cheered by Nasscom's projection.

At the same time, former Nasscom chairman Pramod Bhasin, founder of Indian back office services Genpact, said he expected "more rhetoric" in the United States against job outsourcing.

Opposition in the United States to outsourcing is already running high, stoked by elevated unemployment.

"Right now, there's no impact on business, but we realise it is early days," Bhasin said. But with even with all the "negative confluents," he said he expected business to remain good.

US and other foreign firms have been drawn to India by its vast English-speaking workforce and lower labour costs.

The outsourcing sector, which has been a crucial driver in India's transformation into an emerging market powerhouse, accounts for five percent of GDP and employs some 2.3 million workers.

Mittal noted that the so-called knowledge sector -- which provides market research, statistical analysis, legal, health and a host of other services -- was becoming an increasingly vital component of the industry.

Indian outsourcing firms have been seeking to grow revenues by performing higher-end tasks for Western firms, shifting away from only call centre work. The move toward "value tasks" can mean up to 50 percent higher billing rates than for more basic work done in call centres, industry officials say.

In the last decade, India's knowledge services industry has grown 16 times in size to reach $16.9 billion in revenues, including domestic revenues.