Nasscom, the industry body for information technology services providers, has projected an 11-14 per cent growth in IT exports revenue for fiscal 2012-13, while domestic revenues are slated to grow by 13-16 per cent.

In an exclusive interview to NDTV Profit, Som Mittal, President at Nasscom, said that given the uncertainty, 11-14 per cent growth is appropriate. “Our growth forecast has factored in global uncertainties. However, we feel that fundamentals of the IT industry will continue to remain strong. The domestic business growth is likely to be higher at around 14-15 per cent. And, our volume growth is likely to be higher in FY13 compared to the value growth,” he clarified.

Mittal hopes that the visa rejection issue will ease out this year.

Commenting on the attrition levels in the industry, he said that attrition levels are likely to settle at around 14-15 per cent next year. “Wage hikes are likely to be around 8-10 per cent this year,” he assured.

Below is the complete interview. Also watch the accompanying video.

What was the distribution like from the responses that you got? Why such a large range of 11-14 per cent?
 

This is the first time we have given the forecast for the coming year. We have achieved a level of 16.3 per cent for FY12. There are a number of factors like there is much more uncertainty at this point of time. There are changes that are happening in the industry. We are expecting differentiated growth among various member companies and sectors and so on. So given the uncertainty, 11-14 per cent growth is appropriate. There are suggestions that the economy will start looking up in the budget time and that's the time we will review our forecast.

Do you think there is a downside risk to this 11-14 per cent range?
 

The fundamentals of the industry remain strong, our customers are doing well. It is just that because of the uncertainty, they tend to pullback a little bit. Actually, 11-14 per cent growth is equivalent to almost $8-9 billion.

Last year, we grew at $9 billion so the order is the same. In addition, there are many technology changes that are happening; we are moving to fixed price projects. We are getting into areas where platform based deliveries are happening, where many of the benefits are being passed on to the customers. So there are a large number of variables which are causing this but as I said, the fundamentals remain strong and even at this growth rate, at the worst of the economies and worst of the uncertainties, this is what we think is a healthy growth.

What is the growth expected in exports and what is the growth expected on the domestic side and what would be driving the growth respectively?
 

Well, the 11-14 per cent which is exports is going to be driven by several factors. We do many things which we call “lights on business", we run and help people run their businesses. So, that's a steady business for us and on the other hand, the move towards cloud computing got precious adopting mobility and social networks. The fact that they are trying to enter into emerging markets, will help them to reengineer their businesses. I think are the ones that are driving our growth on the exports side.

On the domestic side, as a country, we are underinvested in technology. There are many initiatives that get SMBs on to the network. Particularly, when cloud computing is coming in, SMBs who were not yet leveraging technology, will start doing that. On the other hand, the e-governance programs are also going to be driving the growth here. 

We are seeing the financial inclusion part coming in with 3G rollouts and banks getting into financial inclusion. I think you will see mobile platform coming in. We have already started seeing the small companies in the last four-five years, have added almost 1000 new startups and today we have around 500 new companies that are really doing product development, those will be the drivers for the domestic business. The domestic business we expect growing to be little higher almost at 14-15 per cent.
 

What is the growth outlook you have factored in for European market and  the US markets?
 

The US and the UK have traditionally been very large markets. Since it is a technology-based market, US still constitutes more than 60 per cent of our business. So, all of them will grow. We will grow existing customers, new customers will come in. Plus, there are new verticals like healthcare, utilities that are driving our business there. The industry has invested significantly in continental Europe but more importantly, also in other geographies such as Latin America and Middle East.

So if you differentiate the total industry versus commercial third party service providers in India, their footprint is very different. The rest of the world which is other than US and Europe, also constitutes 22-23 per cent of their businesses and the US is  about 57-58 per cent as compared to an industry average of 62 per cent. So one is where the industry is growing and the other is where the third party service providers are growing. So the third party service providers would diversify the base even as they grow in US and Europe.

What is the volume growth expectation for India in the coming FY13 year?
 

This year, for a variety of reasons, we are expecting growth in volume to be higher than the growth in the revenue. Plus, platform -based delivery is happening. Companies are investing in new delivery models and cloud computing. 

Last year, we saw one percentage increase in offshore revenues, which means there is more work that happens offshore but the revenue realisation is lesser. So we would think that the volume growth will be a couple of percentage points higher that the value growth we have indicated.

Recently, visa rejection has been very high. What are you hearing from companies on the visa issue?
 

For our business model, it is very important to have international mobility on both sides. We deliver almost 20 per cent of our project in the one form or the other in the lifecycle and hence, movement of people is extremely important. Where we have permanent jobs, we tend to hire local people from our delivery centers.

Visa rejection has added to the uncertainty of our business. When we commit to our customers that we will deliver by a particular time, but if we are uncertain about the visa clients and if the rejection rate goes high then the whole process becomes uncertain. 

We have taken up this (visa) issue. There are misconceptions that exist on this area. The Obama speech was very clear. He clearly sees a shortage of people and people have now started realizing that tech jobs are not about outsourcing or offshoring. In fact, they are helping the US economy. So we do hope that in the coming year, this issue of visa rejection will ease off.

Do you think hiring or attrition will be lower and also wage hike impact for IT companies in the coming year will see  this revision in growth rate?
 

When they downturned in 2008, there was obviously a cut back on hiring. Our pipelines had dried out and that is what led to the high attrition level in the later part of 2011. Currently, in the tech sector, the attrition levels have come down about 16 per cent, which is a fall of about two-three per cent of what it used to be last year. And we expect this to settle down 14-15 per cent this year. 

We have had really good hiring. We have added a net about 2.3 lakh people into the industry. This year, we would probably add 1.8 to 2 lakh people depending upon where we land up. 

Campus hiring has been good. We have already made 100 thousand offers. Given the current situation, the wage increase an average would be 8-10 per cent; there may be variations by companies. We still remain the most attractive sector for young people to join. We offer them much better careers and the salaries that we offer continue to be ahead of the other sectors.