Currency volatility, wage inflation are challenges for IT firms

India's leadership position in the IT-ITeS space globally may be well established, but challenges around protectionism, wage inflation and currency volatility, need to be addressed, a government document said on Wednesday.

India accounts for more than 55 per cent of the total global sourcing market (excluding engineering services and R&D) in 2013 as compared to 52 per cent in 2012, said the Economic Survey, 2013-14, tabled in Parliament by Finance Minister Arun Jaitley.

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Flat entry-level salaries, flattening employee pyramid and fast career growth are helping India "stay 7-8 times cheaper than source locations and 30 per cent cheaper than the next nearest low-cost country", it added.

"However, challenges around protectionism, increased competition, currency volatility, wage inflation and inconsistent levels of customer confidence have to be addressed," the Survey said.

IT-Business Process Management (BPM) sector (excluding hardware) is estimated to have grown by 10.3 per cent to $105 billion in 2013-14.

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Of this, exports with a major share of 81.9 per cent grew by 13 per cent, while domestic revenues fell by one per cent in dollar terms.

The Survey said a gradual revival in consumer confidence leading to return of discretionary spending and increased demand from the US and Europe is helping drive exports.

Domestic revenue is estimated to have increased by 9.63 per cent in rupee terms, it added.

"In 2014-15, higher growth is expected in both exports and domestic revenues," the Survey said.

The National Policy on Information Technology envisages revenues of the IT and ITeS industry expanding from $100 billion in 2011-12 to $300 billion by 2020 and exports from $69 billion in 2011-12 to $200 billion by 2020.  

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The IT-BPM sector is also a big employment generator with direct employment projected to grow 5.6 per cent, reaching 3.1 million in 2013-14 with over 1.66 lakh jobs being added during the year (of which 30 per cent were for women).

Indirect job creation is projected at 10 million, the Survey said.

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