India’s IT Services Industry Trims Annual Sales Growth Forecast

Revenue growth for India’s software services sector will continue to slow as customers adopt a cautious approach to spending amid political and economic uncertainty, according to the body representing outsourcing companies.

Sales will rise 8 percent to 10 percent in constant currency terms in fiscal 2017, according to New Delhi-based Nasscom. That compares with a February projection of as much as 12 percent and last year’s 12.3 percent growth.

India’s $150 billion IT industry has been buffeted by a series of storms including a halting of discretionary IT spending by customers in an uncertain global business environment. That has been compounded by Britain’s exit from the European Union, the so-called Brexit, and last week’s election of Donald Trump as the next U.S. president.

“The industry is going through a transient phase with various domestic and global factors impacting its performance,” Nasscom president R. Chandrashekhar said in a note Wednesday. While the effect of various short-term factors may show for a couple more quarters, “The worst is behind us,” he said.

Trump has been a vocal critic of the H1-B visa program, which Indian companies depend on to send highly-skilled workers to the U.S. to service customers. Trump even singled out two top Indian IT companies, Tata Consultancy Services Ltd. and HCL Technologies Ltd., during the campaign. The U.S. accounts for about 60 percent of India IT services exports.

Already, IT companies have reported muted numbers for the September quarter and indicated that there is margin pressure from customers.

Tata Consultancy, Asia’s largest IT outsourcer, called the most recent quarter ‘unusual’ while second-ranked Infosys Ltd. has cut its annual revenue forecast twice.

“Growing uncertainties in the environment is creating caution among customers and resulted in holdbacks in discretionary spending this quarter,” Tata Consultancy Chief Executive Officer N Chandrasekaran said in a statement last month.

Nasscom said that the industry remains in a strong position as it charts its future path with no major deals canceled, with customers instead deferring their spending.

© 2016 Bloomberg L.P

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