See IT sector growth closer to 11% in FY13: NASSCOM

In an interview to CNBC-TV18, Som Mittal, president, NASSCOM says he expects IT sector growth in double digits. "We had given a guidance that we will have a growth of 11-14 percent this year. Our review, after six months, is that we will still be in double digits. We will still be in double digits and probably closer to the lower end of our guidance, 11 percent," he adds.

Also read: Infosys bags about USD 50m deal from MCA Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Q: You are expecting a growth of around 9-11 percent. Can you give us the likely trends that you are seeing at this point in time within the IT space? Where do you expect growth to close up in FY13? A: We had given a guidance that we will have a growth of 11-14 percent this year. Our review, after six months, is that we will still be in double digits. So, it is not 9-11 percent. We will still be in double digits and probably closer to the lower end of our guidance, 11 percent. It is clear that the economies continue to be uncertain. There is turmoil. The visibility is less, but there are some factors which continue to drive growth. One, it is clear that companies are looking at transforming their business models. As they do that, technology is the centerpiece of that transformation because that is what will drive the changes that they are making. Second, we have drivers like convergence of mobile, social media, cloud coming in together. I think that is also driving business for us. In the first two quarters, we have seen many companies do extremely well in terms of getting both new clients and increasing their penetration in the existing and new customers. Also, over the last three to four years, after the downturn started in 2008, companies started diversifying their geographical base as well as the verticals that they were in. Our analysis shows that, in the last four years, the new emerging verticals are now 16 percent of the pie as compared to 13 percent that it used to be on a smaller base. Similarly, new geographies contribute fairly large percentage now of their business. That means they are diversifying beyond US and Europe as well. So, I think those are the drivers for the industry. Q: What about billing? Even if you get volume-wise business growth of about 11 percent, will it mean in revenue terms a little lower? A: This is not by effort, this is by dollar revenue. In this, we embedded the fact that we have about 20 percent of our business that comes from what we call Global In-house Centers (GICs). In many of those corporations, there has been a worldwide freeze. Infact we were probably expecting a lower growth rate, sub-10 percent growth rate in the GICs, which is bringing it down. But in dollar terms, we will continue to see growth. The outlook for 2013, as we see right now, the trend seems positive. I think the pipeline is good. We are seeing some large contracts coming in. I think that should augur well for the industry. _PAGEBREAK_ Q: Is there any impact of the fiscal cliff, if in case it goes wrong, on the IT industry at all? A: The area that actually went down as a vertical was telecom. I think the telecom industry, which constituted a fair part of business, has actually showed a negative growth. That means it actually de-grew in the last two quarters. But with the diversification that is taking place, I think corporations have to do what they have to. To become competitive, they are now looking at getting into emerging markets. Hence, we are seeing many projects to develop new products and services for emerging markets. So, I do not think, in the short-term, we would see any negative, anywhere the economy will go. But I think the second term of the president has to drive economy growth because it will be only through economic growth that the jobs will get back, which is his topmost priority. Q: This 11 percent that you are expecting in FY13 compares with what in FY12? A: This was 16.3 percent last year. Q: How is the Indian sector shaping up? Is domestic business likely to be lower than what it was last year? A: Domestic business is positive. The domestic business would grow faster than the export business. The 11-14 percent, or the 11 percent, which we spoke about, was for actually export business. That is 90 percent of many of the large companies. But domestic business is also getting driven with the mobile applications coming in, though it may be the smaller companies who are doing this. I think there has been a little slowdown in the government sector in terms of decision making of many of the larger projects. But we would think that corporations continue to invest. On the software and services side, I think the traction would be okay, maybe the refresh rates and hardware are little lower.