The Telegraph
Monday , July 21 , 2014
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New sourcing norms key to IT turnaround

Calcutta, July 20: The government needs to rework procurement norms for IT services to reboot the sector.

Besides the slow pace of decision making, mounting dues from government agencies have slackened the growth in domestic IT business.

Nasscom has projected a flat growth of about 10-12 per cent for the market in the current fiscal, almost at the same levels as the previous year.

Government agencies account for 50 per cent of IT services in the country. ‘

According to the apex body for IT and business process outsourcing in India, an efficient timeline for project execution can restore confidence and fuel a turnaround for the local industry.

While the allocations in this year’s Union budget will give a significant push, the impact, if any, will only be felt next year.

The IT market grew 10 per cent to $32 billion in 2013-14. The 10 per cent growth was in rupee terms even as it was zero in dollar terms.

“The domestic market has been a big disappointment. There are many factors for this. One is the general slowdown in the economy and reduced investments by companies in the private sector. Investments have been delayed over uncertainties in government decision making because of the elections and other economic factors. Companies have huge dues from the government, even for executed projects,” R. Chandrashekhar, president of Nasscom, told The Telegraph.

The current outstanding is around Rs 4,000-5,000 crore from the government, both at the central and state levels, accumulated over the last three years. This has made companies reluctant to respond to government needs.

“In this year, we do not see any significant change in the growth rate of the domestic market. It will be 10-12 per cent.

“In exports, we are projecting a 13-15 per cent growth. But the domestic market will trail… there are huge issues with the whole system of procurement and payment. There are artificial barriers preventing growth from taking place. But the demand is very high,” he said.

Smart cities

The IT industry is betting big on the setting up of 100 smart cities announced in the budget. Such projects will require strong infrastructure such as broadband and adequate use of information and communication technology to manage utilities, power and online government services.

The turnover of the IT industry is slated to reach $300 billion by 2020 from about $118 billion now.

About 80 per cent of the industry’s current turnover of $118 billion come from 150 large companies, while the remaining 20 per cent are from start-ups and product firms.