Nasscom concerned over adverse impact of rupee appreciation

HYDERABAD: Software industry body Nasscom on Tueday raisen concern over the adverse impact of rupee appreciation on Information Technology and Business Process Outsourcing sectors and said it could affect their long-term prospects.

"There is too much rupee appreciation in too short a time. As a result, the small and meium companies are being hit hard," Nasscom President Kiran Karnik told reporters here. If the trend continued, India may not retain its position as an attractive destination for IT outsourcing in future.

The rupee has risen almost 12 per cent against the dollar in 2007, hurting goods and services exports. Indian IT companies derive a large portion of their revenues from the US and a strengthening rupee has eroded their margins.

The IT industry is about exports and there are no imports or raw materials. The input prices are going up rapidly and the output remains the same. The small and medium enterprises and BPOs are bearing the brunt, Karnik said.

Though the industry may manage to reach the software exports target of 60 billion US dollars by 2010, the long-term scenario was far from encouraging, Karnik said, adding "I am concerned about the long-term prospects. I do not know where things are going".

The IT and BPO sectors in India were beginning to see an "opportunity loss" on account of rupee appreciation, he said adding one per cent rise in the rupee value would affect their bottomline by 30 to 40 basis points.