Drop in growth of Karnataka IT exports

Drop in growth of Karnataka IT exports

Laiqh A. Khan and T.S. Ranganna
Downward trend attributed to the financial crunch in U.S. markets
‘IT firms in State are cutting costs and exploring newer Asian markets’

‘e-governance projects worth

Rs. 10,000 crore

are in the pipeline’

BANGALORE: Hit by the global recession, exports by Karnataka-based Information Technology companies have decelerated sharply in 2008-09. The growth of IT exports — hardware and software — from the State increased only by 15 per cent in 2008-09, compared to 24 per cent the previous year. The exports of 2,084 IT companies registered with the Software Technology Parks of India (STPI) in Karnataka amounted to Rs. 67,500 crore in 2008-09, compared to Rs. 58,500 crore during the previous year.

Industry sources expressed worry that the decline had occurred despite the sharp depreciation of the rupee vis-À-vis the dollar in the last year. The State’s IT industry accounts for almost one-third of India’s IT exports. In the three years, commencing from 2005-06, IT exports from the State increased by 34 per cent, 28 per cent and 24 per cent, respectively.

Speaking to The Hindu, Principal Secretary to the Department of IT, Government of Karnataka, Ashok Kumar Manoli, attributed the downward trend to the financial crunch in U.S. markets, which is reeling under its worst economic crisis in more than 50 years. He said the business process outsourcing segment of the IT industry had been affected more by the slowdown when compared to the IT services and product segments. Companies, he said, were “putting their expansion plans on hold.” However, companies were focusing more on Tier II and Tier III cities, he added.

Despite the slowdown, Mr. Manoli said, the revenues of most IT companies had increased by about four to five per cent in 2008-09. He said IT companies in the State were cutting costs and exploring newer markets in Asia, particularly cash-rich countries in West Asia. “IT companies,” he said, “are increasingly looking towards the domestic market, where huge potential exists.” Mr. Manoli said IT companies were turning their attention to opportunities offered by e-governance projects promoted by the Union and State governments. Projects worth Rs. 10,000 crore were in the pipeline, he added.

Job losses
Mr. Manoli said the State government had “no information on the extent of job losses in the industry.” However, he admitted that IT professionals “may be losing jobs and suffering pay cuts.” He said, “We have learnt from our interactions with the industry that pay cuts are happening.”

However, no IT company in the State had closed down, he said. “In fact, about 85 new companies were set up in the State during 2008-09, taking the total number to 2,084,” Mr. Manoli added.