The cutback on routine IT services is likely to push firms including Tata Consultancy Services Ltd and Infosys Ltd to sharpen their focus on high-margin digital services, analytics and artificial intelligence to cushion the impact on earnings.
India's IT and software services export revenue is likely to grow by 10%-12% in the fiscal year beginning on April 1 to as much as US$121bil (RM500.2bil), the National Association of Software and Services Companies (Nasscom) said.
Exports in the current fiscal year ending March are estimated to grow 12.3% to US$108bil (RM446.46bil), at the lower end of Nasscom's projection, with digital services seen up 19%.
"The pressure of being competitive is forcing companies to increasingly adopt digital technologies and that again presents an opportunity for the industry," the lobby group's president R. Chandrashekhar told Reuters.
The shift towards new services could also trigger a wave of mergers and acquisitions in the sector, after Indian IT companies spent US$2.4bil (RM9.94bil) on digital deals in 2015 – three times higher than the year before, Nasscom said.
"To acquire digital skills companies will have to re-skill employees and acquire new technologies and that is likely to continue," it said.
Including domestic sales, total revenue of the Indian IT sector, which accounts for 9.3% of the country's economic output, likely rose 8.3% to US$143bil (RM591.6bil) in the fiscal year ending March 31, Nasscom said. — Reuters
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