With Rupee gaining, IT firms stumbling…
Today, rupee gained 4 paise against U.S.dollar and as we know rupee appreciation brings cheers for importers. Imports of gold, silver, sugar, etc is expected to flourish on viewing the current health of Rupee. We have been taught that there are always two ends: one is gaining and other one losing. So if importers are standing at the gaining end then who is at the losing end? Its IT industry.
The IT industry has always remained the major contributor in Indian economy. It contributes around 15% to India’s GDP. It is moving ahead with the compound annual growth rate of around 20% every year.it has been a major contributor in providing employment too. It has provided direct employment to around 3mn people and has provided indirect employment to around 10mn people of India to earn their living peacefully. The North America has been the main benefactor for us due to importing IT services from India as the hourly wages prevailing in U.S. are much higher as compared to the hourly wages provided in India.
Indian IT industry amounting to $118bn may have to see the dark side of rupee appreciation. Though it will not affect to the IT giants of India as they are on safer side by performing hedging but what about the small IT firms who do not perform hedging? The fluctuating Rupee questions the future of small IT firms. These small IT firms can still readily accept the challenge of working in such uncertain environment if and only if Rupee fluctuates in certain range.so, volatility of Rupee is of the primary concern for small IT firms.
Mid cap IT firms are also suffering from the same situation with the Rupee fluctuating daily. They even face more problems as compared to small IT firms. They are baffled when they bid for the next project as it is hard or almost impossible to determine what currency rate is gonna be in the future. Either to bid at the rate of Rs.60 or Rs.58 or something else. So here the problem lying for mid cap IT firms is not the stability or volatility of Rupee but it’s on what rate do I charge my clients? This dilemma is indirectly affecting their future growth in the IT industry and it may get worse in the coming times when the experts predicting the rupee to climb to Rs.55 level.
Also, the stable regime in India may provide stable growth to Indian economy due to easier decision making but the existing uncertainty in the Rupee fluctuation may create doubts on the growth of IT industry in future. Infact, no clear cut demarcation of what procedures to follow for freelancing companies has already been a cause of worry and now the fluctuating Rupee is ready to stumble the IT firms.
So, it is not wrong to say that coming days are going to hurt the IT industry growth if the rupee continues to oscillate like pendulum. And if it happens so then though rupee appreciating against dollar, the contribution of service sector in the GDP will soar and will ultimately affect the Indian economy.
Let’s hope that the future Indian govt. measures will restrict the Rupee to play to and fro and will stabilize against the dollar otherwise the only way for Indian IT firms would be to get prepared for the upcoming cruel days and try to increase the immunity against volatility of Rupee.
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