NASSCOM Defers Guidance For Next Financial Year 

NASSCOM sees FY17 growth at 8.6 percent versus guidance of 8-10 percent.

Employees work on their systems at Infosys’ Mysore campus (Photographer: Sanjit Das/Bloomberg)
Employees work on their systems at Infosys’ Mysore campus (Photographer: Sanjit Das/Bloomberg)

The National Association of Software and Services Companies (NASSCOM) has deferred its guidance for the information technology (IT) industry for the financial year (FY) 2017-18 by a quarter due to “prevailing uncertainties”.

NASSCOM sees the IT industry growing 8.6 percent in FY17, compared to its earlier guidance of 8-10 percent, the association announced at a press conference in Mumbai. It will issue its guidance for the next year only after a quarter after interacting with all stakeholders to get “more reliable and clear perspective for the projections for FY18”.

I’d rather give you the right data or approximately the right data than to again make the same mistake. Maybe next time i’ll give the improved guidance to you.
CP Gurnani, Chairman, NASSCOM At The Press Conference

Short-Term Concerns

The short-term outlook remains uncertain because of global macroeconomic instability and political volatility. Cross-currency fluctuations and structural shifts also contribute to the uncertainty, NASSCOM said in a media statement.

The healthcare sector will continue to face headwinds as developments on the Affordable Care Act, more popularly known as Obamacare, remain unclear.

IT companies remain undecided on their discretionary budget, underscoring the prevalent uncertainty, the association added.

The Silver Lining

The positives for the sector include a likely pick-up in the U.S. economic growth in 2017, which could drive IT spends higher, NASSCOM said. The industry body expects global IT spending to grow 5 percent in 2017 and 5.3 percent in 2018, compared to 2.8 percent in 2016.

The outlook for the financial services sector is positive relative to 2016, it said, given rising interest rates.

Discretionary spending may see a rebound as digitisation goes mainstream and the macroeconomic outlook improves, NASSCOM added.

Girish Pai’s Bearish Outlook

The deferred guidance did come as a surprise for Girish Pai, head of equity research at Nirmal Bang Institutional Equities, but he’s not too excited about the sector as a whole.

Organic growth of tier-one IT companies will remain in single digit over the next few years, according to Pai. He also feels that some top tier firms may actually fail to meet NASSCOM’s FY17 guidance of 8.6 percent. The better companies may grow close to 7 percent, other companies will grow between 3-6 percent in U.S. dollar terms, in FY18. Wipro Ltd.'s growth may be even lower, he added.