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Global headwinds slow down Indian IT industry’s growth

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Bengaluru, Dec 31 : Global headwinds such as macroeconomic factors, currency volatility and disruptive technologies impacted the resilient Indian IT industry in 2016, forcing Nasscom, its apex body, to lower the growth rate for fiscal 2016-17.

“The IT industry is going through a transient phase with global and domestic factors impacting its performance. While the effect of short-term factors may show for a couple of quarters, the worst is behind us,” Nasscom President R. Chandrashekhar told.

The single-digit growth of global software majors like TCS, Infosys, Wipro and HCL for the July-September second quarter made Nasscom revise its industry export revenue guidance to 8-10 per cent ($117-119 billion) in November from 10-12 per cent ($119-121 billion) it projected in February.

The National Association of Software and Services Companies (Nasscom) has, however, maintained the domestic revenue growth at 11-13 per cent to achieve Rs 1,560-1,590 billion ($22.9-23.4 billion) by March 31,2017.

“This year has been an interesting one for the industry owing to various global and domestic factors. Increased adoption of digital technology by consumers, e-commerce and start-ups has driven the industry’s growth in the domestic market,” Chandrashekhar asserted.

Though India accounts for 56 per cent of global sourcing with seven per cent market share of the world’s software and IT services, currency volatility and innovative technologies like artificial intelligence, automation, Internet of Things and machining have disrupted the industry’s traditional products and solutions to enterprises worldwide.

“To stay globally competitive, the industry needs to invest and enhance its digital capabilities. This entails a mix of reskilling, domain and platform capabilities coupled with acquisition-led competencies,” Chandrashekhar maintained.

Recovering from the fallout of the global financial meltdown in 2008-10, the Indian IT-BPM (Business Process Management) industry flourished to grow in double digits (12-14 per cent) on a wider base over the last couple of years, thanks to its adoption of cloud computing, big data, analytics and mobility.

As a result, the industry’s revenue grew 12-13 per cent in the 2015-16 fiscal to $143 billion, including $108 billion from exports, while domestic revenue increased by 10 per cent to Rs 1,41,000 crore.

For the first time in many quarters, IT bellwether Tata Consultancy Services (TCS) reported flat sequential growth for the second quarter, which made its Chief Executive N. Chandrasekaran admit that growing uncertainties in the environment was creating caution among customers and resulted in holdbacks in discretionary spending.

Similarly, Infosys lowered its annual revenue guidance to 8-9 per cent for this fiscal due to uncertain business outlook and currency volatility from 10-11.5 per cent on June 30 and 11.8-13.8 per cent it projected in April.

Unlike its peers TCS and Infosys, Wipro projected flat revenue from its IT services for October-December third quarter due to weak demand and uncertainty in technology spend.

The government’s push towards digitisation for a digital economy and enhancing the ease of doing business through administrative overhaul and tax reforms, however, augured well for the industry.

Looking forward, Chandrashekhar said 2017 would be the year of re-adoption for the industry, with technology disruptions reshaping enterprises and providers focusing on building technology-led platforms that can redefine services delivery.

“Trends like consumerisation of IT, SMAC (social, mobile, analytics and cloud), changing lines of business and new under-penetrated markets will alter the future of the industry.”

Industry hiring also took a beating, with the IT majors deferring recruitment of freshers from campuses, holding back appointments for laterals and postponing joining dates for new techies.

The industry employee base reached 3.7 million, with an addition of 200,000 employees in 2015-16.

“The industry is looking for talent from ‘qualification’ to ‘skill-based’ with greater focus on hiring ‘knowledge and expertise’-based talent,” Chandrashekhar noted.

(This is a part of a series of articles from IANS that look back at the year that was. Fakir Balaji can be contacted at [email protected])

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Gross NPA may rise to Rs 9.5 lakh crore by March: Study

“Fiscal 2018 marks beginning of third phase of ARCs which promises to change the landscape as new regulations and other changes kick-in.”

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NPA

Gross non-performing assets (NPA) in Indian banks are expected to rise to Rs 9.5 lakh crore by March, from Rs 8 lakh crore in March last year, said a ASSOCHAM-Crisil joint study.

Stressed assets in March 2018 are expected to be at Rs 11.5 lakh crore, the report titled “ARCs headed for a structural shift,” said.

“High level of stressed assets in the banking system provides enormous opportunity size for asset reconstruction companies (ARCs) which are an important stakeholder in the NPA resolution process,” ASSOCHAM said in a statement quoting the study.

It, however, said that owing to capital constraints, growth of ARCs is expected to come down significantly.

“While growth is expected to fall to around 12 per cent until June 2019, however the AUM (assets under management) are expected to reach Rs 1 lakh crore, and that is fairly sizeable.”

The study added that with banks expected to make higher provisioning over and above the provisions made for stressed assets, they may sell the assets at lower discounts, thus increasing the capital requirement.

The study also said that effective implementation of the Insolvency and Bankruptcy Code would be a remedy to the challenge of prolonged litigation and it can help improve the recovery rate of stressed assets’ industry further.

Power, metal and construction sectors contribute the bulk of stressed assets. According to an analysis of 50 stressed assets (forming nearly 40 per cent of stressed assets in the system), sectors like metal, construction and power form nearly 30 per cent, 25 per cent and 15 per cent respectively, while other sectors together form the remaining 30 per cent.

The report stated that 2018 would see a structural shift in the stressed assets’ space as increased stringency in banks’ provisioning norms for investments in security receipts (SRs) is likely to result in more cash purchases.

“Fiscal 2018 marks beginning of third phase of ARCs which promises to change the landscape as new regulations and other changes kick-in.”

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Key Indian equity indices open at fresh highs

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Mumbai, Jan 22: Key Indian equity indices opened at fresh highs during the early morning trade session on Monday, with healthy buying observed in oil and gas, energy and consumer durables stocks.

At 9.20 a.m., the wider Nifty50 of the National Stock Exchange (NSE) traded 8.05 points or 0.07 per cent higher at a new high of 10,902.75 points.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 35,613.97 points, traded at a fresh level of 35,613.73 points — up 102.15 points or 0.29 per cent — from its previous session’s close.

The Sensex has touched a new high of 35,664.01 points during the intra-day trade so far.

The BSE market breadth was bullish as 454 stocks advanced as compared to 238 declines.

On Friday, positive global cues, coupled with upbeat quarterly corporate earnings and healthy buying in banking stocks, propelled the key indices to close at new record highs.

The Nifty50 closed at 10,894.70 points, while the Sensex closed at 35,511.58 points.

IANS

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Amazon opens supermarket with no checkouts

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Amazon Go

Washington, Jan 22: In a move that could revolutionise the way we buy groceries, Amazon opens its first supermarket without checkouts — human or self-service — to shoppers on Monday.

Amazon Go, in Seattle in the US, has been tested by staff for the past year, BBC reported.

It uses an array of ceiling-mounted cameras to identify each customer and track what items they select, eliminating the need for billing.

Purchases are billed to customers’ credit cards when they leave the store.

Before entering, shoppers must scan the Amazon Go smartphone app. Sensors on the shelves add items to the bill as customers pick them up – and deletes any they put back.

The store opened to employees of the online retail giant in December 2016 and had been expected to allow the public in more quickly.

But there were some teething problems with correctly identifying shoppers of similar body types – and children moving items to the wrong places on shelves, according to an Amazon insider.

Gianna Puerini, head of Amazon Go, said the store had operated well during the test phase: “This technology didn’t exist — it was really advancing the state of the art of computer vision and machine learning.”

Amazon has not said if it will be opening more Go stores, which are separate from the Whole Foods chain that it bought last year for $13.7 billion.

As yet the company has no plans to introduce the technology to the hundreds of Whole Foods stores.

However, retailers know that the faster customers can make their purchases, the more likely they are to return.

Making the dreaded supermarket queue a thing of the past will give any retailer a huge advantage over its competitors.

The Seattle store is not Amazon’s first foray into bricks and mortar retailing, however. In 2015 the firm opened its first physical bookshop, also in Seattle where the company is based. There are now about 12 in the US — including one in New York that opened last year — as well as dozens of temporary pop-up outlets.

In its third quarter results in October, Amazon for the first time put a figure on the revenues generated by its physical stores — $1.28 billion. Yet almost all of that was generated by Whole Foods.

While its stores may not yet be moneyspinners, analysts have said Amazon is using them to raise brand awareness and promote its Prime membership scheme. Prime members pay online prices at its bookstores, for example, while non-members are charged the cover price.

Brian Olsavsky, Amazon chief financial officer, recently hinted that rivals should expect more Amazon shops in the months and years ahead.

“You will see more expansion from us – it’s still early, so those plans will develop over time,” he said in October.

IANS

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