The Coronavirus crisis will have a severe fallout on the world economy and India would not likely be insulated from the impact. Soon after it went on for a 21-day lockdown, Moody’s Investors Service has slashed India’s GDP growth projection for 2020 from 5.3 percent to 2.5 percent. While it is quite evident that non-essential consumptions and exports are likely to take a big hit due to this crisis, IT services companies’ revenues including IT/ITeS Exports could get hit badly too, as overseas clients start tightening their purse strings amidst the slowdown.
India’s software/services and IT-enabled services (ITeS) exports in FY 2019-20 had been estimated to the tune of $147 billion with a projected growth rate of 10 percent YoY. A big chunk of the software and services export revenue today comes from the US(61 percent), followed by UK(11 percent) EU(14 percent), and Asia(7 percent) respectively.
“Business transactions with all the export destinations, especially with the US, has been going on as usual so far, because, first, all of them are not entirely locked down and second, the India outsourcing framework embraces digital and collaborative mode of work and communication, and does not require much of physical interventions anyway,” said Omkar Rai, Director General of Software Technology Parks of India (STPI), an autonomous body under the Ministry of Communication and Information Technology (MEITY) for promoting development and exports of software and software services.
IT/ITeS exports comprise a wide array of IT software and services like maintenance services, remote backup services, software development, Business Process Management, Engineering Research and Design services, etc. “While mission-critical services are likely to continue, as usual, a tiny fraction of the IT/ITeS exports volume such as actual software development, where you are trying to develop something new or you are trying to code some program which is not very urgent can wait. But we have to see how customers respond to and act in this situation,” said Rai.
Cushioning against the looming crisis
Director General of Foreign Trade (DGFT) has relaxed certain foreign trade policy norms and announced a few date or validity extensions considering the ongoing crisis. The Department of Telecom (DoT) has relaxed certain norms for Other Service Providers (OSPs) to facilitate work from home (WFH).
Currently, the value of the goods or software exports made by the exporters is required to be realized fully and repatriated to the country within 9 months from the date of exports. But to ease export woes, Reserve Bank of India (RBI) has already extended the realization period of export proceeds( for exports made up to or on July 31, 2020) to 15 months from the date of exports. Exporters this way will get more time and flexibility to realise their money and to negotiate future contracts with buyers too.
STPI also has taken various initiatives to reassure the IT/ITeS companies and to help them continue business as usual.
To ensure business continuity of its services, STPI has allowed its employees across its 60 centers in the country to work from home from March 12.
Payments for almost all the govt. services, as well as rentals that IT companies are required to do as per norms, have been deferred for up to the next three months as of now. STPI could extend the dates further if the need arises. It might even be waived off in case of SMEs/startups who are hit badly and any other deserving cases, Rai assured.
“It’s hard to foresee how things will pan out in the long run for us as well as other countries we are exporting to. The government has been very proactive and supportive so far, as far as regulatory or policy supports are concerned. We are trying to make sure that businesses and exports don’t suffer on any account. It’s a good thing that despite the challenge that we are facing at this moment, all the stakeholders have stepped up and tackled the situation almost like a war-like emergency to keep the industry afloat,” concluded Rai.
Hopefully, IT/ITeS companies will take lessons from this crisis and will learn to re-strategise better for such uncertainties.