Trump, protectionism major worry lines for India's IT sector in 2017

New Delhi, Delhi, India Dec 29, 2016, 10.00 AM(IST)

Indian IT industry is staring at arguably its biggest uncertainty in recent times after Donald Trump as the next president. In photo: CEO of Infosys Vishal Sikka. Photograph:( AFP )

Already battling headwinds of a slowing growth, the $150-billion Indian IT industry is staring at arguably its biggest uncertainty in recent times after Donald Trump was elected as President of the US, which accounts for around 60 per cent of its export earnings.

While artificial intelligence, digital and automation are the buzzwords this year, worrylines have started to emerge on "creeping" protectionism and negative sentiment in key markets.

IT companies, however, can take comfort from the fact that global technology spend is expected to grow 3 per cent in 2017 after sliding 0.3 per cent in 2016 and long-term targets of the industry of grossing $225 billion by 2020 and $350 billion by 2025 remain intact, at least for now.

"For 2017, the big concern areas include protectionism and anti-globalisation creeping into markets like the US, the UK and the rest of Europe, Singapore and Australia. Second, the need to update skill base we have in India and rising need for digital and consulting skills, and third, the policy initiatives like GST which can impact the industry," said R Chandrashekhar, President of software association Nasscom.

Trump, who is due to take over as the 45th US President next month, is known for his hardline stance on protectionism and anti-immigration.

While the industry has tried putting on a brave front, there are underlying concerns about tightening of visa norms that will push up the cost of doing business.

Flagging the issue of protectionism and negative sentiment around skilled worker movement in the US, Chandrashekhar argues that corporate America also needs technology services, given the shortage of science, technology, engineering and mathematics (STEM) skills.

"The issue is as much about what is good for the US economy. The fact is that according to US' own statistics, over one million IT-related jobs will remain unfilled in 2018... So, reality has to be kept in mind before steps are taken," he said.

Indian players like TCS and Infosys are heavily dependent on the US market.

The other big market -- the UK -- also did not bring much good news for the sector this year, with the country announcing its separation from the EU.

While companies as well as industry body Nasscom said there may be short-term impact on contracts, Britain exiting from the UK holds opportunities for India over a longer term.

The IT industry, which has been a poster boy for Indian exports sector, has been battling factors like fluctuating currency and rising visa costs over the past many years.

In March this year, India filed a complaint in the World Trade Organisation (WTO) against the US decision to impose high fees on temporary working visas, a move that makes Indian IT companies less competitive in that market.