THE outstanding performance of India’s top information technology companies in the second quarter of the current fiscal is a sure sign that the sector is on track to achieve its ambitious goal of $60 billion worth of exports by 2010.

The National Association of Software and Services Companies (NASSCOM), the apex industry body, had a few years ago projected that the IT and ITES (IT Enabled Services) industry would generate about $60 billion in export revenues by the end of the current decade.

Not many outside the IT sector were willing to bet on the NASSCOM projections, which appeared unrealistic at a time when the sector was earning less than $10 billion in revenues. About 10 years ago, India’s IT industry had revenues of less than $2 billion. Last week, TCS, the country’s top software company – and part of the Tata group – reported revenues of $1.1 billion for the three-month period, October to December 2006.

Total software and services exports (including ITES revenues) added up to a little over $7.5 billion in 2001-02. Last financial year – ending March 31, 2006 – software exports added up to $23.6 billion (which was a 33 per cent growth over the previous year’s figures). Overall, the IT-ITES industry (both exports and domestic sales) grew by 31 per cent, almost touching the $30 billion-mark last financial year.

The end of fiscal 2006-07 (March 31, 2007) will see the industry’s export earnings itself crossing the $30 billion-mark (up by almost 30 per cent), while revenues are projected to grow to $38 billion, says Kiran Karnik, president, NASSCOM. “The industry is on course to meet the projected target of $60 billion exports by 2009-10.”

The ITES – or Business Process Outsourcing (BPO) – segment will see exports of $8 billion, up from $6.3 billion last year. The IT-ITES industry has grown by a compounded annual growth rate (CAGR) of 28 per cent over the past five years, and has to grow at a little over 26 per cent (CAGR) over the next three years to reach the target of $60 billion exports.

Nandan Nilekani, CEO and managing director, Infosys Technologies, feels that other sectors – including infrastructure – should repeat the success of the IT industry. India’s infrastructure sector has been lagging behind, hindering the growth of other fast-growing sectors, including IT, telecommunications, automobiles, aviation and real estate.

Nilekani points out that if the IT sector can achieve such dramatic growth – with turnover expanding from under $50 million a few years ago, to a projected turnover exceeding $50 billion in three years – other sectors including infrastructure should be able to come out with such stellar performance.

INFOTECH companies are usually among the first to announce their quarterly results, and this time was no different. The top three IT companies – TCS, Infosys and Wipro – came out with their quarterly results during the first few days of the New Year.

The three companies have grown at an average of almost 45 per cent during the first half of the current fiscal. Their remarkable performance has boosted market sentiments, and stock indices are pushing ahead, breaking new records.

The BSE IT index shot up by 20 per cent in the quarter ending December, outperforming the Sensex, the benchmark index on the Bombay Stock Exchange, by 10 per cent.

The big three, together with the next three in the IT hierarchy – Cognizant, HCL Technologies and Satyam – have seen top line growth of 45 per cent, and bottom line growth of 47 per cent.

TCS, with revenues of $1.1 billion during the October-December quarter, is likely to emerge as a $4 billion. TCS also reported quarterly net profit of $252 million, a 40 per cent growth. The company has been reporting 40 per cent growth in net profit over the last four quarters.

Infosys, the country’s second largest software exporter, saw net profit for the third quarter zoom by 51.5 per cent to $218 million, while revenues soared to $821 million, up 47 per cent.

The Bangalore-based IT major, which was among the first Indian companies to go in for a listing on the Nasdaq, was last month included in the Nasdaq-100 index, in league with the biggest listed tech companies in the world. Nearly a fifth of Infosys’ shares are traded on the Nasdaq.

According to Nilekani, the CEO, there has been no slowdown in global IT spending, which means Indian companies can expect to grow at a hefty pace.

Wipro, also based in India’s IT capital, reported a 43 per cent growth in quarterly revenues to $899 million, while net income rose by 40 per cent to $169 million. Wipro’s chairman, Azim Premji – who was ranked 25th among the world’s richest people by Forbes magazine in 2006, with net worth of $13.3 billion – has spent over $250 million in the past one year on eight acquisitions.

The company is expected to close the financial year with fourth-quarter revenues of about $685 million.

All three IT leaders came out with outstanding performance despite the rupee gaining four per cent against the US dollar in the October-December period. India’s IT exporters earn 60 per cent of their revenues from US-based clients, so any gains by the rupee hurts their business.

FRENZIED growth by top IT firms in India has resulted in huge demand for qualified manpower. The three top companies have combined staff strength of over 200,000, with TCS alone accounting for almost 85,000.

All three majors plan to hire another 90,000 employees this year. Almost 10 per cent of the 35,000 staffers that TCS will recruit will be from abroad, as there is an acute shortage of qualified personnel.

India’s booming IT-ITES sector has seen employment leap by a million over the past seven years; total employee strength is expected to jump by another million over the next three years. While the industry provides employment to 1.3 million people today, it has helped created another three million jobs indirectly.

Every year, the industry has been adding on average a quarter-million workers, but this year the big three together are recruiting about 200,000 new people. Last year, the sector hired about 380,000 people.

But the industry is facing two major problems: shortage of manpower, and rapidly rising wage bills. While IT workers in India earn less than counterparts in the US and Europe, compensation is rising much faster here – by almost 15 per cent a year, as against around five per cent in the developed world.

Attrition rates are also high in the industry. At Wipro it is 16.2 per cent (down from 17.6 per cent last year), at Infosys the rate is 13.5 per cent, and at TCS 10.8 per cent.

Though Indian universities churn out three million graduates a year, the IT sector finds less than 15 per cent to be employable. And of the 400,000 engineers who graduate every year, only one in four is employable.

Nandan Nilekani of Infosys says there’s “a disconnect” between what the country’s education system produces and the needs of the IT industry.

According to S. Ramadorai, CEO and managing director, TCS, at least half a million additional employees would be needed by the industry by 2010. The McKinsey-NASSCOM study had projected the sector would provide direct and indirect jobs to nine million people by 2010, though it would face a shortage of half a million skilled workers.

Lack of qualified manpower would be a major factor slowing down the feverish growth of the Indian IT-ITES sector.