NEW DELHI: India’s IT software and service exports will keep climbing to record levels despite a surge in the rupee’s value against the dollar, the industry’s top body forecast on Wednesday.

The rupee has risen by more than 11 per cent this year against the dollar, in a blow to India’s flagship outsourcing sector that earns two-thirds of its revenues from the United States.

The National Association of Software and Services Companies (Nasscom) said it was sticking to its official forecast of achieving $60 billion in exports by 2010 despite expectations of further rupee appreciation.

“We see no (export) slowdown,” said Nasscom president Kiran Karnik, but added the appreciation of the rupee could weigh on margins and profits.

India’s software and services exports grew by 33 per cent to 31.4 billion in the financial year to March 2007 while total revenues climbed by 31 per cent to $40 billion.

India has become the world’s back office as Western companies set up call centres, software development and number-crunching outlets.

Western firms have cut costs by moving work to India to tap its many English-speaking, computer-savvy graduates at lower pay than counterparts abroad.

Karnick forecast no overall impact on industry revenues from the rupee’s rise “but we see a small impact on the bottom line.” Industry revenues are expected to hit $50 billion in the current financial year.

Sector heavyweights like Tata Technology, Wipro and Infosys had greater scope to cope with the rupee’s rise to nine-year highs by boosting productivity and currency hedging.

But smaller cutting-edge firms that are important to the industry’s future dynamism were being squeezed and needed tax breaks, Karnick said.

“For companies with low margins the impact is big,” he said. “It can mean the difference between being in the black and being in the red.”

His comments came as the Associated Chambers of Commerce and Industry of India issued a survey of 215 chief executives that forecast the rupee would extend its gains to 37 to the dollar by the end of the financial year.

That would represent a year-on-year rise of 15 per cent for the rupee which was trading at around 39.7 to the dollar on Wednesday.

The rupee’s rise has been driven by massive capital inflows into an economy expanding by nine per cent, the second fastest after China.

On the plus side, Karnick predicted the sector’s employee talent crunch would moderate thanks to industry training efforts and wage growth, which averaged nearly 18.7 per cent this year, next year.

An average annual pay cheque for an Indian software worker is $15,500, says technology magazine Dataquest. Big pay hikes have pressured company margins.

But even with such wage growth, India would remain the favourite destination for global information-technology sourcing as Indian base salaries were much lower than in Western nations, Nasscom said.

“I’m sure wage escalation will not erode the industry’s competitiveness in the next five years,” Karnick added.

The association announced Karnick would step down as Nasscom president at year end and be replaced by Som Mittal, head of services business of computer giant Hewlett Packard for Asia Pacific and Japan.—AFP