Even as the continuous decline in the value of rupee is expected to bring in gains for the domestic IT industry amidst concerns over U.S immigration bill and rising visa cost, experts feel such volatility is not good for business in the longer run.
"Indeed, there will be an impact of depreciation in rupee's value for many IT software companies. It will be positive for the industry in the short-term, making them more cost-competitive,” Pradeep Udhas, Partner, KPMG India said.
Meanwhile, industry body NASSCOM said that while the downward spiral in rupee’s value, which hit a historic low of 68.85 against the US dollar on Wednesday, is expected to provide short-term benefits, it will affect signing of new contracts by domestic IT firms.
“Depending on companies’ hedging strategy, a company may gain a little. But the problem now is when companies will be bidding for next project, they do not know what the currency rate is going to be. The problem is shall I do it (hedge) at Rs. 60, Rs. 65 or Rs. 70 to the US dollar. So, the problem is if I don't see stability, on what basis do I price? What do I tell my customer, what is the rate?” Nasscom President Som Mittal told The Hindu .
The rupee has declined nearly 25 per cent from Rs. 54.28 against dollar on April 1, 2013, to Rs. 68.85 today, on concerns about the country's widening current account deficit, slowing economic growth and capital outflows.
“It is a real problem. We don't know where to hedge, our customers don't know where to hedge. The industry needs a stable currency as it helps in signing contracts,” he added.
Additionally, the gains from the falling rupee are not likely to be very significant as most IT companies hedge their forex position.
“If we see three months down the line, the decline in rupee will translate into some gains in terms of top line of the companies. However, as most companies have a hedging policy the positive impact will be slight,” Arup Roy, Research Director, Gartner India said.
