India's IT and ITeS industries are beginning to see "an opportunity lost," warns NASSCOM

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"There is too much rupee appreciation in too short a time. As a result, the small and medium companies are being hit hard," Kiran Karnik, president, NASSCOM, said, adding that in the long term it could affect India's dominance as a top destination for IT outsourcing.

"There is a feeling that the future growth of this industry is being sacrificed," he said.

Earlier, out of every $100 investment, $80 used to come to India and only $20 went to Phillipines, China or Vietnam, but now "we are beginning to see the ratio changing to 70:30 or even 60:40," Karnik said.

"If we want to be number one in IT, like Japan in automobiles, in the next 10 years, then we have to look at how we can continue to be attractive," he said.

With the rupee rising almost 12 percent against the dollar in 2007, the IT and the BPO sectors, two-third of whose revenues come from U.S.-based clients, have been hit hard, witnessing erosion of their profit margins.

Though big companies have "handled the situation extremely well," smaller companies "have taken a hard hit" as their margins are lower, Karnik said.

"I am concerned about the long-term prospects. I do not know where things are going," Karnik said, adding that one percent rise in the rupee value would affect the bottomline of the industry by 30 to 40 basis points.

Karnik, however, said that the software export industry was growing at a steady pace and would achieve the export growth target of 26-28 percent this year. "I have a sense that we will hit the 2010 target ($60 billion). But looking beyond that, I am concerned," he said.

"We are beginning to see an opportunity lost," Karnik said.

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