US Finds India's IT Software and Services Exports Wildly Exaggerated

A 2005 study by US General Accounting Office (GAO) found that Indian government's figures for software and technology exports to the United States were 20 times higher than the US figures for import of the same from India.

U.S. General Accounting Office looked at the 2003 data showing the United States reported $420 million in unaffiliated imports of BPT (business, professional, and technical) services from India, while India reported approximately $8.7 billion in exports of affiliated and unaffiliated BPT services to the United States.

US-India IT Trade Discrepancy Source: GAO 
The GAO found at least five definitional and methodological factors that contribute to the difference between U.S. and Indian data on BPT services. First, India and the United States follow different practices in accounting for the earnings of temporary Indian workers residing in the United States. Second, India defines certain services, such as software embedded on computer hardware, differently than the United States. Third, India and the United States follow different practices for counting sales by India to U.S.-owned firms located outside of the United States. The United States follows International Monetary Fund standards for each of these factors. Fourth, BEA (Bureau of Economic Analysis) does not report country-specific data for particular types of services due to concerns about the quality of responses it receives from firms when they allocate their affiliated imports to detailed types of services. As a result, U.S. data on BPT services include only unaffiliated imports from India, while Indian data include both affiliated and unaffiliated exports. Fifth, other differences, such as identifying all services importers, may also contribute to the data gap.

In theory, India follows what is known as BPM 6 (MSITS) reporting method for software and information-enabled technology services (ITES) which counts sales to all multinationals, earning of overseas offices, salaries of non-immigrant overseas workers as India's exports. In practice, India violates it. BPM 6 allows the salaries of first year of migrant workers to be included in a country's service exports. India continuously and cumulatively adds all the earnings of its migrants to US in its software exports. If 50,000 Indians migrate on H1B visas each year, and they each earn $50,000 a year, that's a $2.5 billion addition to their exports each year. Cumulatively over 10 years, this would be $25 billion in exports year after year and growing.

There has neither been any acknowledgement nor any correction of the Indian government's methodology for reporting software and IT services exports since the GAO report was published in 2005. This raises serious questions about the accuracy of India's claims of $60 billion to $70 billion IT software and service exports being currently reported. If the 20X exaggeration still persists, the Indian IT exports could be as little as $3 billion to $4 billion today based on the US methodology.

Pakistan IT Exports BPM 5 Method Source: State Bank of Pakistan

Unlike the Reserve Bank of India's claimed BPM 6 methodology, the State Bank of Pakistan uses a much more conservative BPM 5 reporting system which does not include sales to multinationals located in Pakistan and earning of overseas offices and salaries of non-immigrant Pakistani overseas workers in Pakistan's exports figures. If the State Bank switched to BPM 6 method, Pakistan's software and IT exports of $294 million for 2012-2013 could easily become at least $5 billion.


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Comments

Riaz Haq said…
Here's a news report that helps understand why some Indian IT companies overstate exports to claim tax exemptions:

Did IBM India export software in 2008-09? Though the company says it did, the claim may not run deep as telecom service companies have said that they did not give any leased lines to IBM India to enable the IT giant to export its software.

Software is generally exported through leased lines — dedicated cables — that transmit data and connect the seller to the buyer in different locations. The telecom service providers’ statement during the tax department’s probe is significant in light of the income tax department’s notice to IBM India last week for evading crores of rupees in taxes under an export promotion scheme.

In response to dna’s questionnaire, IBM India did not specifically respond to queries on leased lines and its foreign bank account. However, the company’s spokesperson said: “IBM does not agree with the tax department’s claims and will aggressively defend itself through the appropriate judicial process.”

IBM India not only under-reported revenue of Rs7,288 crore in 2008-09 to evade tax to the tune of Rs5,357 crore but it also showed sales in India as exports to claim tax exemption under the STPI scheme, according to the tax department. Under the Software Technology Park of India (STPI) scheme, IT companies are eligible for 100 per cent tax exemption on income generated from software exports as defined in section 10A and 10B of the I-T Act 1961 or under 10AA if they are located in a special economic zone (SEZ). IBM India has several units in STPIs and SEZs across the country that claim tax exemption on income from software exports.

IBM India claimed that it had exported software in 2008-09. But telecom companies, VSNL (Tata) and AT&T and others, denied providing leased line services to IBM India to export software from their eligible Software Technology Park of India or special economic zone locations, such as in Bangalore, Hyderabad, Gurgaon, etc. Rather, the companies gave it connection only within the country, according to the tax department’s notice.

In order to milk the export promotion scheme, IBM India also violated the Foreign Exchange Management Act and deceived the Reserve Bank of India. These and other violations came to light after the tax department initiated a thorough probe into the company’s affairs when IBM India failed to furnish software development agreements, software export forms (softex) despite several summons and show cause notices. The investigation reveals that thousands of invoices submitted by IBM India to STPI and SEZ authorities were different from the invoices referred to in its HSBC bank account in New York in which sale proceeds were credited. The department suspects these to be “bogus invoices”....


http://www.dnaindia.com/india/report-ibm-india-exported-software-minus-lease-lines-1916031
Riaz Haq said…
Here's Yahoo Finance news on Pakistani start-up Convo getting $5 million from US VC Morgenthaler Ventures:

SAN FRANCISCO, Sept. 16, 2013 /PRNewswire/ -- Convo, a cloud-based collaboration service, today announced a $5 million Series-A investment from Morgenthaler Ventures. This financing is the company's first investment by an institutional venture capital firm. The funding will be used to evolve its offerings, introduce their service on more platforms, and accelerate user reach and growth.

Convo is a multi-platform service designed to allow teams to share and work together simply and naturally by combining discussions with messaging, images, docs, presentations and PDFs.

Since 2012, Convo has seen exceptionally high levels of engagement in their paying accounts, with an average monthly-active over daily-active ratio of 75%, which is noticeably higher than even the 30% of most social games.

Convo is available across all major platforms and has launched versions of its software for Windows, Mac, Web, iPhone, and Android.

"We built our company with slim resources and a small team, and therefore are excited about our prospects with Morgenthaler Ventures in our corner. They have helped companies at our stage and with our enterprise focus grow exponentially," said Faizan Buzdar, founder and CEO of Convo. "Our immediate priority is to use the new infusion of capital to continue delivering a service that meets the ease-of-use, reliability, and security demands of our customers."

Said Rebecca Lynn, Partner at Morgenthaler Ventures, "We have been amazed at the level of engagement we have seen from Convo's early customers, including many global brands. These organizations won't settle for inconsistent, light-weight solutions. Multinational organizations have selected Convo after putting them through a battery of security tests. There are collaboration services you use to run chit chat, and there are those that run your company. Convo is relied on for the latter."

"Looking across our portfolio, there is a common trait amongst our entrepreneurs, one of extraordinary tenacity and vision, which Faizan has in spades," said Alex Nigg, Venture Partner, Morgenthaler Ventures. "Faizan started his business in Pakistan, moved it to San Francisco, and overcame considerable odds to attract a list of loyal customers from around the world."

About Convo

Convo (www.convo.com) is designed to help any group of people working together to achieve great things. Convo allows creative and innovative teams to easily have the real-time conversations needed to advance a cutting-edge campaign, launch a new product or break the latest news story. Convo, an interactive workspace, is made for people who thrive on the creative process and who want to "get there first." The company (formerly Scrybe) has recently reincorporated in the United States and is headquartered in San Francisco with an offshore office in Pakistan.



http://finance.yahoo.com/news/convo-secures-series-funding-morgenthaler-113000482.html
Riaz Haq said…
Here's more from Express Tribune on Faizan Buzdar's Convo:

The funding will be used to evolve the company’s products, introduce its service on more platforms, and accelerate user reach and growth. Convo will also use the money to more than double its team in Pakistan, the company’s Director Marketing and Operations Shehryar Hydri told The Express Tribune.
The product is making big waves already and giving social enterprise giants, the likes of Yammer and Jive, a run for their money according to reviews published by top technology blogs; it has even taken away a chunk of their clientele.
The company’s market position couldn’t be determined because it didn’t disclose financial data. It did say however that over 10% of the Fortune-500 companies use their product, and they have 6,000 customers in more than 150 countries.
What really brought Convo to the limelight were the rave reviews it received from customers and leading technology blogs, such as TechCrunch and The Next Web, for its innovative features. In fact, this innovative product even got the attention of the United States President Barack Obama few months ago.
“Faizan,” Obama tweeted, “is a perfect example of why we [America] need immigration reform.”
Obama’s tweet, which praised Buzdar, was meant to gather support for an immigration bill that would allow non-US citizens into the country to help promote innovation in the country’s technology industry.
Buzdar, too, faced a host of immigration hurdles before getting his green card recently. “America needs immigration reform or it risks losing out on innovation,” he had told The Next Web prior to getting his resident permit.
Launched from Islamabad in 2005 as Scrybe and later renamed Convo, it is one of the few software product-based companies that originally started in Pakistan and gained a global footprint in terms of funding and customers.
Buzdar started his company from a five-member team working from a small room in the federal capital but he is determined to make it big, perhaps the biggest in the market it serves.
“Our customers say that Convo is the first app they check as soon as they wake up, even before email or Facebook. I want to see that behavior across many more organisations,” Buzdar said.


http://tribune.com.pk/story/631651/up-and-coming-pakistani-startup-raises-5m-from-venture-capitalist/
Riaz Haq said…
Here's a Forbes piece on Goldman Sachs's report on "Modi-fying India":

Global investment firm Goldman Sachs probably didn’t think it would be accused of meddling in India’s domestic politics when it upgraded its view on India. But with national elections due within a few months, it made the mistake of attributing some of its positive sentiment to the leading opposition party candidate.

In its latest report on India earlier this week, Goldman Sachs said it was “Modi-fying our view: raise India to market weight.”

The ‘Modi-fying” was a clear play on the name of Narendra Modi, the prime ministerial candidate of the Bharatiya Janata Party, the main opposition party to the ruling Congress Party-led United Progressive Alliance.

The report said:

“Equity investors tend to view the BJP as business-friendly, and the BJP’s prime ministerial candidate Narendra Modi (the current chief minister of Gujarat) as an agent of change. Current polls show Mr. Modi and the BJP as faring well in the five upcoming state elections, which are considered lead indicators for the general election next year.”

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A smarter thing for Minister Sharma would’ve been to cite the rest of the reasons that Goldman Sachs listed in its report for raising its investment case on India–a variety of measures taken by the current government and India’s central bank in the past few months and that are finally beginning to bear fruit, making India a better investment case.

Specifically, the report says:

BJP and Mr. Modi, in particular, have been focussed on infrastructure and capital spending in the past and a BJP-led government may be beneficial for the investment demand pick up, in our view.
the central bank (RBI) has taken various measures to relieve immediate pressure on the current account and encouraged capital flows which have helped arrest [rupee] weakness
Some of the key data points and lead indicators related to investment demand have started to show signs of pick up. The decline in new project starts in industrial and infrastructure projects seem to have halted in 2QFY14, although project starts still remain at low levels. We are also seeing early signs that fewer new projects have stalled – an indication that we may be close to a trough in the investment cycle given recent policy initiatives from the government and new approvals coming through in power and road projects.
Over the last month, earnings sentiment has improved significantly… with early signs of pick up in investment demand.
Foreign inflows into Indian equities have remained strong this year despite the excessive volatility and sell-off in emerging markets…. While FII flows have been strong and “sticky”, which has been supportive of the rally in equities, domestic institutions have been net sellers of equities…. If the recent rally and optimism regarding leadership change stem the redemption flow, the equity demand/supply balance could shift more favorably.
As elections loom closer and turnouts at Modi’s rallies easily outstripping those at Congress rallies, was Minister Sharma’s outburst a sign of panic? He would’ve better served his party by just holding up the report and taking some credit.


http://www.forbes.com/sites/meghabahree/2013/11/08/indian-minister-lashes-out-at-goldman-sachs/
Riaz Haq said…
Here's an excerpt from US Bureau of Economic Affairs (BEA) on source of differences between Indian exports and US imports of IT and related products and services:


BEA follows international standards for balance-of-payments accounting by excluding the compensation paid by U.S. firms to U.S. residents. Foreign workers who are in the United States for less than one year are considered to be foreign residents, and typically their earnings are included as compensation of employees (under “income” in the balance of payments accounts). Workers who are in the United States for more than one year are considered to be U.S. residents, and so their earnings are excluded from the balance of payments accounts. According to the GAO study, Indian officials acknowledged that temporary Indian workers in the U.S. have accounted for about 40 to 50 percent of their data on exports of BPT services.



b) Sales through affiliated companies. India’s data on services exports to North America include sales of services to affiliates of U.S. companies located in India or another foreign country, as well as sales by affiliates of Indian companies located in the United States to other U.S. residents. According to international standards, BEA excludes these sales from U.S. trade in services because the transactions did not occur between a U.S. resident and a non-resident. A U.S. company’s foreign affiliate that is located in India is an Indian resident, and so its transactions with other Indian residents should not be included in the balance of payments. Similarly, an Indian company’s affiliate in the United States is a U.S. resident, and so its transactions with other U.S. residents should not be included. According to the GAO study, an Indian official stated that inclusion of sales to affiliates of U.S. companies is “likely a significant factor” accounting for differences between U.S. and Indian data.



c) Sales of goods. India’s data on trade in BPT services include some sales of goods, such as prepackaged software and software embedded on computer hardware. The U.S. data on trade in these products are included in the goods trade data, not in the services trade data. According to the GAO study, Indian officials stated that embedded and prepackaged software account for about 10-15 percent of India’s estimate of exports of BPT services to the U.S.



d) Sales of technology-enabled services. India’s data on trade in BPT services include some technology-enabled services (such as some financial services). BEA includes these services in other services categories.



e) Intrafirm trade. Through 2006, U.S. data for trade in services are collected separately for cross-border trade between unaffiliated companies and for intrafirm (or affiliated) trade. The surveys that BEA uses to collect data on unaffiliated trade are detailed enough to allow BEA to identify trade in BPT services vis-à-vis India. Affiliated trade, however, is collected on separate surveys, and data for individual foreign countries that separately identify BPT services are unavailable. Therefore, reported BEA data for BPT trade with India cannot be directly compared with the Indian data, because BEA’s data for BPT services include only unaffiliated trade and India’s data on BPT services include both affiliated and unaffiliated trade.





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BEA adjusted its own data to include an estimate of affiliated transactions, which are collected on surveys that do not allow for BPT services to be separately identified by individual foreign country. In order to estimate affiliated imports of BPT services from India, BEA used a ratio calculated from global affiliated and unaffiliated imports of BPT services. BEA used the same procedure to estimate affiliated imports of computer services

http://www.bea.gov/faq/index.cfm?faq_id=324
Riaz Haq said…
#India is pissed about the #US now charging more money for #H1B temp worker visas: https://news.vice.com/article/india-is-pissed-about-the-us-now-charging-more-money-for-guest-worker-visas … via @vicenews

The annual gold rush in Silicon Valley to fill out applications for guest worker visas began Friday, as the federal government began distributing some of the 85,000 H1B visas it is authorized to issue this year.

But the dash to grab visas is set against the backdrop of a political debate both within the United States and abroad about the regulations surrounding H1B visas, the government designation for visas designed for highly-skilled employees in "specialty occupations."

Just weeks ago, India filed a complaint with the World Trade Organization over an increase in fees on H1B visasthat the US imposed on companies with workforces comprised of more than 50 percent foreign workers. A provision included in last year's federal spending bill tacked on a new $4,000 fee the H1B visas, which India argues is discriminatory to the country under its trade agreement with the US.

India's complaint comes as Congress has been mulling other reforms to the H1B program to address allegations that companies are using the visas to hire cheaper foreign workers to replace American workers. The Senate Judiciary Committee held hearings earlier this year in which senators, including Ted Cruz and chairman Jeff Sessions, probed experts on whether US tech firms really needed more H1B visas to fill open positions, as they claim, and what protections might be put in place to ensure that American workers are being given preference for positions over foreign workers.

Related: The Los Angeles Unified School District Has Banned Immigration Raids on Its Campuses

"The intent of the program is to fill skills gaps in the US when American workers aren't available, but the reality is that the program has become a way for firms to create a business model that's about bringing workers who are cheaper into the US and to either substitute or directly replace Americans," said Ron Hira, a political science professor at Howard University, who testified at the hearing on February 25.

Hira said that foreign workers make anywhere from 20 percent to 40 percent less than their American counterparts within the program.

Two recent lawsuits accused companies, including Disney, HCL, and Cognizant, of firing Americans in order to hire H1B workers for less money. Leo Perrera, a former Disney employee who brought one of the suits, testified at the Judiciary hearing in February that "20 years of hard work, a bachelor's degree in information technology and an IT job for Disney were all over when my team along with hundreds of others were displaced by a less-skilled foreign workforce imported into our country using the H1B visa program."

The debate over whether the H1B program is hurting American workers rose to public consciousness amid the Republican primary debates earlier this year. Donald Trump said in one debate he supported expanding the H1B visas in one instance, but later said the system was "rampant with abuse." Ted Cruz has introduced a bill in the Senate that proposes some reforms to the programs, including minimum salary requirements for foreign workers, while Bernie Sanders has called for changes to the program. Hillary Clinton has, in the past, called for an expansion of the H1B program.

Cruz's bill is one of three bills proposing reforms to the H1B program currently in Congress. A bill proposed by Senator Chuck Grassley and Senator Dick Durbin would put in place a requirement that companies first seek American workers to fill open roles before applying to have them filled with foreign workers and would limit how many H1B workers a company could hire, while a proposal by Sessions and Senator Bill Nelson seeks to cut the number of H1B visas allocated each year.
Riaz Haq said…
#TRUMP'S #H1B VISA PLAN COULD SEE THOUSANDS OF #INDIAN WORKERS DEPORTED. #India

http://www.newsweek.com/h-1b-visa-proposal-could-see-thousands-indian-skilled-workers-deported-will-770955

As President Donald Trump considers plans to create new rules that would curb H-1B visa extensions and could see thousands of mostly Indian skilled workers deported while they wait for their green cards, industry leaders in India are warning that the move could also hurt the U.S. economy.

The proposal, which was part of Trump's Buy American, Hire American initiative that he vowed to launch on the campaign trail, is being drafted by Department of Homeland Security leaders, sources have told McClatchy DC. If approved, it could see as many as 500,000 to 750,000 Indian H-1B visa holders forced to leave the U.S., IndiaToday.in has reported.

Those who have their green card approved would be able to return to the U.S., but it would essentially mean restarting the process of establishing a life in America.

Industry leaders in India have also warned that the new rules could cause a shortage of skilled workers in the U.S., potentially damaging the country's economy.
Riaz Haq said…
A US Recession Will Also Come to India’s Tech Hub
Analysis by Andy Mukherjee | Bloomberg

https://www.washingtonpost.com/business/a-usrecession-will-also-come-to-indias-tech-hub/2022/07/25/0e4e899e-0bd6-11ed-88e8-c58dc3dbaee2_story.html

Look closer at the financial results of IT firms, and you’ll see signs of stagflation in plummeting profitability. Infosys managed to boost rupee earnings by just over 3% from a year earlier in the June quarter, even with nearly 24% revenue growth. A 20% EBIT margin — earnings before interest and tax as percentage of revenue — is a 3.6 percentage point drop year on year. In fact, it’s even worse than what the bellwether outsourcing firm was garnering immediately before the pandemic gave a big lift to the business.

At Infosys’s traditional Bengaluru rival, Wipro Ltd., the EBIT margin fell to its lowest since the September 2018 quarter. Partly that was because it signed up 15,000-plus net new employees, including 10,000 fresh graduates in three months through June 30. (Infosys bumped up its headcount by more than 20,000 during the same period.) But then again, competitor HCL Technologies Ltd., which hit the brakes by slashing quarterly net hiring by almost four-fifths to about 2,000, also saw a lower-than-expected EBIT margin of 17%, a multiyear low.

The margin at Tata Consultancy Services Ltd., the biggest Indian IT vendor, was better at 23.1%, but it was still 2.4 percentage points narrower than for the June quarter of 2021. TCS management has indicated that $7 billion to $9 billion worth of quarterly deal wins could be a sustainable rate. That’s “flattish” from a year-on-year growth basis, Nomura says.

Profitability might remain under pressure for the rest of this year — both because of a slowdown in the West, and the way the industry is structured in India. Offshoring is profitable, but the people it employs won’t stay on their jobs forever without onsite postings at client locations and dollar wages. With the pandemic over, travel and visa expenses are adding up. But the Indian vendors will struggle to get paid more — customers will cite the near-7% drop this year in the rupee as a reason to not bump up the dollar price of contracts. The exchange-rate advantage, however, will be insufficient to make up for the rising pressure of rupee costs.

For one thing, salary increases can’t be skimped on: TCS employs more than 600,000 people, but its attrition rate is almost touching 20%, more than double from a year earlier. Employee retention appears to be even more challenging at Infosys, where attrition surged past 28% in the June quarter. Startups that target India’s local e-commerce or fintech markets compete for the same programmers as the software exporters. While small, private-equity-funded firms are turning cautious about burning cash on payroll, an employers’ market for coding talent is perhaps a story for next year. With India’s domestic inflation rate at 7%, IT services firms have little scope for belt-tightening on wage costs.

Ultimately, all of them will resort to “pyramiding” to protect their margins. It basically means putting a lot of inexperienced code-writers under an experienced project manager and hoping that the client will still come out happy. But since rookies’ productivity has its limits, the more complicated programming will have to be sub-contracted to smaller vendors. The costs of doing that are rising as well.

Riaz Haq said…
Layoffs in the Silicon Valley are proving to be exceptionally problematic for Indian Techies. Most them were working on H-1B visas & now have just a 60-day grace period to find another job.

https://www.wionews.com/videos/gravitas-the-impact-of-silicon-valley-layoffs-on-indian-techies-534175

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Layoffs at Amazon: Many Indians impacted, have limited time to find a new job
Amazon is said to cut nearly 10,000 jobs globally this week. While the tech company hasn’t revealed any information about layoffs yet, impacted employees have taken to social media platforms like LinkedIn to share their distress.

https://www.indiatoday.in/amp/technology/news/story/layoffs-at-amazon-many-indians-impacted-have-limited-time-to-find-a-new-job-2297970-2022-11-16
Riaz Haq said…
An Indian-origin Google employee lost job after 11 years of service.
The Google employee says it is difficult to express the pain after layoff news.
The H1B visa holders need to leave the country after 60 days if they job.

https://www.indiatoday.in/technology/news/story/indian-google-employee-with-h1b-visa-lost-job-after-11-years-of-service-says-countdown-begins-to-leave-us-2327310-2023-01-27

Google laid off thousands of employees and the process was not as smooth considering many were locked out of their systems without any notice. While the news of layoff is disheartening for many, the most impacted ones are the employees who got the job on an H1B visa. An Indian-origin employee with an H1B visa who worked at Google for more than 11 years also lost his job and found out about layoff news out of nowhere.

His wife also got locked out of the system and discovered in the morning that her access to any internal resources on the laptop was blocked. He penned down an emotional note on LinkedIn about his good and bad experiences at Google. He wrote that they were in disbelief after finding about the job they lost at the biggest tech company, even after giving many years to the company.

“Two out of the 12,000 Googlers were staring at each other in disbelief in that room while our 2-year-old daughter slept peacefully not knowing (thankfully so) what just hit her family. It’s hard to explain what this feels like, especially when you’ve spent a third of your life at a place that’s given you so much and more that it becomes an integral part of your identity. I spent 11.5 amazing years at Google - staying loyal and committed to its mission and believing in its “do no evil” motto,” he said on LinkedIn.


The laid-off Google employee with an H1B visa also expressed his pain of leaving the country after about two months if he doesn’t get a job in the US, where he is currently living. “The dreaded H1b countdown has begun and I’m starting to look for roles,” he said.


For those who are unaware, H1B visa holders or we can say immigrants, who get a job in the US, are not allowed to stay back in the country for more than 60 days if they lose a job. The H1B visa workers will have to find a new job in about 60 days or they will have to leave the country. The visas are typically issued for three years, and they can get extended depending on the employment.

Google did fire as many as 12,000 employees across globe, but the company has also promised to offer severance pay to the affected workers. The laid off Google employees will get 16 weeks of salary, two weeks for every additional year at Google, and at least 16 weeks of GSU vesting. Google will also pay 2022 bonuses and remaining vacation time. The sacked employees will also be entitled to receive six months of healthcare, job placement services as well as immigration support.
Riaz Haq said…
India's Infosys tumbles 15% on downbeat revenue outlook

https://www.nasdaq.com/articles/indias-infosys-tumbles-15-on-downbeat-revenue-outlook


BENGALURU, April 17 (Reuters) - Infosys Ltd INFY.NS shares slumped nearly 15% on Monday and dragged stocks of peers, after the IT services exporter's dismal revenue outlook highlighted the impact of banking turmoil in major markets, the United States and Europe.

Infosys' outlook followed a disappointing quarterly report from larger rival Tata Consultancy Services TCS.NS, highlighting worries for the sector which earns more than 25% of its revenue from just the U.S. and European banking, financial, services and insurance sector.

The collapse of two mid-sized U.S. lenders in March had left the financial ecosystem shaken and driven an extraordinary government effort to reassure depositors and backstop the system.

Infosys saw its biggest intraday percentage drop since October 2019, and dragged other IT stocks, with the Nifty IT index .NIFTYIT dropping as much as 7.6%.

India's second-largest IT services firm on Thursday said it expects revenue growth of 4%-7% for the fiscal year ending March 2024, well below analysts' expectations of 10.7% growth, as clients deferred spending due to growing fears of a recession. The previous slowest growth was a 5.8% increase in fiscal 2018.

"Given the uncertain environment in the near term, growth can be back ended for Infosys, in our view," PhillipCapital said in a note.

The Bengaluru-based company's net profit of 61.28 billion rupees ($748.21 million) in the January-March quarter also missed analysts' expectations of 66.24 billion rupees, according to Refinitiv IBES.

Riaz Haq said…
In the high-stakes race for supremacy in the burgeoning field of generative AI, India’s technology ecosystem is facing an uphill battle to catch up to global leaders. Despite being home to one of the world’s largest startup ecosystems, the South Asian economy has yet to make a material impact in the rapidly advancing AI arena.


https://techcrunch.com/2023/05/03/where-is-india-in-the-generative-ai-race/


No homegrown Indian contenders have emerged to challenge the dominance of large language model titans such as OpenAI’s ChatGPT, Google Ventures–backed Anthropic, or Google’s Bard.

“While there are over 1500 AI-based startups in India with over $4 billion of funding, India is still losing the AI innovation battle,” say analysts at Sanford C. Bernstein.


To their credit, many of India’s major startups are using machine learning to enhance aspects of their business operations. For instance, e-commerce giant Flipkart uses machine learning to refine customer shopping experiences, while Razorpay utilizes AI to combat payment fraud. Unicorn edtech Vedantu recently integrated AI into its live classes, making them more accessible and affordable.

Industry insiders attribute India’s dearth of AI-first startups in part to a skills gap among the nation’s workforce. Now the advent of generative AI could displace many service jobs, analysts warn.

“Among its over 5 million employees, IT in India still has a high mix of low-end employees like BPO or system maintenance. While AI isn’t at the level of causing disruptions, the systems are improving rapidly,” Bernstein analysts said.

Dev Khare, a partner at Lightspeed Venture Partners India, recently assessed the disruptive potential of AI and warned that jobs and processes in industries such as market research, content production, legal analysis, financial analysis, and various IT services jobs could be impacted.


However, for India, this disruption also presents an opportunity. A rapid gain in agriculture sector, which employs over 40% of the country’s workforce, is challenging, and similarly automation in the manufacturing industry may be unnecessary due to the abundant and affordable labor force.
Riaz Haq said…
In the high-stakes race for supremacy in the burgeoning field of generative AI, India’s technology ecosystem is facing an uphill battle to catch up to global leaders. Despite being home to one of the world’s largest startup ecosystems, the South Asian economy has yet to make a material impact in the rapidly advancing AI arena.


https://techcrunch.com/2023/05/03/where-is-india-in-the-generative-ai-race/


With timely upskilling and resource optimization, the services sector stands to benefit the most. Indian consultancy giants are already recognizing it. Infosys, for example, revealed last month that it is working on several generative AI projects to address specific aspects of clients’ businesses. TCS, on the other hand, is exploring cross-industry solutions to automate code generation, content creation, copywriting, and marketing.

In response to this landscape, New Delhi has declared that India will not regulate the growth of AI, taking a different approach from many other countries.

“AI is a kinetic enabler of the digital economy and innovation ecosystem. Government is harnessing the potential of AI to provide personalized and interactive citizen-centric services through digital public platforms,” India’s Ministry of Electronics and IT said last month.


Glimmer of hope
With the more established segment of India’s startup ecosystem staying muted in the generative AI race, young firms are stepping up to the occasion.


Startups like Gan, which enables businesses to repurpose videos at scale; TrueFoundry, which assists in building ChatGPT with proprietary data; and Cube, which facilitates AI-powered customer support on social media, are among those leading the charge.

The surge of interest has prompted nearly all venture funds in India to develop investment strategies in the emerging space.

Anandamoy Roychowdhary, partner at Surge, Sequoia India & Southeast Asia, pushed back that Indian startups have just started to explore applications around generative AI, saying several have been working on this space for many years.

“What cannot be denied though is the spectacular pace of projects and startup creation post the launch of ChatGPT. The Sequoia India and SEA team have been early to this trend, having partnered with 7 to 8 AI companies across earlier Surge cohorts,” he told TechCrunch.

Sequoia India and SEA is evaluating at least five firms in this space each week, he said.

Accel, another high-profile venture firm that has been operating in India for over a decade, said Wednesday that AI is one of the two main themes across the new cohort of its early-stage venture program.

However, some founders expressed concerns that these AI startups are unlikely to focus on creating their own large language models due to the lack of funding and conviction from investors to support such high compute and other infrastructure expenses.

An investor, who requested anonymity to speak candidly, cautioned that the current frenzy around AI deals somewhat echoes aspects of the crypto craze in 2021.


“Everyone wants to do genAI but no one knows how/what to do. This is the crypto arms race all over again,” the person said. “I doubt most Indian VCs ever really dug deep and understood crypto, because otherwise they wouldn’t have made so many utterly crap investments.”

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