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Negative impact of Rupee depreciation on Indian BPO sector

The IT/ITES industry body, NASSCOM, is seen noting its concern about the negative effect of the continual volatility of the Indian currency.  The apex body said that the currency volatility is all set to hinder the planning process of the BPO industry.

Apart from the Eurozone financial crisis and the rupee depreciation, factors like US Subprime crisis and rising input costs are also seen hindering the growth of the sector.  Though the rupee depreciation has brought in good news for the exporters and software exporting Indian companies like TCS and Infosys. Since these are big companies that engage themselves in hedging, it would be for the smaller IT companies to bear the brunt of the market situation.

The industry apex body, NASSCOM, warns the companies of the worst situation that lies ahead of them in terms of huge loss, if the currency further depreciates by 10%. And the loss is definite enough for all the companies, however big or small they may be in its operations.

The volatility in currency poses a major challenge to the BPO firms since for the offshore work they earn their revenues in dollars and the expenses have to be met in Indian rupees.

But since the rupee is falling over the US dollars and the fact that the BPO industry earns its revenues in US dollars, they simply earn more. Hence, currency depreciation is as good as it bad for the industry.
But all BPO companies are gearing up against the odd situation, by entering into hedging, and auto escalation clause.  Also there are some companies who have asked and convinced their clients to bill in rupees instead of dollars and some others have opted the option of linking the pricing to the fluctuations in exchange rates.

In a backbreaking situation for the industry like this, it would be interesting as to how the Indian BPO industries gear up with different strategies to null the currency volatility crisis.