Rupee instability hampering signing of new contracts: Nasscom

Rupee has declined over 20% since April on concerns about the country's widening CAD, slowing economic growth and capital outflows

The continuing instability in the rupee, which today hit a historic low of 68 against the US dollar, is affecting IT firms in signing new contracts with foreign clients, IT-ITeS industry body Nasscom said.

"It is a real problem. We don't know where to hedge, our customers don't know where to hedge," Nasscom President Som Mittal told PTI when asked whether the rupee instability is impacting IT firms in signing new contracts with global clients.

The rupee has declined over 20% since April on concerns about the country's widening current account deficit, slowing economic growth and capital outflows.

"Now the questions is when I'm going to sign contracts, I don't know what the currency rate is going to be. My problem is shall I do it at Rs 60, Rs 65 or Rs 70 to the US dollar. So I have a problem is if I don't see stability at what basis do I price. What do I tell my customer, what is the rate?" Mittal added.

On the question of rupee becoming cheaper against the US greenback, which helps exporters, he said it does help some small contracts depending on what has not been hedged, but in most of the long-term contracts, which are spaced over a period of 4-5 years, the amounts are hedged.

Explaining his point he said: We have severe competition. In our case there is no elasticity of demand. So the exports doesn't go down, it gets depressed in dollars. So if I was selling my services at USD 50 and I think I'll pass on the benefit to the client at USD 45, my top line came down."

Mittal said the industry needs a stable currency as it helps in signing contracts.

"So actually, we want a stable currency," he added.

Nasscom expects the USD 108 billion Indian IT industry to clock export revenues of USD 84-87 billion maintaining a growth rate of 12-14% in the current fiscal.