MAIT frets over slowdown, IDC says no cause for worry

Preety Raheja

NEW DELHI: There seems to be a lot of confusion over the contrasting findings

of the Manufacturers' Association for Information Technology (MAIT) and

International Data Corporation (IDC) about the industry’s performance. In its

Mid-year Industry Performance Review for 2000-01, MAIT has expressed its concern

over the slowdown in PC sales. "With less than expected sales of PCs,

especially in the second quarter, the projection for fiscal 2000-01 has been

revised from 1.9 million to 1.75 million units," says the MAIT report.

On the contrary, IDC has stuck to its previous prediction of 1.75 million

units of PC sales for the entire year. It says that despite an economic

slowdown, the domestic IT industry is witnessing an exhilarating growth.

According to IDC, there is tremendous buoyancy in the Indian IT industry and it

will not be impacted by the minor slowdown that the economy is currently facing.

Vinnie Mehta, Director, MAIT, conceded that in the first half of 1999-2000,

PC consumption per 1000 consumers was 3.1 in the first time buyer sector. This

went up to 3.5 in H2 and again in H1 of 2000-01, it came down to 3.1 per 1000

consumers.

Apart from doing the survey on who bought what, Mehta said that MAIT also

tries to figure out the intent of buying for the next half by polling the

industry. Taking all these into account, it has been found that 98 per cent of

the forecast has been achieved in the first half. Within the business segment,

the larger businesses grew at 39 per cent, however, the small and the medium

segment registered a growth rate of only 10 and one per cent respectively–reflecting

a significant change in the buying pattern which is a matter of concern.

As per MAIT, although sales in the business segment kept pace with the

estimates, if you consider large, medium and SMEs individually, there was a

slowdown in buying. In case of notebooks in the first half of this year, 66 per

cent of the sales was to large businesses, a complete reversal of the trend

witnessed during the comparative period last year, when 66 per cent of the sales

went to the small and medium segment.

Despite MAIT’s gloomy forecasts, IDC maintains that in the first half of

2000-01, sales of notebook computers, which move primarily into the commercial

segment, grew by 68 per cent in unit terms. Although component shortage and

currency devaluation kept the average sales value of PCs on the higher side, it

could not arrest the tremendous momentum that existed in the market. IDC

estimates that in the first half of 2000-01, more than 0.85 million PCs were

shipped.

The other factor, according to MAIT, which led to the slowdown of the

industry was the recent order by the Directorate General of Foreign Trade (DGFT)

issued on November 24, 2000, which makes it mandatory for imported pre-packaged

commodities to carry a label specifying, among other things, their maximum

retail price. Because of this, several MNCs have containers stuck in various

ports. "This is a matter of concern since there is a fear of slowdown with

the supplies running dry," said Mehta.

IDC believes that such a small issue will not have a definite impact on the

growth rate of the industry as a whole. It confirms that even if there were an

economic slowdown, it would at best have a marginal impact on the industry.

Aditya Pant, Head (Research Operations), IDC India, said, "Marginal

slowdown is expected but there is nothing to be concerned about. Corporates

allocate their budget well in advance and the impact shows only two-three

quarters down the line."

Mehta argued that budgetary allocation go hand in hand of how much one can

buy. "Corporates may plan the budget but what do they do if they don't have

money?" he questioned.