1)The Indian economy is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP).
2)India is poised to achieve 9 per cent economic growth in the current financial year itself, driven by robust performance by the agriculture and industry sectors.
The economy grew by 8.9 per cent in the second quarter of the current fiscal.
3)India has emerged as one of the world's top ten countries in industrial production. The nation's industrial production grew at the fastest pace in three months at 10.8 per cent.
Manufacturing grew 11.3 percent in October after a 4.6 percent gain in September.
4)India is one of the fastest growing automobile markets in the world, expanding at 35 per cent on average in the first four months of the current financial year.
5)The Bombay Stock Exchange has been rated as the world's best performing stock market recently. With a 13 per cent gain, Sensex is among the world's 10 biggest markets, according to data collected by Bloomberg.
6)Indian companies have become bigger and stronger in the last ten years with the average revenue of a company on the Fortune India 500 list standing at Rs 7,632.5 crore (Rs 76.32 billion).
The total revenue of the Fortune India 500 companies stands at Rs 38,16,239.40 crore.
7)India is the world's largest recipient of overseas remittances. The remittances grew from $49.6 billion in 2009 to $55 billion in 2010.
It is also the country with the second largest number of emigrants after Mexico, according to the World Bank.
8)India owns over 18,000 tonnes of above ground gold stocks worth approximately $800 billion and representing at least 11 per cent of global stock, according to estimates of World Gold Council.
India ranks 11th in the world with 557.7 tonnes of gold reserves.
9)India is among the top 10 nations in terms of foreign exchange reserves.
The country's foreign exchange reserves breached the $300-billion mark for the first time since 2008 with an addition of $2.2 billion on the back of a healthy rise in foreign currency. The nation's forex reserves currently stand at $296.40 billion.
10)India's services sector, backed by the IT revolution, remains the biggest contributor to the country's GDP, with a contribution of 58.4 per cent.
The industry sector contributed 24.1 per cent and the agriculture sector contributed 17.5 per cent to the GDP.
11)India's civil aviation sector will be among the top five in the world in the next five years.
Indian domestic air traffic is expected to reach 160-180 million passengers per year, while international traffic will exceed 80 million.
12)India's exports during November jumped by 26.8 per cent to $18.9 billion year-on-year. India's exports during April-September aggregated to $103.65 billion registering a year-on-year growth of 28 per cent.
13)India, China and Brazil are the top three target countries for foreign direct investment until the end of 2012 with the United States, for years number one, now in fourth place, according to the UN trade and development agency UNCTAD.
14)The Indian telecommunications industry is the world's fastest growing telecommunications industry, 723.28 million telephone (landlines and mobile) subscribers and 687.71 million mobile phone connections as of September 30, 2010.
15)The number of Internet users in India is estimated at 81 million. The Telecom Regulatory Authority of India pegs the number of broadband subscribers at 10.08 million in August 2010.
16)The Indian IT-BPO industry is expected to exceed $70 billion in fiscal 2011.
The Indian IT-BPO exports are projected to grow by 13 per cent to 15 per cent while domestic IT-BPO will grow slightly more by 15 per cent to 17 per cent during fiscal 2010-11.
17)India has the largest number of post offices in the world. The world's highest post office, Hikkim is located at 15,500 feet in the Lahaul Spiti district of Himachal Pradesh.
18)The largest employer in India is the Indian Railways, employing over 1.6 million people. Indian Railways started operations on April 16, 1853.
19)ndia ranks second in farm output globally. India is one of the largest producer in the world of milk, cashew nuts, coconuts, tea, ginger, turmeric and black pepper.
20)Tourism is the largest service industry in India, with a contribution of 6.23 per cent to the national GDP. The number of foreign tourists visiting the country during September this year is higher than that of the same month last year.
Around 3.69 lakh (369,000) foreign tourists came to India in September this year as compared to 3.28 lakh (328,000) during the same month in 2009.
Courtecy:www.rediff.com
Showing posts with label Software Export. Show all posts
Showing posts with label Software Export. Show all posts
Monday, December 20, 2010
Wednesday, March 25, 2009
IT Industry and fraud
Recession. Slowdown. Companies across sectors praying for customers. Contrast that with information technology and business process outsourcing firms, where customer count was always a recurrent boast. Before Satyam, that is: investigators into the Satyam scam are now trying to find out, among other things, if the IT major at all had the large customer base it used to claim before promoter B. Ramalinga Raju was caught with his hand in the till.
Among the other things Satyam inflated or is suspected to have inflated: earnings and employee headcount. For the authorities, regulators, investors and industry brethren, the Satyam case has raised a red flag over the entire IT industry and its numbers. The nature of their products make physical verification almost impossible. Conventional methods are more geared to checking how many tables, chairs and equipment exist and not for an equivalent audit of, say, how many customers it has, who they are and what their order size is.
Observers feel that IT companies and their auditors need to devise foolproof ways to measure customers, employee numbers and orders/ sales, even though industry insiders say this is a time-consuming job in a sector traditionally in a hurry to declare quarterly results. The trade-off is between doing things thoroughly and doing things quickly. Apart from land in the Indian context, people form the asset base of an IT company. The focus has been to attract and retain people by “paying more” and offering a campus life that is the envy of other sectors. In IT, the ability to earn revenues is entirely dependent on the headcount, which is akin to plant capacity in manufacturing. One of the first questions emerging from the Satyam scam—till the time the new board members clarified—related to headcount. Did the company actually have as many as it claimed, or was money being siphoned out in the name of fake employees?
The metric system
Then, the metrics, or numbers relating to billing rates, utilisation, dollar size of clients and man-months billed. IT is the most metrics-driven sector across industries—and there lies another danger. Consider what analysts at Edelweiss Securities point out: “Back in 2000-01, when Infosys was the first in the IT sector to make public operating metrics such as billing rates, utilisation, client metrics and man-months billed, little did we know that this consistent and tireless action on the part of Infosys was to usher in a metrics-driven information revolution.’’
Soon enough, other IT companies followed suit. No one questioned the metrics, even though they are self-reported and certainly not audited by external auditors. The Satyam scam will cast a cloud over the metrics claims of all IT outfits, till may be there is an audit in place.
As an Edelweiss report notes: “In theory, metrics such as utilisation, billing rates, onsite-offshore split can be manipulated so as to provide consistency and assurance with the reported revenues.” The report is captioned: “Weighing Consequences of Satyam on Indian IT and India Inc.”
Exports: Zeros & Ones?
After numbers and metrics, comes the biggest black hole: the product or service exports that form the very basis of an IT firm’s revenues. IT exports are not like physical items such as automobiles, garments or ore that can be counted, weighed, valued or even seen by customs and tax authorities as they are shipped. IT exports are software, complex and customised code that travels over broadband to the buyer.
There are checks and balances and IT companies do need to fill in a Software Export Declaration (Softex) form with the Software Technology Parks of India. But there is no way of checking the value, when value lies in the eyes of the buyer, or input costs, when inputs are intellectual. Debanjan Banerjee, Partner at the law firm Fox Mandal Little, says: “In spite of these controls, there are cases of fudging… then the artificial figures of sales and receivables and inflated profits push up share prices, and benefit the promoters as they sell or pledge their shares.”
“The ‘software products’ of IT/ITES firms are predominantly intangible in nature, and, therefore, it is difficult to make an assessment of the price. There are no checks and balances if a firm decides to sell similar packages to different customers at vastly different prices. There may be wide variation between price points depending on the nature of the product, the service provider and the end-customer,” he points out.
Accounting Standard X
That leads to the question of accounting practices and standards. Take a simple case of cost of completion method of accounting where, if you start recognising revenues but do not book all the costs or do not book the real costs, you could constantly have inflated profits. As Tushar Chawla, Partner, Economic Laws Practice, a law firm, says: “The most common malpractice observed in IT companies seems to be the reporting of inflated figures, done by booking fictitious income, i.e., income from nonexistent customers or inflated income from existing customers.”
He cites a multinational IT major that had inflated revenues by booking sales of software licences that were actually transferred to a related distributor. Satyam seemed to have gone a step further by showing fictitious cash and bank balances. So, why should an IT company do all this—book fictitious exports, inflate income etc? Money laundering. “A lot of IT companies are merely incorporated as shell companies that are actually laundering money,” says Chawla. According to him, a nexus has emerged between the export earnings of IT companies and money laundering transactions, with a large number using hawala for showing export incomes.
Without naming any company, he says this could be driven by the fact that, with export earnings and earnings per share shrinking, promoters are more likely to show inflated income either to get good finances or to exit. This again, Chawla says, would not be happening in big companies but in small ones with revenues of $10-100 million. Listed entities, especially. “This also allows the promoters to convert their cash into official export income at a low premium without paying any income tax,” he says.
However, Indian IT does not mean just the Big Four or Big Five. According to NASSCOM’s recent strategic review 2009, the Indian IT-BPO export industry has seven players with revenues over $1 billion each. They accounted for over 47-48 per cent of software and services exports in fiscal year 2008.
Then come 75-80 mid-sized players (revenues $100 million-$1 billion) who account for 35-37 percent of total exports, and 300-350 emerging players (revenues $10 million to $100 million) with a 7-8 per cent share, and over 3,500 small and start-up companies with revenues less than $10 million who account for 8-10 per cent.
Rivers of cash
As Banerjee of Fox Mandal Little says: “The IT sector is export-oriented and very cash rich. Naturally, the cash and receivables management takes a key role. …It makes it easier for the companies to move the liquid cash from one company to another, especially through various investment vehicles and structures.” “There are possibilities of overand under-invoicing and cross border fund mobilisation and movement,” he says. Because of the rapid expansion of the sector and its export-earning capacity, the regulatory system and accounting practices are often not fully operationalised.
“That keeps loopholes for informal movement of currencies through several devices,” he says. Auditors stress the need to be very careful in making an invoice and tracking work-in-progress as well as receivables. Are the IT companies doing so? Four months ago, who knew what was happening at Satyam? There is good reason, therefore, that B.V.R. Mohan Reddy, Chairman and Managing Director of Hyderabad-based Infotech Enterprises, an IT solutions provider, says: “The systems and processes we have at this point are good enough but there has only to be a rigour in following them.” Banerjee points out that the IT majors have “a high degree of internal checks and controls and people like compliance officers, risk assurance officers and revenue leakage assurance in place to ensure that accruals of revenue are genuine and accurate.” Also, it is not as if companies are free from external checks, says Banerjee. IT companies are not totally tax-free.
As the IT sector waits for the Satyam report card, it is ironic that a company whose founder believed in speed and detailed metrics finds itself stuck in netherland. There is no Raju to preach his favourite metrics: the 6 Ps (people, process, product, proliferation, patent and promotion), 5 Rs or the service outcome attributes (faster, better, cheaper, larger and steadier) and the various indexes. The abstract defined. The definable abstracted.
Source
Among the other things Satyam inflated or is suspected to have inflated: earnings and employee headcount. For the authorities, regulators, investors and industry brethren, the Satyam case has raised a red flag over the entire IT industry and its numbers. The nature of their products make physical verification almost impossible. Conventional methods are more geared to checking how many tables, chairs and equipment exist and not for an equivalent audit of, say, how many customers it has, who they are and what their order size is.
Observers feel that IT companies and their auditors need to devise foolproof ways to measure customers, employee numbers and orders/ sales, even though industry insiders say this is a time-consuming job in a sector traditionally in a hurry to declare quarterly results. The trade-off is between doing things thoroughly and doing things quickly. Apart from land in the Indian context, people form the asset base of an IT company. The focus has been to attract and retain people by “paying more” and offering a campus life that is the envy of other sectors. In IT, the ability to earn revenues is entirely dependent on the headcount, which is akin to plant capacity in manufacturing. One of the first questions emerging from the Satyam scam—till the time the new board members clarified—related to headcount. Did the company actually have as many as it claimed, or was money being siphoned out in the name of fake employees?
The metric system
Then, the metrics, or numbers relating to billing rates, utilisation, dollar size of clients and man-months billed. IT is the most metrics-driven sector across industries—and there lies another danger. Consider what analysts at Edelweiss Securities point out: “Back in 2000-01, when Infosys was the first in the IT sector to make public operating metrics such as billing rates, utilisation, client metrics and man-months billed, little did we know that this consistent and tireless action on the part of Infosys was to usher in a metrics-driven information revolution.’’
Soon enough, other IT companies followed suit. No one questioned the metrics, even though they are self-reported and certainly not audited by external auditors. The Satyam scam will cast a cloud over the metrics claims of all IT outfits, till may be there is an audit in place.
As an Edelweiss report notes: “In theory, metrics such as utilisation, billing rates, onsite-offshore split can be manipulated so as to provide consistency and assurance with the reported revenues.” The report is captioned: “Weighing Consequences of Satyam on Indian IT and India Inc.”
Exports: Zeros & Ones?
After numbers and metrics, comes the biggest black hole: the product or service exports that form the very basis of an IT firm’s revenues. IT exports are not like physical items such as automobiles, garments or ore that can be counted, weighed, valued or even seen by customs and tax authorities as they are shipped. IT exports are software, complex and customised code that travels over broadband to the buyer.
There are checks and balances and IT companies do need to fill in a Software Export Declaration (Softex) form with the Software Technology Parks of India. But there is no way of checking the value, when value lies in the eyes of the buyer, or input costs, when inputs are intellectual. Debanjan Banerjee, Partner at the law firm Fox Mandal Little, says: “In spite of these controls, there are cases of fudging… then the artificial figures of sales and receivables and inflated profits push up share prices, and benefit the promoters as they sell or pledge their shares.”
“The ‘software products’ of IT/ITES firms are predominantly intangible in nature, and, therefore, it is difficult to make an assessment of the price. There are no checks and balances if a firm decides to sell similar packages to different customers at vastly different prices. There may be wide variation between price points depending on the nature of the product, the service provider and the end-customer,” he points out.
Accounting Standard X
That leads to the question of accounting practices and standards. Take a simple case of cost of completion method of accounting where, if you start recognising revenues but do not book all the costs or do not book the real costs, you could constantly have inflated profits. As Tushar Chawla, Partner, Economic Laws Practice, a law firm, says: “The most common malpractice observed in IT companies seems to be the reporting of inflated figures, done by booking fictitious income, i.e., income from nonexistent customers or inflated income from existing customers.”
He cites a multinational IT major that had inflated revenues by booking sales of software licences that were actually transferred to a related distributor. Satyam seemed to have gone a step further by showing fictitious cash and bank balances. So, why should an IT company do all this—book fictitious exports, inflate income etc? Money laundering. “A lot of IT companies are merely incorporated as shell companies that are actually laundering money,” says Chawla. According to him, a nexus has emerged between the export earnings of IT companies and money laundering transactions, with a large number using hawala for showing export incomes.
Without naming any company, he says this could be driven by the fact that, with export earnings and earnings per share shrinking, promoters are more likely to show inflated income either to get good finances or to exit. This again, Chawla says, would not be happening in big companies but in small ones with revenues of $10-100 million. Listed entities, especially. “This also allows the promoters to convert their cash into official export income at a low premium without paying any income tax,” he says.
However, Indian IT does not mean just the Big Four or Big Five. According to NASSCOM’s recent strategic review 2009, the Indian IT-BPO export industry has seven players with revenues over $1 billion each. They accounted for over 47-48 per cent of software and services exports in fiscal year 2008.
Then come 75-80 mid-sized players (revenues $100 million-$1 billion) who account for 35-37 percent of total exports, and 300-350 emerging players (revenues $10 million to $100 million) with a 7-8 per cent share, and over 3,500 small and start-up companies with revenues less than $10 million who account for 8-10 per cent.
Rivers of cash
As Banerjee of Fox Mandal Little says: “The IT sector is export-oriented and very cash rich. Naturally, the cash and receivables management takes a key role. …It makes it easier for the companies to move the liquid cash from one company to another, especially through various investment vehicles and structures.” “There are possibilities of overand under-invoicing and cross border fund mobilisation and movement,” he says. Because of the rapid expansion of the sector and its export-earning capacity, the regulatory system and accounting practices are often not fully operationalised.
“That keeps loopholes for informal movement of currencies through several devices,” he says. Auditors stress the need to be very careful in making an invoice and tracking work-in-progress as well as receivables. Are the IT companies doing so? Four months ago, who knew what was happening at Satyam? There is good reason, therefore, that B.V.R. Mohan Reddy, Chairman and Managing Director of Hyderabad-based Infotech Enterprises, an IT solutions provider, says: “The systems and processes we have at this point are good enough but there has only to be a rigour in following them.” Banerjee points out that the IT majors have “a high degree of internal checks and controls and people like compliance officers, risk assurance officers and revenue leakage assurance in place to ensure that accruals of revenue are genuine and accurate.” Also, it is not as if companies are free from external checks, says Banerjee. IT companies are not totally tax-free.
As the IT sector waits for the Satyam report card, it is ironic that a company whose founder believed in speed and detailed metrics finds itself stuck in netherland. There is no Raju to preach his favourite metrics: the 6 Ps (people, process, product, proliferation, patent and promotion), 5 Rs or the service outcome attributes (faster, better, cheaper, larger and steadier) and the various indexes. The abstract defined. The definable abstracted.
Source
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