Depreciating rupee gives hope to Indian BPOs

June 25, 2013

New Delhi, 25 June 2013: The export-driven BPO industry expects the depreciating Indian rupee to have a favorable effect on its profitability. India-based BPO companies are expecting a positive impact of as much as 10-15 bps in their quarterly results for the quarter ending in June, owing to the depreciating currency that touched 60 Rupees to a US Dollar earlier this month.

Currency fluctuation often leads to corresponding fluctuations in profitability of offshore vendors. Typically, a 1 percent fall in the rupee against the dollar could result in an increase of 30-50 bps in profitability. In June alone, the rupee depreciated 10 percent leaving India-based BPO service providers jubilant. It is noteworthy here that the depreciating rupee will help win new contracts from foreign businesses against the appreciating Peso, currency of the Philippines, India’s close competition in the BPO sector.

While there is a positive impact in the short term, experts believe that the long term consequences of a volatile currency may be worrisome. For starters, customers may expect savings to be passed on to them should the rupee stay depressed, negating any increase in profitability. In addition, the unstable rupee may interfere in planning and decision making in the IT-BPO industry, impacting industry growth negatively.