Even as the US attacks on Iraq gets intensified by the day, and fears of the war dragging on linger, Nasscom president Kiran Karnik admitted in Bangalore on Friday that a prolonged war could hit the world economy and the IT sector, in particular.

"As of now there is no impact on the IT industry. But should the war drag on for weeks and months, then not only the global economy will be hit, but also the IT industry as travel, investment decisions and technology spending will be put on hold," Karnik told rediff.com on the sidelines of a two-day Sun Tech developers' conference that got underway earlier in the day.

Hoping that the war would be a short-term affair, Karnik said the latest travel advisory by the US Administration to its citizens could have a temporary effect on the movement of CEOs and CIOs to the sub-continent.

"It all depends on how the situation unfolds in the coming weeks. We may also have to factor the magnitude of the war causing damage to the world economy, with a direct impact on movement of people and goods.

"Our understanding is that the war could be a little protractive if not short. But once we get over this development, we are confident that business will return to normal. In the post-war phase, we see business for India increasing, as there will be more outsourcing to contain costs," Karnik stated.

Asked about the impact of depreciating dollar on the Indian software exports for the current fiscal year (2002-03), Karnik said as Nasscom projected earlier, the growth in volume terms would be about 30 per cent, but rupee appreciation would mean the revenue growth could take a dip of 2-3 per cent.

"We are sticking to our projections in volume terms. But the depreciation of the US dollar over the months would mean the export earnings in value terms will be less by 3 per cent for the Indian IT firms.

At the beginning of this fiscal, the software sector as well as the money markets have expected the dollar to appreciate up to Rs 50 over the quarters. However, the rupee became stronger, and is now quoting around Rs 47 per dollar. If the trend continues, the revenue growth will take a hit," Karnik disclosed.

Nasscom has declared in Mumbai last month that software and services exports from India generated revenues of Rs 340 billion ($ 6.9 billion) in April-Dec, 2002, up from Rs 266 billion ($ 5.6 billion) for the corresponding period in the previous year, representing a growth of 28 per cent over the same period last year.

Expressing concern over the continued backlash on hiring of Indian professionals by US firms and against increasing outsourcing to Indian IT companies, Karnik said Nasscom would soon be hiring a public affairs firm in the US to address these growing concerns.

"This is something we have to live with. So far it's nothing serious. But we are working towards a strategy to address these concerns and discuss the issue with governments, unions, employees, and firms in the US.

We do have an agency in the US and UK that lobbies for the Indian IT firms under the aegis of Nasscom. But the new strategy is to engage another agency that will exclusively deal with the backlash issues," Karnik affirmed.

Declining to comment on the latest class lawsuit filed against Sun Microsystems for hiring Indians for cost advantage, Karnik said there was no cause for immediate concern as such lawsuits, filed earlier also in individual capacities, were thrown out by courts.

"Hiring and outsourcing decisions are taken by firms, keeping in view the legal framework. The benefits of outsourcing are a win-win situation, which the US companies are quite aware of.

The pressures of cutting costs and improving margins will continue to make any company to look for value proposition.