India’s software industry association on Monday rejected claims that wage inflation was making the country’s computer services industry uncompetitive as it unveiled bullish growth forecasts for the sector this year.

Responding to claims from some Silicon Valley companies that wage costs in Bangalore had risen to near US levels, the National Association of Software Services Companies said this was an isolated phenomenon.

“It is there in pockets,” said Ameet Nivsarkar, vice-president, research at Nasscom. “But we haven’t come across this as a large trend.”

In spite of rising salaries and real estate costs, India’s information technology software and services industry is booming, with Nasscom forecasting sales will grow up to 27 per cent to $50bn in the year ending next March.

The industry reported growth of 30.7 per cent in the year ended March 2007 to reach sales of $39.6bn, driven by the country’s top IT services companies as well as an increasing shift among western IT groups to India.

But the growth has been overshadowed in recent years by the mounting debate over wage inflation in India.

Like.com, a Silicon Valley search engine start-up, created waves after Munjal Shah, its chief executive, complained he had been forced to shut his Bangalore office because of wage costs and shift the jobs back to the US in a form of “reverse offshoring”.

In general, the salaries of Like.com’s Indian engineers had risen to about half US levels from about a quarter when the company opened in Bangalore two years ago, said Mr Shah. The company would have had to raise salaries to 75 per cent of US levels if it stayed, he added.

However, Mr Nivsarkar said that while India no longer competed only on wage costs, its graduates were still more plentiful than elsewhere and were generally paid much less than their western counterparts.

The country produced 3m university graduates last year, of whom just more than 10 per cent were employed in the Indian IT software and services industry.

Starting salaries in the industry were $10,000, about one-sixth those in the US. Wage inflation in India, which averaged 15 per cent last year, was still lower in absolute terms than the salary increase of a US worker, who received an increment of about 3 per cent a year on a much bigger salary.

He said, however, the quality of some new graduates was an issue, and that scarcity became more of a problem at senior levels or in specialised sectors.

Hilary Robertson, offshore development officer with UK-based IT outsourcing company Xansa, said the company, which has extensive operations in India, was finding that it was taking longer to find senior managers.