India's export oriented IT industry expects to grab more businesses in the vast European region but crippling work permit rules and strict labour laws act as major impediments in the way of boosting growth.

Industry representatives say Indian technology outsourcing companies have not been able to exploit the vast potential in Europe, the second biggest export destination after the US, due to various policy barriers.

"There are many challenges in doing business in Europe and sometimes they discourage investments," said Mukund Garg, regional director (Belgium, the Netherlands, Luxemburg and Scandinavia) of Satyam Computer Services.

"The visa and work permit rules vary from country to country despite the region being a 25-member European Union (EU) bloc. The processing time is also very long in most of the countries," Garg told IANS.

"In the IT business, business deals are finalised in a matter of days and not weeks or months. So, if the whole process of getting visa and work permit is time-consuming, it doesn't really help the company."

The EU accounts for 18 percent of the total annual revenues generated by Hyderabad-headquartered Satyam Computer Services, India's fourth largest software exporter.

India's IT-ITES industry recorded a 34.5 percent growth in exports in the fiscal year ended March 31, 2005, clocking revenues of $17.2 billion.

North America and Europe remain the key markets, accounting for 69 percent and 22-23 percent of the total export revenues, respectively.

Britain, Germany and France are the top three markets in Europe for the Indian technology outsourcing companies. Other important export destinations include Italy, Finland, Sweden, the Netherlands and Switzerland.

Under pressure from strict labour laws in the region, Indian companies have not been able to ramp up their operations in Europe in the last few years despite the presence of a large number of multinational firms.

"What is preventing higher growth is hiring of professionals under local labour laws. Companies are afraid to hire in some countries in the European Union because once you hire professionals they can't be fired," said Garg.

Milind Kamble, regional manager (Belgium and Luxemburg) of Tata Consultancy Services, admitted that movement of software professionals across the European region was one of the main challenges for the Indian firms operating here.

Europe is one of the main strategic growth markets for Tata Consultancy Services, India's largest software services firm. The company has 19 offices across 11 countries in the EU, employing over 700 people.

"Sometimes, time spent by authorities in the decision making process is very long here. While I won't call these issues showstoppers, they really pose challenges in boosting the business growth in this vast market," said Kamble.

Although the EU is India's largest trading partner, barriers to trade between the two regions complicate matters.

While India speaks of "fortress Europe" that is increasingly difficult to penetrate and is in urgent need of harmonisation, the EU complains of New Delhi's sharply higher average duties.

According to Garg of Satyam Computer Services, since IT is the most important industrial sector in trade relations between India and the EU, it should be given highest priority from both sides.

"To begin with, we can work out a vast track visa mechanism for the top five Indian IT companies," he added.