Union Budget 2010 - Reactions from the IT Industry, Part IV
IT News Online Staff
2010-02-27
Padmaja Krishnan, director, Sales and Marketing, CSC India:
"There is good focus on the Banking sector as more banks will be encouraged. The budget is also a step in strengthening the Manufacturing sector. Both banking and auto stocks have led the rally as the stock market gave a thumbs up to the Union Budget 2010-2011. The allocation for the power sector has also increased by more than double. The National clear energy fund for funding research and innovative projects in clean energy technologies is a good initiative too. Overall, to me, the budget looks good and I hope all this focus in these sectors will also mean a share in the IT pie."
Vivekanand Venugopal, VP and GM, Hitachi Data Systems, India:
"Overall a positive budget. Growth schemes in Banking, Investments in e-Governance and Infrastructure will drive investments in IT. The revision in Income Tax slabs and investments in Rural Sector Development is encouraging."
Vikas Khanvelkar, MD, DesignTech Systems Ltd.:
"The Budget has nothing new for the IT Industry. 2% increase in excise duty on all the products will not have a very significant adverse impact on the demand and hence the production. Rise in petrol and diesel prices will increase the inflation, which is already very high.
Substantial increase in the budget allocations for "Infrastructure and Energy" segments is a really good move which will create positive impact on the GDP and Economy in the long run by addressing long pending pain areas of the industry.
GST has been postponed to 1st April 2011 as anticipated. Industry will have to keep dealing with multiple level taxation structure for one more year."
Group of Technopark Companies:
Group of Technopark companies (GTech) have expressed appreciation to the Union Government for presenting a focused and Balanced Budget, aimed at putting India back on the economic growth trajectory. GTech said that the budget allocation for the Infrastructure, Agriculture and Health sectors would ensure the sustainable growth of the Indian Economy. Appreciating the Finance Minster for Fiscal Prudence in containing the Fiscal Deficit to a new target of 5.5%, GTech felt that this would send a positive signal to Investors on India's Economic Outlook.
GTech welcomed the proposals in the Budget like changes in the Income Tax Slabs, Surcharge reduction to 7.5%, maintaining the status quo on service tax, Implementation of the Uniform Direct Tax Code and Goods Services Tax (GST) by April 2011 and Simplification of the refund of the accumulative credit to exporters in the IT and the BPO space. The thrusts laid down by the Finance Minister on the urban and rural development and also increase in the budget allocation for NREGA would help in the inclusive growth of the economy.
However, GTech expressed the IT Industry's disappointment for the increase in MAT from 15% to 18%. This increase in the MAT would hit the mid size IT companies operating in the State.
GTech also noted the appreciable efforts taken by the Government in laying down a fiscal deficit management roadmap and also the emphasis to attain a GDP growth rate of 10% in the near future.
Rajoo Goel, Secretary General, ELCINA Electronic Industries Association of India:
"The Union Budget has tried to address the issue of high inflation facing the country while also trying not to constrain growth, which is critical to meet the aspirations of our people. After a lull in growth due to recessionary conditions, the economy is showing signs of resilience and recovery and all of us have expectations of accelerated double digit growth in the next few years.
The Finance Minister has tried to contain the growing fiscal deficit by focusing on planned expenditure and lowering the growth in non-plan expenditure. The budget emphasizes fiscal discipline which is commendable though we have to wait and watch if it would be implemented in spirit. The Budget has retained emphasis on the social and rural sector and push for inclusive growth by increasing allocations for the rural sector, NREGA, education, health and women empowerment.
The rollback of the incentive package by increasing Excise Duty from 8% to 10% was expected and industry seems prepared to accept it. ELCINA feels that this shows an enhanced level of maturity of Indian industry. Continuing of Service Tax at 10% is a welcome step and it will enable a smooth transition to the GST regime, which has been pushed back to April 2011.
On the direct taxes front, the FM has taken a bold step by shifting up the Personal Income Tax slabs significantly and providing much needed relief to middle class. However, it is not clear why he has not increased the exemptions for transport and medical expenses?
ELCINA also appreciates the reduction in excise duty to 4% on LED Lighting , an industry which needs urgent attention and encouragement. However there is some ambiguity on whether this reduction is applicable to the LED components which we aspire to manufacture. In addition, some essential inputs for manufacturing electronic components have been included in the zero duty import list for actual users. This was strongly recommended by ELCINA.
Full exemption from Customs, CVD as well as SAD has been extended to parts for the mobile phone Chargers and Hands Free headphones. We believe it was done to encourage manufacture of these two accessories. However, ELCINA feels that this will discourage development of local value chain and the industry will remain dependent on imports due to total exemption from Excise Duty. Local parts for Chargers and Hands Free headphones would cost more as they are manufactured from inputs (plastics, copper, metals), which are subject to tax.
While the government has recognized electronics hardware as a key sector for the Indian economy, the Budget has once again not given any clear direction to this sector. The Department of IT has recently estimated that demand for electronics hardware would soar from $45 billion today to $125 billion in 2014 and further to $400 billion in 2020. This would result in a massive import bill of $300 billion by 2020. Why then are we not addressing this issue, which is a great opportunity for us, but could turn into a threat if left without a clear policy direction?
ELCINA believes that mere tinkering will not realize the potential of electronics hardware and it is high time that a clear sectoral policy is promulgated, which will bring huge benefits by way of employment and revenue for the country and strengthen us strategically."
Manoranjan Mohapatra, CEO, Comviva:
"We welcome the move to strengthen the fabric for financial inclusion in the country with the augmentation of the Financial Inclusion Fund and Technology Fund to enhance banking facilities in rural areas so as to provide financial services to the unbanked. We hope that the government will take further measures to extend the reach of mobile commerce in the country in order to realize the goal of financial inclusion for the masses in the shortest timeframe.
With over 500 million mobile phones in the country and growing rapidly, the mobile phone offers the ideal platform to deliver banking and financial services to the underserved sections of society."
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