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Union Budget 2013: Reactions from the IT Industry - Part II
IT News Online Staff

Debasis Chatterji, CEO, Netxcell Ltd.

I feel that the budget is on the expected line and there is no surprise. On the macroeconomic front the Finance Minister has proposed the reduction of fiscal deficit to 4.8%, which will be big challenge keeping in mind the non-plan expenditure of Rs. 11.1 trillion. On government revenue front, enhancement of surcharge on corporate income tax from 3% to 10% for a turnover of more than Rs. 10 crores is a dampener.

As such there are no benefits to boost telecom sector. On the contrary, enhancement of excise duty from 1% to 6% on mobile phones, costing more than Rs. 2000/-, is going to make smartphones more expensive. As we know that smartphones are needed to experience 3G and 4G therefore because of this price rise subscribers in tier 2 and 3 cities and upcountry will fill the pinch to buy smartphone to experience 3G and 4G.

We have to wait and watch how this budget is going to generate employment and growth while keeping inflation under reasonable control.

Ramesh Loganathan, Vice President Products and Center Head, Progress Software
In my view this budget is more of sustainable medium-term substance rather than short-term considerations' driven. I am particularly impressed with the thought that has gone into helping foster a Start -Up ecosystem. Though small steps, they are two strong signals in the budget that forebode very well for the next few years' budgets. One is the stipulation that allows corporate support for academic incubators to qualify for the mandatory Corporate Social responsibility that is now in place. And the second is the clarification that angel investors, which are not yet categorised by the regulator, will be now clubbed with venture capital or social funds. The former will hopefully spur a surge in corporate providing financial support to academic incubators, which will in turn accelerate the growth of new technology start-ups that leverage IP and innovation. The latter, removes a major ambiguity introduced in last budget that treated angel investment as income to the startup and therefore taxable which was a major deterrent for angel investments. Both of these will significantly help boost the early stage startup ecosystem.

A related element in the budget is the SIDBI's re-financing facility to benefit micro small and medium enterprises (MSMEs); which will now be an alternate source of funding for startups also, which given their size qualify as MSME.

Directly relating to the IT industry, the strong support provided for semi conductor segment is a good thing. The incentives for semiconductors industry including zero customs duty on plants and machineries, and the 15% investment deduction allowance introduced for investments of Rs. 100 crores or more in plant and machinery is appreciative.

A slight disappointment to the IT industry is the lack of any new stipulations clarifying the transfer-pricing computation, which is an issue the industry has taken up with IT authorities and finance ministry for a few years now, to ensure more transparency and clearer guidelines on how this is treated and computed.

Overall, I am quite happy with the budget this year it reflects in many ways the maturity of our economy and the policy framework.

Suman Reddy, Vice President and Managing Director, Pegasystems
The overall budget was an attempt to increase investments both domestic and foreign and also increase the revenue by raising the tax implications. Though the finance minister acknowledged the challenges in bringing back the economic growth to 8%, but there were no specific policies and decisions announced which could allow us to grow at that rate. As far as the salaried class is concerned the budget had some good elements such as the decrease in tax implications for interests on housing loans and tax credit of 2000 to the people in the income bracket of 2 lakh - 5 lakh. Also the initiatives on women development for reducing gender discrimination, infrastructure development initiatives such as roadways in AP are refreshing. However having said that, this budget did not quite answer the expectations of the industry at large as there were no major policies or reforms announced.

From the IT sector's perspective, we had high expectations from this budget to have some clarity on the transfer pricing and hoped for a structured framework in terms of policies for long term growth of the IT sector. We also had expectations on the infrastructural incentives for early stage startups. Most of these were unanswered in this budget. However the announcement of providing extended benefits for MSMEs up to 3 years of them graduating to a higher category is commendable. Also the policy implementation for considering private sector involvement in a certified institutional incubation center as a CSR activity is appreciated. On the other hand this budget lacked clarity on investment related policies. Though the Finance Minister mentioned in his speech, the objective of India being recognized as a country favorable for business and acknowledged the areas of concern such as easy policies and simplified regulations to achieve these objectives, there were no definite policy decisions taken on the same which was disappointing. Also there was no clarity on the policy framework for bringing in the FDI and FII.

Kiran Murthi, CEO,
Small and Medium Sector Enterprises are dependent upon banks and financial institutions for their capital requirements. The move by the Finance Minister P. Chidambaram to enhance the refinancing capability of SIDBI from the current level of Rs. 5,000/- crores to Rs. 10,000/- crores per year is likely to encourage new entrepreneurs to set up their own businesses. This move will also result into generation of more employment opportunities.

Implementation of the comprehensive GST is still under consideration stage. This needs to be operationalized soon.

Sanjay Baweja, CFO, Tata Communications
The Union Budget 2013-14 did not have much focus on the Telecom sector in particular, but the overall budget will be good for investments. There has been a meaningful increase in planned expenditure to the tune of 30%. This year the FM has put out a 4.8% fiscal deficit compared to 5.2% of last year. However, we see that an increase in government support to the industrial corridors will help growth and see a lot of foreign investment over the course of this financial year.

We feel positive about the commitment to having an ATM in every PSU bank branch by March 31st 2014 as it will provide a huge thrust to ATM network reach, penetration and adoption in India. As India's largest managed ATM services provider with existing relationships with most of the PSU banks, this presents additional growth opportunities for Tata Communications Payment Solutions Ltd. (TCPSL), a wholly owned subsidiary of Tata Communications.

Manufacturers' Association for Information Technology (MAIT)
(MAIT), the apex body actively representing ICT Manufacturing, Training, IT, Design, R&D and associated services sector has expressed its disappointment with the Union Budget 2013, saying that it has failed to protect the interest of local IT manufacturing in the country.

J. V. Ramamurthy, President, MAIT
Though the Government has announced the National Manufacturing Policy that aims to increase the share of manufacturing in GDP to 25% within a decade, the budget has failed to reverse the inverted tax structure which has been impacting the industry for years now, making India a predominantly import dependent country.

Amar Babu, Vice-President, MAIT
The key positive aspect was that the Government has aimed to enhance the ESDM industry by providing appropriate incentives for semiconductor industry, including zero customs duty on plants and machineries for setting up wafer fabs units in India, but it does fail to correct the inverted tax structure anomaly.

Anwar Shirpurwala, Executive Director, MAIT
The prevalent rates of Countervailing Duty (CVD) and Special Additional Duty (SAD) on inputs for IT equipment result in an increase in the costs of a finished product manufactured in India. Thus the industry will continue to be dependent on imports. In India it is good to be a trader than manufacturer. We welcome the move to give additional depreciation but the inverted duty structure and lack of demand would reduce the incentive for many companies to take advantage of this provision.

Sunil Khanna, President & MD, Emerson Network Power India
The commitment to bring about constitutional reforms in GST is a positive sign. The Finance Minister's initiative to set apart Rs. 9,000 crores towards GST compensation will encourage the states to get on board with GST and hasten reforms. Another welcome aspect is no change in the normal rate of excise duty coupled with revival of investment in manufacturing sector which has been reeling under inflationary pressures. Setting up of a Cabinet Committee on Investment (CCI) to monitor investment proposals and ongoing projects, remove bottlenecks, review stalled projects and improve public-private partnership is welcoming.

The budget has also taken growth inducing measures such as encouragement of IDFs and additional investment into industrial corridor projects and JNNURM which are positive signs for the sector. The proposal to introduce 15% investment allowance for high value investments in plant and machinery, and new incentives for renewable energy projects will help the industry keep pace with rapidly changing technology. Overall, it's a relatively measured budget focussing on fiscal consolidation.