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Union Budget 2013: Reactions from the IT Industry
IT News Online Staff
2013-02-28

Pradeep Nair, MD, India and SAARC, Autodesk

The budget was austere in character and as expected stressed on fiscal prudence. What should please us in corporate India is the fact that the FM has laid a lot of importance on two specific areas which are imperative to boost growth - namely infrastructure development and Medium and Small enterprises. In particular, the move to extend MSME benefits for a period of three years post moving to a higher category is welcome. The exemption of 15% in investments of more than Rs. 100 crores to setup plant and machinery should also provide a huge leg up to the manufacturing sector. The commitment to increase the availability of low cost funds to infrastructure sector is noteworthy.

I am also particularly pleased with the emphasis on national skill development as well as the separate amount of Rs. 200 crores to fund 'technology for common man', which is perfectly aligned to our corporate vision. Overall, not much that's spectacular or game changing in the budget, but well balanced."

Partha Iyengar, Country Manager - Research, India
The big overarching focus on growth by the FM is the fundamental 'feel good' factor in this budget. Given the fact that one can argue that a lot of the weakness in the Indian economy is what I call a 'sentimental recession', his strong statement that there is no grounds for 'doom and gloom' heading into the new year. The big specific positives of the budget are that he has focused both in terms of the letter and spirit of the budget on the key planks of growth for India and health of every industry, including IT, which is Infrastructure, Education, Skills Development, and incentives for the growth of domestic manufacturing.

Some of the other positive areas are support for entrepreneurship, the MSME sector, both in terms of financial and overall support. The recognition that the overseas 'trust deficit' in terms of a comfort level on India's investment climate has to be addressed is also welcome.

However, the budget is only a directional statement, and the challenge for India historically and even currently is in the execution of the statement of intent outlined in the budget. This has been India's Achilles' heel, in that bold pronouncements in the budget never see the light of day or are not implemented as effectively as they can or should be. So it was disappointing to not see any statements on what the government would do to ensure mechanisms/oversight to ensure speedy and efficient implementation of these programs.

Overall a 7/10 score for the budget.

Jagdish Mahapatra, Managing Director, McAfee India & SAARC
Overall, the Union Budget for 2013-2014 is a realistic one hinged on growth and development oriented expenditure. The focus on technology infusion in agriculture and provisions regarding MSMEs will spur the growth of the economy in the right direction. The budget highlights the need for public sector banks to be compliant with BASEL3 norms which underlines the need for having a robust and connected security framework which can help banks comply with such regulatory norms.

From an IT standpoint, this is a marginally encouraging budget. We were hoping for the discontinuation of MAT on SEZs and apportionment more grants to ensure secure data access which hasn't been considered. The other disappointing aspect is the surcharge for MNCs in India has increased from 2%-5 %, if the taxable income exceeds Rs. 10 crores. On the other hand, the incentives to semiconductor wafer fab manufacturing facilities along with provisioning zero customs duty for plant and machinery is quite positive. In a nutshell, this is only a marginally encouraging budget from an IT industry perspective.

N. Chandrasekaran, CEO & MD, Tata Consultancy Services
The FM's intentions are very clear: to move India back to a higher growth plane. And given his lack of runway, he has taken lots of small measures which together could boost growth. From a technology perspective, allowing funding for technology incubators located within academic institutions to qualify as CSR expenditure as per new Companies Act will give a huge boost to entrepreneurs and start-ups and increase the engagement of the corporate sector and start-ups.

On the taxation front, removing double taxation on dividends received from overseas arms will reduce the burden on shareholders. From the perspective of the IT industry, the clarifications on taxation rules regarding development centers and safe harbor rules are very welcome as are measures to drive skill development, with a special focus on Tier II and Tier III towns.

Overall it would be safe to say that with this budget we have started our climb back to higher GDP growth levels.

Siddharth Nambiar, Co Founder and Managing Director, OfficeYes.com
We are pleased to see an encouragement to MSME by way of the extension of benefits for 3 years for those companies that cross the threshold. This is a core customer constituency for our B2B office supplies e-commerce business and their growth will ensure higher growth for us.

In addition, the participation of global funds and investors is a pre-requisite to encourage the ecosystem. The budget has incentivized startups and SMES. Angel investors registered with SEBI will get pass through status. The news on implementation of a uniform Goods and Services Tax (GST) is encouraging with pre-allocation of Rs. 9000 crores as compensation to States on the passage of the bill. When implemented, this will mean that enabling infrastructure such as warehouses, logistics systems, etc. will be set up in locations on the basis of pure business efficiency, rather than for tax-related reasons, which should lead eventually to a reduction in costs for customers.

The impact on increase on tax on royalties to technology companies will complicate the turf for some organizations, however overall it should be good for the sector. The classification of funding to technology incubators located within academic institutions as CSR is likely to be a great catalyst for innovation.

P. V. G. Menon, President, India Electronics and Semiconductor Association (IESA) & Dr. Satya Gupta, Chairman, India Electronics and Semiconductor Association (IESA)
The India Electronics and Semiconductor Association (IESA) welcome the budget for its boost to the Indian Electronics and semiconductor industry. We believe the steps outlined for this sector by the Finance Minister will help to boost this sector by attracting investments, promoting entrepreneurship and domestic manufacturing.

- About the investment allowance of 15% in addition to the current depreciation benefits, the IESA believes this will significantly aid in attracting investments into this sector.

- About the import duty on Set Top Boxes (STBs), the IESA welcomes the increase in import duty on this product, which is one the fastest moving electronics products today. There is a potential for 100 million STBs over the next 2-3 years as a result of the digitization of cable act, and we believe this increase of import duty will help Indian manufacturers to address the Unfair advantage imported set top boxes are getting and will boost domestic manufacturing of Set Top Boxes in India.

- About the fab, the IESA welcomes the 0% customs duty for import of equipment for the fab. IESA believes this will help in improving the viability of the project for the investors.

- About the 17% increase in the outlay on education, IESA welcomes this move. Both skill development and R&D are areas that are critical to India. IESA also welcomes the Rs. 10,000/- grant for youth who will undergo an NSDC approved Skill Development Course and obtain certification.

- We also welcome the Rs. 200 crores fund to be setup to help innovators and inventors scale up their inventions and develop products aimed for the masses.

- About the support to the entrepreneurial ecosystem, IESA welcomes the support to kick start the entrepreneurial ecosystem in India, especially the following two initiatives: 1) investments in technology incubators established in academic institutions being recognized as CSR. 2) The decision to recognize angel investor pools under SEBI guidelines will also help to grow this segment and encourage HNI's to come forth and invest as Angel Investors, thus helping again to grow the entrepreneurial ecosystem.

- The Budget will also benefit the MSME sector through the measure of doubling the SIDBI's refinancing facility to MSMEs to Rs. 10,000/- crores.

- The IESA also welcomes the strong commitment to infrastructure development particularly the continued support to the DMIC and the two other infrastructure corridors of Chennai - Bengaluru and Bengaluru - Mumbai.

- About the establishment of the National Clean Energy Fund: IESA welcomes this initiative to provide low cost funding through IREDA to clean and green energy projects as it will help to boost the renewable energy sector.

- Rules for safe harbor for the development centers - IESA also welcomes the announcement to notify the rules for safe harbor for the development centers based on the report of the Rangachary Committee, which will submit its report March 31, 2013.

- The setting up of a Standing Council of Experts in Ministry of Finance to examine transaction cost of doing business in India is a welcome move which will help in ease of doing business in the country.

Provisions yielding adverse impact
- Higher Excise Duty on mobile phones above Rs. 2000/-: This is a blow to domestic mobile handset makers, as excise duty on instruments priced above Rs. 2,000/- has been raised to 6% from the earlier rate of 1%.



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