Monday, July 6, 2009

Union Budget 2009: Reactions from Indian IT industry

Several friends in the PR community have very kindly shared some of the comments made by leading captains of the Indian IT industry. Thanks a lot to all those good friends in the Indian PR community. Some of the budget reactions are given below for readers:

Ajai Chowdhry, CEO and Chairman, HCL Infosystems
Overall, this budget is good for the IT sector with certain facets that are encouraging for the sector. However, the ICT industry was looking for more support from the government. We had recommended a 100 percent depreciation on financing of IT equipment, which was not included.

On taxation aspect, the excise/CVD exemption is unclear as it was not stated whether VAT is included in this or not. The government has also put a huge focus on R&D and it is good to see continuity of fiscal stimuli by the government. Various projects and schemes announced by Govt, will require increased role of IT, for example -- the UID project. It is critical now to implement these projects at the earliest.

Other encouraging measures include the ‘Mission in Education through ICT’ which has been substantially increased to Rs.900 crore and the provision for setting up and up-gradation of Polytechnics under the Skill Development Mission enhanced to Rs. 495 crore. More and More should be done to give an impetus to ICT in education and literacy. It was also discouraging to see that the extension of the sunset clause was only for one year, which ideally should have been extended for a longer period.

Naresh Wadhwa, President and Country Manager, Cisco - India and SAARC
On the face of it, the budget put forth by the government is positive and focuses on inclusive development. It is encouraging, especially the fact that there is a thrust on infrastructure development, rural development, education and social welfare. The impetus to infrastructure development –- both urban and rural -- is a highly visible and much welcome component of this budget.

Leveraging technology as a tool for accountability, better governance, in business and administration is a step in the right direction. The allocation of funds for e-governance investment schemes like the unique identity number for every Indian and the formation of a Centralized Processing Centre (CPC) in Bengaluru to process electronically filed tax returns will enable effective delivery of public services through public private partnerships.

The increased budgetary provision for the scheme ‘Mission in Education through ICT’ will help take the benefits of IT to the grass roots in a critical sector like education.

The ‘Aam Aadmi’, i.e., the individual tax payer, will definitely appreciate the abolition of Fringe Benefit Tax and raised exemption limit for income tax.

S. Gopalakrishnan, CEO and Managing Director, Infosys Technologies
The Finance Minister has talked about the creation of 12 million jobs, reaching a growth rate of 9 percent and investment in infrastructure at the rate 9 percent of GDP. From a taxation perspective, increasing the income tax slabs, removal of the surcharge on personal income taxes and FBT stands out.

For the IT industry, extension of 10A/10B exemptions by one more year is a move that is more emotional than of actual benefit since most STPs would have come out of the tax holidays. The government’s focus on IT investment for enhanced governance is encouraging. The move to increase investment in higher education, especially in the IITs and NITs, will greatly benefit the industry in the medium and long term.

On the whole, directionally it is a good budget given the current economic situation. However, I would have liked to see a clear road map on how the FM would bring down the deficit from 6.8 percent to perhaps 3 percent. The second thing I would have liked to hear about is how he intends to enhance foreign direct investment.

Pramod Bhasin, Chairman and Som Mittal, President, NASSCOM
NASSCOM welcomes the budget proposals 2009-10 aimed at achieving the dual objective of enhancing inclusive growth in India and boosting economic activity in the country. The budget recognizes the contribution of the IT-BPO industry to India’s economic progress and has provided the necessary measures to boost the sector.

Som Mittal, President, NASSCOM said, "The Finance Minister’s decision to extend fiscal benefits available to the industry under Section 10A/10B for one year will help the industry mitigate the impact of the current economic environment and help India retain its competitiveness."

Pramod Bhasin, Chairman, NASSCOM said, "Many of the initiatives in this year’s budget recognize the role the IT BPO industry can play in promoting inclusive growth and creating substantial employment opportunities in the country.

"The industry will be keen to partner with the Government in expanding e-governance initiatives, including modernization of employment exchanges, the UIAD project, and smart cards for healthcare services so as to achieve enhanced governance. Increased capital outlays on the education and infrastructure sector will also address growth challenges that the country has faced."

The budget proposals also address NASSCOM’s recommendations relating to multiplicity of taxes on packaged software, creating a dispute resolution mechanism on transfer pricing, abolishing FBT and issues on service tax refund.

The combined effect of these proposals will facilitate the industry and its 2 million workforce to compete effectively and sustain India’s advantage. NASSCOM will continue to examine the fine print and seek clarifications as needed.

NASSCOM would like to express its gratitude to the Union Finance Minister Pranab Mukherjee and IT Minister Thiru A. Raja for their unstinted support.

R.Chandrasekaran, President and Managing Director, Global Delivery, Cognizant
The extension of the sunset clause on STPI by a year is welcome. While this will benefit the entire industry, it will specifically benefit the small and medium sized companies in the industry that needed this critical impetus for growth.This is also important in this turbulent global economic environment, in the context of emerging locations such as China, Philippines or Vietnam continuing to offer attractive tax incentives.

A substantially higher outlay for institutions of higher learning such as IITs and NITs should increase the R&D throughput and innovation quotient in a material way. At a time when industries are undergoing structural changes globally, it is innovation that can catalyze the next phase of growth. The support provided by way of subsidy for poor students pursuing higher education should provide the required impetus for enhancing the overall employable talent pool. The modernization of employment exchange under the PPP (private-public partnership) mode will help align skills with available employment opportunities at the national level and on a real time basis.

The abolition of fringe benefit tax is also welcome since the administrative hassle involved in FBT compliance was very high.

The clarity on transfer pricing assessments and the setting up of an independent dispute settlement mechanism is something that the industry sought. That the Finance Minister has announced an industry-specific safe-harbour provision will be notified, will help in resolving assessment issues relating to transfer pricing.

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