IT industry reacts to Budget 2010

The Finance Minister has given us a pragmatic forward looking budget that provides clarity to business
. We appreciate the clarification on Section 10AA and the Direct Tax Code, implementation date. The changes to the personal income tax are very beneficial to all professionals and is in line with overall simplification theme.”

Ambrish BAKAYA, Director- Corporate Affairs, Nokia India
We would like to thank the government on its proposal to extend the benefit of exemption of Special Additional Duty of Customs (SAD) of 4% on parts imported for manufacturing mobile handsets from July 06, 2010 to March 31, 2011.
The Union Budget 2010 has also responded positively to the industry’s request on manufacturing of parts and accessories of mobile handsets in India. The budget proposes to remove the 24% import duty on components/raw material imported for manufacture of batteries, chargers and other part and accessories.

The will help bring more investment in the area to the country and encourage domestic manufacture of parts and accessories. We believe these moves are extremely encouraging to the category, and will help catalyze India’s emergence as a global telecom manufacturing hub.

Separately, the move towards exempting the Special Additional Duty of Customs (SAD) of 4% on import mobile handsets is also a very welcome step. This duty was hitherto refundable on payment of VAT; this step will make the entire process of handset imports much simpler, facilitating better cash flow in the industry.”

Ananda Mukerji, MD&CEO, Firstsource Solutions Limited.
It’s a balanced and overall positive budget. Given fiscal constraints, the continued investment in infrastructure, education and health is a good sign. However 14 -16% growth in investment in historically hugely underinvested areas like primary education and healthcare is not going to be enough for sustained development in the long run and it would have been good to see bolder steps in this area. Commitment to a clear target of fiscal reduction and a roadmap of getting there is a laudable effort. While the fine print will have to be examined the Government’s stated intention to ease the refund of service tax credits to BPO units is also good to hear.

A clear disappointment is the lack of extension of STPI benefits given the huge role mid-sized IT and BPO companies play in employment generation in the country. This clearly has the risk of reducing India's attraction as a global outsourcing destination. Another retrograde step is increase in MAT. Though for Firstsource specifically this has very little cashflow impact since part of our revenues in any case attract deduction at source.
Sanjay Kapoor, CEO, India & South Asia, Bharti Airtel
I must congratulate the Finance Minister and the government for a pragmatic, broad based and inclusive budget. Despite an abnormal south-west monsoon hampering kharif crop resulting in negative growth in the agriculture sector and double digit food inflation, the fiscal deficit has been restricted to 6.9%.

A long term focus on aggressive fiscal deficit reduction, addressal of government borrowings and continued focus on reforms redefines our budget as a process rather than an event.

The disposable income benefits to the "aam aadmi" - both in urban and rural India - should stimulate demand for service sectors like telecom which in turn contribute handsomely towards the economic growth of this country.

Manoj Chugh, President, India and SAARC, EMC Coporation
We are pleased at the earnest effort to introduce GST from April 2011. The continued focus on deployment of Information Technology for mission mode projects like commercial taxes augur well. Increased budget for the UID and the formation of the technical advisory group under the able leadership of Nandan Nilekani is laudable. We are also happy to see significant enhancement in funding for education and rural and urban infrastructure, which will drive demand for Information Technology.

Vikas Khanvelkar, MD, DesignTech Systems Ltd
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.

Kapil Dev Singh, Country Manager, IDC
The finance minister is very optimistic about India’s growth. The expectation of Indian achieving 10% growth, in the near future, points to the domestic market consumption being the key driver.

The trend of domestic IT growth surpassing the IT exports growth is more certain, especially with the current focus on the domestic market and measures that will leave more in the hands of the consumer.

The broad based growth in various industry segments will have a derived effect on the IT market. This coupled with government’s commitment to spend on IT will augur well for the IT players focused on the domestic market.

Ashok Chandak, senior director, global sales and marketing, NXP Semiconductors
The current budget is a well balanced budget and the Finance Minister has clearly been focused on the banking industry, rural and agricultural sectors as well as infrastructure, along with giving a boost to investors and entrepreneurs. With regards to the semiconductor industry, it is a welcome step with a focus on financial inclusion, solar semiconductors, Research and Development and further enabling the use of smart cards and identification technologies at various levels.

The allocation of Rs 1,900 crore to the UIDAI for 2010-2011 would provide an effective platform for inclusive growth and enable the participation of the rural population integrating them with various social welfare schemes and development. The assignment of Rs 100 crore each for the Financial inclusion (FIF) and the Financial Inclusion Technology Fund and fillip to Business Correspondent concept will further enable to provide banking and insurance services to the bottom of the pyramid backed by a technology platform. All these initiatives could enable the use of smart cards and identification technologies like Near Field Communication to realize their true potential, as in the case of the earlier financial inclusion projects by various banks and during the pilot phases of the Multipurpose national identification projects supported by NXP.

Vinnie Mehta, Executive Director, MAIT
“We are glad that the Hon’ble Finance Minister has unveiled the roadmap for GST with a definite date for implementation ie April, 2011. Unification of the rate on excise duty and the service tax has been a step in the right direction towards implementation of the GST. The rate of service tax as well as that of excise duty will now be 10%. This will also help mitigate the issue of CENVAT overflow for manufacture of IT products in the country.”

Elaborating on the outcome, he added, “Exemption of Special additional Duty (SAD) on pre-packaged goods for retail is also a welcome step as refunds for SAD were not forthcoming. However, to sustain hardware manufacturing in the country in the long run, it is critical that SAD on the input components be exempted as well.”

“It is heartening that the Hon’ble Finance Minister has recognised the strong potential of the electronics industry and its role in energy generation. In this regard, the announcement of concessional customs duty of 5 percent on machinery, equipment etc. for setting up photovoltaic and solar thermal power generating units is welcome”, added Mehta.

“Lastly, MAIT welcomes the setting up of the Technology Advisory Group under the chairmanship of Mr Nandan Nilekani for monitoring effective IT implementation in projects of National eminence. Timely completion of IT implementation in Government projects is not only critical to the growth and development of the country but also essential for delivering services to the citizens”, mentioned Mehta.
WS Mukund, MD, Acer India.
"It’s been a fairly balanced, yet progressive Budget. Focus on Education, Health and Infrastructure, with enhanced allocations, do pave the way for building a vibrant & competitive India.

For the PC industry there are some positives in terms of scope for adoption of IT in initiatives such as the Financial Inclusion Fund project to extend Banking to more habitats and scaling up of the Smart card projects in Health Insurance. That a Tech Advisory Group is being set up under the leadership of Nandan Nilekeni is another pointer to rapid adoption of IT projects in the areas of Taxation, Pension, Treasury, Infrastructure and GST.

For the PC industry, which had shown a de-growth in the year 2009-10, the roll back of Excise/CVD to 10% is a big dampener.

Also some of the inconsistencies that have been highlighted for redressal the last many months, such as MRP based abatement, phased reduction of CST to 1% (made all the more acute due to GST being postponed to the next fiscal) as also lack of any bold policy initiatives to make Broadband more pervasive and affordable, continue to persist. "

Surjeet Singh, Chief Financial Officer, Patni
“Increase in MAT from 15% to 18% on book profits would result in higher outgo of cash in the short term and would affect Indian corporates adversely. However this impact has been cushioned to a large extent by lowering of corporate surcharge from 10.0% to 7.5%. We welcome a higher percentage of weighted deduction on in-house R&D which has been increased to 200% from 150% as it will incentivize IT companies’ innovation focus.

We appreciate the setting up of Technology Advisory Group along with substantial outlay for UID project. This group will help in accelerated execution of large strategic Government IT projects thereby benefiting IT companies. Budget also proposes to ease the process of refund of service tax credit for exporters of services which will hopefully streamline the current cumbersome process. Tax reduction on account of changed tax slabs for individuals will also benefit the industry indirectly.

However Budget has not addressed IT Industry’s demand for extension of Tax holiday under STPI scheme as per Section 10 (A) of Income Tax Act which is a significant negative for the Industry.

Ramesh A Vaswani, Ex Vice Chairman, Intex Technologies
The FM has done a commendable job of partially withdrawing the stimulus by balancing this with various schemes which should accelerate GDP growth. The focus on the rural economy with substantial & higher allocations will more than make up for the slack in demand, if any, due to the marginal increase in the excise duty rate.

This budget will lead to an increase in the feel good factor which is believed to play an important role in increasing the demand of consumer products.

It is very heartening to note that the cost of mobile phones will come down and will further boost demand and encourage local manufacturing.

I am disappointed, however, by the lack of adequate attention to promote the local manufacturing of IT hardware and to increase domestic consumption of PC.I feel that the economy now requires for inclusive growth not only inputs in agriculture and rural infrastructure but also in IT literacy and IT infrastructure.

India has been talked of as a knowledge economy. And a knowledge commission was also set up to chalk out various initiatives. The small increase of weighted average expenditure deduction on in-house R & D from 1.5 to 2 % only encourages ongoing R&D activities. The FM could have thought of additional incentives to lure large foreign corporations and research institutions to set up their facilities in India.