IT@TT - Online

Moving Towards a Geek-friendly Budget

Lately it's become fashionable to call India an IT superpower. Moreover, our politicians, bureaucrats and software companies are not above an effort to move the Finance Ministry towards an IT-friendly Budget. In addition, when Budget 2001 was announced on February 28 it included mixed readings for the IT sector. The Finance Minister has given a few sops to the industry, as well as imposed new taxes in some other areas. The motto seems, as always that we giveth and taketh! Overall, the IT industry seems to be happy with this year's budget. However, some time needs elapse before the impact of this year's budget is actually felt in the IT sector.

A cursory glance gives the idea that there's a fair share of tears and laughter. The hardware sector had been eagerly awaiting a cut in PC prices. Nevertheless, since that didn't happen, PC purchases are not likely to improve, as price-sensitive customers who were hoping to make their next computer purchase a bit cheaper, are quite sad. On the other hand, there's good news too. IT companies who were straining the leash so far, are finally free to go on an acquisition spree. Greed now seems to be good for acquisition-hungry IT companies. Companies setting up new units for telecom, ISP, and broadband projects can also rejoice. The government has announced a 5-year tax holiday for broadband and ISP firms. Stalwarts like Manoj Chugh; the Cisco president (India and SAARC region) says this budget will have a positive impact on GDP growth rates.

IT professionals in Bangalore hope that the annual fiscal package would focus on development of infrastructure to shift the software sector's growth into fifth gear. In a move to lower the computer hardware cost, the Union government is likely to bring down the import duty on all computer hardware components to zero percent in the coming budget. The Manufacturers' Association of Information Technology has urged the Government to bring in a rationalised duty structure, special economic zones and permission to retain 100 per cent export earnings in foreign currency for the IT hardware industry. The COAI has urged that individuals and non-corporate investors in telecom companies should get tax relief under Section 10 (23 G). In a bid to expand Internet usage, Mahanagar Telephone Nigam Limited in a pre-budget proposal has suggested a tax rebate for Internet usage. Confederation of Indian Industry is also urging the government to accelerate reforms in the tax structure of hardware products used by the information technology sector. NASSCOM is also doing its bit to prevent any kind of taxation on e-commerce transactions, income-tax exemption for software units in backward areas and extension of service tax exemption for software development. From the look of things, this budget seems to have encouraged the growth of IT resources and cut down on unnecessary expenditure by offering some sops. Let's consider briefly how geeks are going to benefit from this budget.

NASSCOM has welcomed the continuing economic reforms announced in the Union Budget 2001-02 and hailed it as an IT hat trick. NASSCOM hopes that the current budget concessions will help the IT industry to reach a target of US $6.24 billion of exports in the current year i.e. 2000-01 (up from US$ 4 billion of exports in 1999-2000). However, the growth in domestic market may be restricted to 30 percent. This means better growth prospects for the geeks.

Then there is an unspoken boost to the IT industry. The Finance Minister announced that the government is now committed to computerisation of all key government departments by end-2002. The current financial year will see the computerisation of Accounts, offices under GPF, and passports. Such automation and e-governance endeavours will naturally lead to an increased demand for software, customised or otherwise. Thus, the geeks will be more in demand than ever before.

Another opportunity for the geek, community's growth lies in the FM's clarification that on-site services would be exempted from income tax under section 10A/10B and 80 HHE of the Income Tax Act. On-site services constitute over 60 percent of the revenues generated from software exports today. In 2000-01, out of the projected US$ 6.2 billion of software exports, almost $3.7 billion are expected to be through on-site services.

The budget also offers other sops for aspiring geeks. IITs are set to see an expansion in their base, thus resulting in an overall growth and development of IT education. The University of Rourkee has been upgraded to an IIT status, and the FM has promised more investments into IIT, Guwahati and stated that the 43 regional engineering colleges will also be upgraded during the course of the year.

Apart from these initiatives, tech education is in for a boost and step up. Banks are to provide non-collateral funds up to Rs 7.5 lakh for local education and Rs 15 lakh for overseas learning.

All this is more than welcome news not just for geeks but also for the whole of the IT sector. However, in spite of a favourable budget, the tech community largely keep themselves away from the budget. It could be that because of the continuing identification of the budget with the financial sector, geeks choose not to relate to the budget. Regardless of the many sops offered to the software sector, the coding community at large dismisses the entire exercise with a shrug. You may ask, why. Is there a lot more that is lacking to lure the aspiring geeks (and those abroad) to stay put in India and not go abroad, so that higher education becomes subsidised and some world-class indigenous software is developed in India? This'll make India's taxpayers more than plain proud. Maybe it's time for a reality check into the continuing disinterest that heralds the budget from the geek sector.

Amrita Ghosh
[email protected]

Top

Other Articles