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Follow UsPUNE, INDIA: The big day came, but nothing big happened for the IT sector, is what the initial -- and to some extent -- disappointed reactions to the Union Budget 2008.
As the finance minister’s speech progressed from one line to another and from one sector to another, there remained no doubt that the spotlight that sectors like IT enjoyed hitherto, has clearly moved to other siblings.
Budget 2008 was expected to be populist in the light of the elections nexr year. Just how much true the apprehension turned out to be, it’s not hard to guess; agriculture, education and infrastructure usurped the blue-eyed boy seat from the IT industry.
Ripple effects
Look deep and far, and we find that the Budget will not be completely stoic for IT and associated sectors.
There are many ripple effects that can come out from the impetus given to other sectors and consequentially a lot to cheer about.
The cascading effect will be in the form of a bigger, healthier and more skilled talent pool for IT; more domestic spends by other sectors; better education infrastructure; and overall macro-economic growth that will in turn spur numbers for IT. All the thrust given to sectors other than IT, will give way to a larger domestic market for the IT industry.
Sashi Reddy, chairman, CEO of AppLabs states. “IT will benefit because other industries will now be able to invest more.”
Sanjay Pradhan, CEO of MaxSecure is happy, for instance, with the price cuts that have happened for hardware related goods. “This will give a larger bandwidth for people to buy software that goes along with it.”
Financial Inclusion with 250 Rural HH accounts per rural and semi-urban branch and funds to NABARD / SIDBI / NHBs would drive the Banks and RRBs to look for IT solutions that would reduce their cost of transaction to serve the un-banked population as per a Frost &Sullivan assessment. “There is a huge opportunity for IT and telecom sector in long run.”
In fact, the setting up of Healthcare Delivery System could only be possible through effective use of IT/Telecom, and a part of spend expected to go to ICT Industry, Sourabh Kaushal, industry manager, Frost&Sullivan, south Asia and middle East estimates.
In another obvious correlation effects, Internet and broadband will drive the industry further. There are plans for 100K Broadband Rural Kiosks with Rs 75 crore, SWANS with Rs 475 crore and State Datacenters with Rs 275 crore. This will result in direct benefit to Telecom Sector.
“Looking at the potential this is miniscule but is definitely a move towards right direction. Would lead to huge opportunity in mid to long term (three to five years),” reckons Kaushal.
Time to look inwards
Even the sops bestowed on manufacturing industry and automobiles with excise duty cuts will induce more spends on IT by these companies, feels Ashish Dehade, MD, First Advantage. “So far IT companies have focused on western markets with dollar-driven revenues till now. This is the right time to look inwards.”
Education specially, has received a big fillip in this Budget. Education spend has been increased by 20 per cent besides 6000 model schools setup, national knowledge network and 16 central Universities as key highlights.
A part of this increased spend is expected to go to IT Hardware and telecom sector, feels Kaushal from F&S.
The biggest advantage that will come to the IT industry clearly will be in form the thrust given to education sector. “Skilled and healthy human resources, are the main raw materials for this industry so there will a huge indirect support that will come with FM’s focus on the real issues like infrastructure, rural economy, healthcare, waiver of loans, etc. With education, he has addressed the fundamental concern of corporates at large. Also rural growth will help the larger market to grow, and thus help the IT industry,” explains Dehade of First Advantage.
Increased allocation on education sector by 20 per cent and health sector by 15 per cent is highly appreciated from the social perspective. “The inclusions like setting up of new IITs and 16 Central Universities, new scholarships for scientific study and research, allocation of Rs 100 crore to IT Ministry to set up knowledge network, all national institutions to be networked on knowledge network in budget will definitely help in increasing the number and quality of the talent pool for IT/ITES sector,” hopes Naveen Gupta, vice president – Finance, GlobalLogic Inc.
“As a country, where huge numbers of fresh graduates enter the employment pool every year, we as a sector are facing unique supply side gaps. A large per cent of that lot is not job-ready and any focus on education by Government will only improve the situation for us,” opines Amar M Karvir, head, Aztecsoft, Pune.
But not all ripples would be positive, as Pradhan warns by saying that the growth that will be induced in other sectors, can lead to overlapping needs on talent resources. “The challenge will now get acute on the front of human resources which is already a big problem for IT industry. The sectors will fight for the same limited pool of people and might even start pulling out more people from IT sector.”
Benefits to women
V. Sundararajan, CFO, Aztecsoft Limited, highlights the tax benefits to women. “With a high proportion of women employees, the increase in the threshold limit for taxation for women to Rs. 1,80,000 will be highly appreciated by the IT sector. Increase of the basic exemption from Rs. 1,10,00 to Rs. 1,50,000 is a great measure for the common man.”
Amar Karvir, head, Aztecsoft Pune echoes the same sentiment. “The IT sector per se, has a large proportion of women employees and their attrition rate is lesser too. The threshold limit increase will be helpful. We plan to imbibe more women employees as a company too.”
Muthu Logan of BroVis feels the tax reliefs and other sops for lower income groups and women class will help build purchasing power and economic outlook which can help the IT industry.
As interestingly pointed out by an MD from the IT sector, “IT industry has got used to direct incentives, which have spoilt us at large. Let’s see the macro-economic scenario now and try to leverage the eventual benefits that the Budget will bring.”