Budget is a mixed bag, says industry

BANGALORE, INDIA: While there are quite a few positive moves in the Union Budget, the industry is not that happy about it. The response to the budget is a strange mixture of satisfaction and anxiety, which reflects the concerns of the tough ties that we are passing through. Response of some industry players towards the Budget:

Manoj Kohli, CEO & Joint Managing Director, Bharti Airtel

The budget signals significant demand stimulus emanating from its rural and infrastructure growth packages. Telecom infrastructure is an engine of growth and if we are able to double the tele-density to 75 per cent in the next five years, especially due to the rural development focus of the government, then GDP growth can be enhanced by 2-3 per cent.

Sameer Garde, Country General Manager, Dell India

The clarity on dual levy of software is a welcome move. The honorable FM has clarified that the excise duty and CVD is exempted on the value attributable to the transfer of right to use the packaged software. However, we continue to study and analyze the notification for better clarity and implications.

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.

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 to process electronically filed tax returns will enable effective delivery of public services through public private partnerships.

Neeraj Paliwal, NXP India Country Manager, VP & SoC Factory Global Manager, NXP Semiconductors

The imposition of five per cent customs duty on Set Top Boxes are welcome moves as this may encourage set-top box manufacturing in India for India's own market.

Furthermore the increased spends on the National Rural Employment Guarantee Scheme (NREGS) and Commonwealth Games should enable the rapid deployment of contactless technology in IT-enabled financial inclusion in villages, and robust infrastructure upgrades that will prepare Delhi for the upcoming Commonwealth Games.

Amar Babu, Managing Director, Lenovo India

I find the budget addressing only 60 per cent of the issues. The 6.7 per cent GDP in the current economic scenario is indeed good compared to other emerging countries.

From a PC industry point of view, there is no direct benefit as such – the Government could have introduced programs for PC affordability and broadband implementation. The budget also lacks support for medium and large enterprises as corporate taxes remain same.

Sunil Jose, MD, India & Sub-continent, Sybase

I believe our Finance Minister has tried to be sensitive to the great challenge of rising expectations of a young India. 

The investment in infrastructure for the growth of economy is critical. If what is promised in this budget of removing the bottlenecks for speedy implementation of infrastructure projects is implemented, then we will definitely see a rise in our industrial development and India will witness a multifaceted progress after the revival of economic slowdown.

The refinancing of 60 per cent of commercial bank loans for the PPP projects in critical sectors like telecommunications, power generation, airports, ports, roads and even in railways will definitely be very encouraging for software vendors.

Vishnu R. Dusad, CEO & MD, Nucleus Software

The extension of the sunset clause for the STPI schemes by one year to FY 10-11 is welcome but well short of the industry expectations . While this would benefit existing players of all sizes , it would not encourage new entrants in the sector.

The abolition of FBT does give relief to the taxation of business expenses . However the burden of perquisite taxation moves back to employees.

Ravi Pandit, Chairman and Group CEO, KPIT Cummins

There are some changes in the service taxes applicable to exporting companies which we would like to study further and in detail. I am happy with the significant investment that the government plans to do in the area of infrastructure.

The deficit to GDP ratio has to be seen not on a year-on-year basis but over a period of years because some years it would be deficit if there is slackness in the market and in some other years there might be surplus.

Thus the deficit should be averaged over a period of few years and not a single year. The current high deficit ratio is not something that one needs to be worried about.

Rajoo Goel, secretary general, ELCINA (Electronic Industries Association of India)

Budget is neither negative nor positive. It has not taken any definite measures to promote industry. Good thing is that it has kept excise duty at 8 per cent, removed FBT. But seeing economic slowdown and recession, scenario, it has not taken any important step to boost industry. Same is getting reflected in markets today.

Ramkumar Subramanian, Vice President, Sales & Marketing, AMD India

The Unique ID project is a much needed and long overdue project which can dramatically change the way citizens interact with various government and non-government institutions by bringing greater transparency and accountability.

Government should invest in appropriate data mining solutions to leverage the tremendous amount of data which could be utilized very effectively. The UID project has the potential of boosting E-Governance in the rural areas by enhancing projects such as CSCs and improving the overall interaction between citizens and government.

Surjeet Singh, CFO, Patni Computer Systems

For the IT services sector in particular, the FBT removal and reforms in indirect taxes is seen as a major plus, allowing for stock based compensation to be more effective. In a knowledge sector such as ours, this calls for better attraction, talent retention across all levels, inspires innovation and entrepreneurship.

The hike in MAT from 5 to 15 per cent is a slight disappointment and will lead to higher cash output in short term. We are also awaiting greater clarity on the service tax on IT services exports and expect further policy announcements in public sector disinvestment and infrastructure reforms in the days to come.

Sudip Nandy, CEO, AricentM

Aricent welcomes the Union Budget 2009 as it delivers on quite a few of the expectations of the IT industry. We are particularly pleased with the one year extension granted to the tax holiday scheme as it would greatly benefit the SMEs especially given the tough market conditions faced due to the downturn.

It is heartening that the finance minister has abolished the Fringe Benefit Tax and double taxation on the packaged software which will simplify business.

However, the increase in MAT is a bit of a concern as it could impact current cash flow for companies.

Madan Padaki, Co Founder & CEO, MeritTrac Services

The Budget has bought cheer to an economy much in need of a boost. The tax benefits extended to include loans taken for vocational education will provide an impetus for growth for this sector. The growth in this sector is critical to have a large talent pool of skilled, trained and assessed human resource in the country.

Jaswinder Ahuja, Corporate Vice President and MD, Cadence Design Systems

The Union Budget seems to be pro-development and has made some welcome allocations towards infrastructure creation and betterment as well as social welfare projects. The budgetary allocation towards schemes such as UIDAI will set the tone for future public private partnerships as well. Reducing customs duty on LCD panels and introducing customs duty on set-top-boxes both signal a pro-manufacturing agenda, which is much needed.

Bikram Dasgupta, CEO, Globsyn Group

The budget to be balanced and has opened doors for education and made sufficient efforts for bringing in much needed reforms in the society.

Move to set up central university in each state and redefining the investment for higher education by setting up of more IITs and IIMs, STPI scheme extension are welcome steps as also defining the software product as a service.

However much is left for the SME sector of software industry to give it a further fillip in order to march the growing requirements of the economy.

Praveen Bhadada, Engagement Manager, Zinnov Management Consulting

As a result of the exemption of the value attributable to the transfer of the right to use packaged software from excise duty,piracy would reduce in domestic software market and therefore sales would go up.

With the mandate to increase the banking network in the country, this is an opportunity for banks to go to un-banked markets. This would, in turn, provide an opportunity for Indian IT services companies to help the sector with solutions like centralization of core-banking system in these un-tapped geographies.

Maninder Singh Grewal, MD, Religare Technova

We were hoping that this year could have been used to provide world-class processes and practices for our domestic sector, whether public or private; whether services or manufacturing. Therefore, instead of being the proactive agent of change, the budget represents a prudent and cautious approach not reflective of the newer aspirations of the majority of our population or of the energy of our youth”

Girish Trivedi, Deputy Director, ICT Practice, Frost & Sullivan, South Asia & Middle East Impact

We still need to assess if increase in consultancy service tax rate includes IT consulting services as well, if yes might be an additional burden on most of the large IT companies who have started taking lot of consulting work along with their IT projects.

No announcements of 3G and revenues that can be generated as a result of auctions etc. It also means that the overall 3G launch might take a bit more than expected.

Extension of tax holiday for STP scheme which was expected is positive, however a longer term view should have given a better impetus to the industry which is suffering due to low opportunities in traditional US/ European market. Duty on set -top box might be good for local manufacturing companies, but since most of these boxes are imported, the costs will get passed on to the users.

Ganesh Guruswamy, Vice President and Country Manager, Freescale Semiconductor India

Setting up of Unique Identification Authority of India (UIDAI) and investments in SMART infrastructure offers opportunities for Semiconductor industry to introduce new solutions and will also generate entrepreneurs.

I am particularly delighted about the increased focus on development of technical graduates which is essential in a country like ours where human capital is a key asset. Allocation of Rs 2,113 crore for IITs and new IITs will create world-class educational centers that will nurture talent in India.

Alok Bharadwaj, Senior Vice President, Canon India

Like always, the budget is a mixed bag. The half glassful is the removal of surcharge and increase in standard deduction by Rs. 10,000. This will improve the consumption sentiments. Consumer market will indeed show buoyancy. The abolition of fringe benefit tax is a big relief.

The half glass empty part is the increase in MAT to 15 per cent and status quo on CST tax which was expected to come down to 1 per cent to give way to GST next year.