Budget Reaction

By : |July 7, 2004 0



Motorola Inc president for India, Thailand, Indonesia, Philippines and Vietnam, Amit Sharma: Overall it’s a good budget for telecom and the IT sector and will send strong positive signal to the overseas community about the new coalition government’s intent. However, its unfortunate that the broadband sector has been left untouched. While we expected some kind of measures to boost this sector, the budget has no mention of it. There has been no reduction in duties for setting up the broadband infrastructure either. Even the high-flying BPO sector has been left untouched.



Vanenburg IT Park managing director, S Ramanathan: Abolishing excise duty on computers is a welcome sign for the IT industry. As the cost dwindles, the penetration for computers increases making it viable for the common man to purchase one. Not just the common man but for service providers too it is beneficial as the cost of running an operation comes down while providing service to various companies. Also educational institutions can now be equipped with systems and students in rural areas can have good exposure to the emerging trends in IT.



Software Technology Parks of India (STPI) Hyderabad, Director, M Vijay Kumar: The Budget 2004-05 is a healthy sign for the IT industry particularly for two reasons. Primarily, the status quo has been maintained keeping in view the potential of the industry. All the services and programs have been reiterated. Another highlight is the government addressing the concerns of the industry to provide it with adequate infrastructure. Particularly for the two-tier states, provision of telecom and power facilities would really enhance the IT enabled services.

Though the present budget is a boost to the rural economy on one side, it equally proliferates the IT industry in the domestic market. The hike in FDI in telecom sector from 49 percent to 74 percent and the exemption of excise duties on PC’s will build up a value-chain within the IT industry. And the IT regulatory policy should boost the manufacturing of reliable systems, and generate employment.



AMD Far East Limited, Country Manager, Sanjeev Keskar: The Finance Minister has presented a forward looking budget that provides a big impetus to the Indian Hardware industry by bringing down the cost of IT hardware and creating a larger domestic market by identifying technical education as a thrust area.

By abolishing the excise duty on computers from 8 percent to zero percent, the Finance Minister has significantly reduced the cost of owning a personal computer and I expect this to act as a trigger for the large-scale proliferation of PCs turning them into common household devices. Additionally, the incentives announced for developing low-cost IT infrastructure and upgrading technical education standards across the country should also spur growth of the domestic hardware industry.



MAIT executive director, Vinnie Mehta: Reduction in Excise duty to from eight percent to zero percent on PCs is indeed a welcome step. This will have the positive impact of abolishing the grey market and make IT products from the organized sector price-competitive. We believe that this will help deepen the existing market and improve IT penetration in the country.

We wish that a similar measure of zero excise duty were also adopted for IT peripherals as a consumer today buys a package-PCs and peripherals together, rather than a stand-alone system. Further, according 100 percent depreciation to IT products would have given additional boost to IT consumption in the corporate sector.

Among other positives, creation of National Manufacturing Competitive Council will get the manufacturing sector the much-needed attention. The IT manufacturing industry is the world’s largest and fastest growing industry and also the largest employment generator. We hope the Government will give due consideration to the sector as well. Further, the focus given to agriculture, education, and healthcare is encouraging. Deployment of IT and IT solutions can bring in significant efficiency and effectiveness to the said programs. Impetus to upgrading the technical education (ITI) will lead to better quality manpower for the sector.



HCL Infosystems CEO and chairman, Ajai Chowdhry: We are happy that the Finance Minister has taken a special view of IT manufacturing in India by reducing excise duty from eight percent to zero percent on PCs, including parts used for PC manufacturing. This step assumes even more significance as it has come ahead of the WTO zero duty regime. This is a very positive step and will definitely help the organized sector in making more investments in manufacturing. We can look forward to increased PC penetration, as PCs will now become more affordable.



Nokia Networks India & South Asia Country Head, Ashish Chowdhary: From a telecom perspective, this year’s budget reflects the government’s focus on telecommunications as a key infrastructure sector and its efforts to provide impetus to one of India’s fastest growing industries. The initiatives to raise the FDI limit and exempt MSCs from import duty are a welcome move and will help mobilize much-needed investments and drive down the cost of telecom equipment, further accelerating overall growth in the sector. These initiatives will supplement the operators’ efforts to build telecom infrastructure across the country and provide affordable services to the masses and help India move quicker towards becoming a wireless dominant country.



Cisco Systems India and SAARC president, Rangu Salgame: The FM mentioned the need for thought and passion in Governance and his proposals reflects that-by encouraging investments across all key sectors of infrastructure, industry, agriculture as well as services. The proposal to increase telecom FDI to 74 percent is a welcome step. The move to abolish duties on PC’s as well as rationalization of duties on telecom infrastructure is positive. These initiatives will help drive demand within the economy and help further improve business productivity.

However, the FM has restrained supply by keeping peak rates of customs duty constant, even as he mentioned that there was a need to bring duty rates down to the ASEAN levels in the future.

For overall growth, both the demand and the supply sides should have been provided the right impetus. The Indian Budget has thought and passion and now it is for the Government to implement and for the market to invest.



EMC India and SAARC president, Manoj Chugh: As a significant investor in India, we welcome the growth-focused budget presented by the new government. It is investment friendly, continues the reforms process and focuses on development in infrastructure and education, all of which will have a multiplier effect throughout the economy. I especially welcome government’s focus on technical skills development and R&D in India, and also the impetus given to the telecom and IT sector, through the hike in FDI and removal of duties and taxes. These initiatives will create a strong domestic IT market and are critical building blocks for India to become one of the leading knowledge economies in the new millennium.



Hughes Network Systems India president Pranav Roach: The proposed Budget for 2004-05 focuses on growth and development. The Government has rightly identified the telecom sector as a key sector that will drive growth. We welcome the proposal to raise telecom FDI to 74 percent. The telecom sector is among the top FDI destinations in the country. Going forward, estimates indicate that to scale up the telecommunications infrastructure to global standards, the sector will need investments of up to $ billion. Despite the 40 percent growth in telecom sector, India needs to do a lot of particularly with respect to tele-density, Internet usage and convergence.

Unfortunately, convergence of telecommunication technologies that needs to be addressed in the context of promoting social, political and economic goals has not been addressed. From a technology point of view, convergence is no longer a question about what will be possible in future. It has already become a reality. In several countries including India, triple play-TV, telephony and Internet access over one medium such as terrestrial (cable, fiber or wireless) or satellite is not only possible but also widely prevalent.


Arjun Malhotra, Chairman and Chief Executive Office, Headstrong: In Union Budget 2004, the removal of customs duty on computer hardware will act as a catalyst spurring growth of the domestic IT hardware market and in effect turn PC’s into house hold devices that further home education and small businesses. Further – keeping in mind the estimated gap between demand & supply of trained IT manpower, the focus on enhancing technical education by upgrading ITI’s is a small but welcome initiative which the Finance Minister would do well to build on.”


Ajit Edlabadkar, Country Manager India, Wind River: Focus shift towards manufacturing which is a key to growth and government has not given incentives for promoting this sector. Hike in FDI limits especially the insurance sector is a positive signal, aviation could have been neck to neck with telecom. Good news for the auto sector in terms of R&D expense exemption. Reduction of one percent in fiscal deficit is a welcome initiative. No tax up to Rs one lakh demonstrates government understanding that this is not a very high figure for survival. The surcharge on higher brackets could have been removed, let us stop penalizing high income personnel. Welcome advantage given to senior citizens.
On the flip side, the concerns are, no clear statement on road infrastructure, the investments need to continue as before or in an accelerated mode. Delivery mechanism for rural facilities in terms of education and health care needs to be improved, else the benefits will not reach the needy. Steel prices will firm up further, having a cascading effect on many essential commodities. Unwarranted turnover tax on securities on already sagging capital markets. Computers should have been made customs duty free one year ahead of commitment. Overall a decent budget considering the political situation, could have done better in pushing forward the reforms.


WS Mukund, Managing Director, Acer India (Pvt) Ltd: A very different and extremely positive budget. The priorities of some of the core necessities, which will be essential for the achievement of Vision 2015, have been extremely well spelt out. The availability of credit in the rural, banking / cooperative sector will boost demand for all products including ours. The decision to upgrade 500 ITIs at 100 ITIs every year will create new technology for all IT products such as computers and create a more empowered workforce for tomorrow. The housing of an international container terminal at Kochi will benefit companies like ours, as it will offer quicker turnaround and more economical logistics for our products. The reinforcement of the decision to impose VAT from April 2005 is a welcome decision; it will need a strong IT backbone.
The raising of FDI cap in the telecom and insurance segments specifically will definitely lead to growth in these segments, both of which are traditionally Acer’s strong customer base. Considering that the Government is set to adhere to the April 1, 2005 decision to abolish Customs Duty on all IT related imports, the decision now to abolish Excise Duty is definitely a healthy sign to encourage local manufacturing. However, the impact on end user price points cannot be commented upon yet, as we await clarification on CENVAT credit on account of CVD paid for imports of components.

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