Disappointing budget for the industry

Vinay Deshpande



Overall from the IT industry’s point of view, the budget is rather disappointing.

In fact, a large segment of the industry has been asking for the extension of the ten-year tax holiday. There was no mention of that. Instead of extending that, now there is minimum alternative tax to the industry - 11.2 per cent.

I’m not saying that IT companies should not pay tax. There are a lot of small and medium companies in the IT industry who actually need a lot of support at this stage since this is a time of consolidation. A lot of them are not doing as well as the large companies. Large companies can afford to pay tax. Smaller companies can’t.

If the government really wanted to tax large players, it should have specified the tax for those beyond certain revenue. Now, this is applicable across the board.

Secondly, the fact that no real major initiative for encouraging R&D, except that the finance minister has extended for period for the current R&D scheme, which gives an exemption from income tax. You need something more dramatic to encourage people in R&D. That has not been done. I also expected some investment for a large R&D fund. It was rumored that something like that was being formed to encourage companies to invest in R&D. This did not happen. Except that he said that technology upgradation fund, would be extended and enhanced.

In the hardware industry, today there is 16 per cent excise duty. There was a hope that it would come down to about 12.5 per cent. But there was nothing. But apart from reduction in taxes, I was hoping that there would be incentives given to hardware sector but there is absolutely nothing especially in relation to the semiconductor industry, where a policy was announced recently.

On the increase in e-governance fund outlay—it depends on how it is implemented. I was hoping that there was something in the budget to encourage the domestic IT industry.

Some of the positive aspects of the budget are in the area of encouraging SMES. It is a small but good move. The NREGS being extended to another 130 districts is another positive step.

The focus on infrastructure with Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and allowing mutual funds to float separate infrastructure funds is great. The announcement on computerization of PDS is a good move. But again it depends on the action taken on that front. Focus on SMEs is very welcome. The financial inclusion technology fund seems like an interesting move that could help the IT industry indirectly.

I expected a lot more in the power sector - for manufacturing to grow, power is needed. Clearly, if you want to provide inclusion, it is only by manufacturing and not by IT.

(The author is CEO, Encore Software. The views expressed here are personal)

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