Will NaMo be able to put ICT back on the growth trajectory?

By : |May 26, 2014 0

BANGALORE, INDIA: The Indian IT industry and software exporters had enjoyed a period of success and phenomenal growth over last two decades. But all the trend reversed since 2008-09 period were outsourcing backlash, global economic scenarios, ceasing of tax holidays, and visa process slowed down the sucesses.

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The stronger mandate of 2014 elections and BJPs thumping victory over previous government’s inability to push policy reforms, no control on inflation, corruption, has given them a chance to set forth a renewed focus on major policy changes; which will impact the macro outlook of the country, delivering on the promises made to the nation of an all-inclusive growth. This can play its part in driving growth levels to 5.5 p.c upward in real GDP terms for the next one year at least. Currently, the mood and euphoria of post poll and tall expectation are swinging along positive sentiments and witnessing a global liquidity spillover.

The election speeches of prime minister Narendra Modi emphasized his thrust on exports, which will help stabilization of Indian currency and growth. The new government and their leader’s belief in technology were evident in the increased usage of social media and 3D meetings, which sets the tone for a better adoption of technology and its penetration within country. With a young demographic dividend available in the country, it’s just a spur required from the government for a conducive business environment, which will see increased digital natives (new generation) and immigrants (older generation) embracing technology and benefiting from it together.

Five point agenda as a starter can boost Indian IT industry:-

1) Allow STPI tax holidays: The STPI tax holidays could be one of the policy decisions IT industry might be expecting from the new government. With all industry association heads making a beeline to sworn-in PM and suggesting him to bring back the tax holidays for IT service export business, which will boost the services export revenue. China too had a similar policy for manufacturing for more than three decade and chose to continue with it in spite of ruling the world with their manufacturing supremacy.

2) Bake a stronger relation with US: A better diplomatic relationship with US will help Indian companies to conduct business in smoother way with US. It will help companies to leverage on US market revival with its discretionary and new technologies spending in their reviving economy. This will help IT companies to capitalize on re-acceleration of US economy.

3) Call for local manufacturing in India: The ICT sector growth was largely services-led story till now; it’s time for us to look at indigenous manufacturing of hardware and promoting Electronic System Design and Manufacturing (ESDM) in India. There is a huge untapped market of low-cost device for computing and communication needs in the country. In a long run India can be an exporter of these low-cost devices for emerging market with similar demographics.

4) Domestic ICT spending: – The role of ICT in smarter governance will increase the domestic spending and it will improve the local ICT consumption which is a big positive for the sector. Many smart infrastructure and smart governance model enabled by ICT interventions are going to drive these spending in the area like smart transportation, automated fare collection and green-field airport and other infrastructural projects. The government projects are going to be big drivers of domestic IT spending.

5) Exempt software licenses from double taxation: – The new government can look at extending a relief on the applicability of taxes like Service Tax and VAT levied together on the software licenses. Hence, bringing more clarity and uniformity in the taxation will help the industry’s long standing debate.

The challenges are enormous and new government will inherit difficult economy and it will take time to rekindle the growth phase without even having time to get on with the adjustment process. Last time, it took 5 years to adjust. A faster and firmer decision on the above mentioned points can trigger the growth of IT industry and will co-create and drive the ICT sector as whole.

(The author is senior vice president with CyberMedia)

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