Great expectations guillotined?

Palaniappan Chidambaram started off with his budgetary speech on an ominous note, quoting the first line from Charles Dickens classic The Tale of Two Cities (“...the best of times and the worst of times”).

A few hours later, by the time he ended his speech, the Indian IT industry was relating to the central character of the novel Sydney Carton, dying on the guillotine.

The industry was reeling, it really did not know, where should it look. Everything that the industry was hoping and praying for didn't happen. Late in the evening, everyone was trying to put up a brave front, “no bad news is good news,” was the popular refrain. All were searching for the silver lining on the dark cloud.

Yet, the dark cloud loomed large, most of 'poster boys' didn't know what to say. The comments ranged from exhilaration to despair. The BPOs were not happy, the services were sad and the hardware were confused.

Budget 2006 for the hardware industry is a boon or bane, depending upon where your manufacturing unit is located. The fledgling domestic industry, heavily under the shadows of Taiwan and China, was a tad excited with the imposition of 12 percent excise duty on the computer hardware.

One of the industry veterans, K.R. Naik, managing director, D-Link India, said, “It is a shot in the arm, but the industry required surgery. The measures will help to a certain extent, much more was required.”

According to Naik, the provisions did make life a bit easier for the domestic player, as the difference of inverted excise structure have been addressed. But, there is a rider, he added, prices will rise by 3-4 percent.

Vinnie Mehta, executive director, MAIT, was palpably more ecstatic and said, “The imposition of 12 percent excise duty will establish a seamless CENVAT chain for the Computer manufacturing industry and will facilitate local sourcing of components such as monitor, motherboard, keyboard, etc. thus promoting indigenous manufacturing. It will also encourage manufacturing of high-end products such as notebooks and servers.”

He is of the view that, there would not be any major impact on the price, and believes, “the prices will stabilize in the long run.”

Shantanu Ghosh, chairman, Xenitis (makers of Amchi PCs) feels the budget “seems favorable for the domestic manufacturer and the intention is obvious.”

He also comes up with a complex calculation that predicts a 0.5 to 1% increase in computer prices. “The IT industry also seems to be missing out on one important aspect, with the implementation of excise duty, the companies that purchase hardware goods will be indirectly benefited through minor tax credits,” he added.

On the other end of the spectrum, MNCs like the Compaqs and the Lenovos were certainly not amused, they are predicting a rise in hardware prices, especially laptops.

Raj Saraf, MD, Zenith, truly represented the feeling of the industry when he said, “The imposition of excise is a retrograde step. With this levy the hard ware prices will go up, affecting the price-sensitive market.”

One of the industry leaders, Ashank Desai, chairman, Mastek, summed up, “With the PC penetration so low, why would you want to increase software and hardware prices.”

Coming back to The Tales of Two Cities, one wonders, whether FM would relate to the last line, “It is a far, far better thing that I do, than I have ever done.”

Considering his past budgets and potential, he surely could have done better.