Is Budget a bad news for Indian IT industry?

MUMBAI, INDIA: Though the Union Budget 2010-11 has given some good news for the construction, hospitality, banking, education and pharma sectors, it may not be a very good news for the IT industry.

In his Budget speech, Finance Minister Pranab Mukherjee has not mentioned anything on the extension of tax holidays for the industry.  

According to a Reuters analysis, outsourcers such as Infosys Technologies, Tata Consultancy Services and Wipro stand to lose from the Budget as there is no mention of extension of a tax holiday scheme for software firms in the minister's speech. The tax break ends in March 2011.

Meanwhile, Infosys chief mentor NR Narayana Murthy said that the IT industry needs no STPI extension. While talking to CNBC-TV18 before the presentation of the Budget, Murthy differed from other industry veterans and said that the IT industry needs to pay higher taxes and does not need Software Technology Parks of India (STPI) extension any more.

In his speech Mukherjee said that India needs to review public spending and improve its fiscal position.

The Finance Minister also said the government raised its factory gate taxes as industry is on a recovery path. He said the economy would grow at 8.5 per cent in the year to March 2011. Mukherjee claimed the Budget for 2010-11 gave a correct signal towards fiscal consolidation.

However, the allocation of Rs 1900 crore for UID project and the announcement of the modernization of national employment exchanges are some moves that would help the IT industry as a whole.