IT cos half-smile, trade bodies frown upon Budget

BANGALORE, INDIA: The Union Budget for 2012-13 has impressed in parts the IT sector and not so much the industry bodies, primarily due to its lack of reformist agenda.

Given the economic and political circumstances, the FM has presented a pragmatic budget with doses of good intentions for long-term growth, but without short-term punch to get growth going, felt N. Chandrasekaran, CEO & MD, Tata Consultancy Services.

"For the IT industry, the request to exempt SEZ income from MAT has not been granted and this is disappointing."

"The focus on R&D is good as the weighted deduction of 200 per cent for R&D expenditure in an in-house facility has been extended beyond March 31, 2012 for a further period of five years. There is no date or schedule for the Direct Tax Code implementation and GST, but the government is committed to bring these in near future. For the IT industry, the APA will be useful to ease transfer pricing litigation," Chandrasekaran added.

SAP Labs India's managing director V.R. Ferose finds it a 'status quo budget' aimed at fiscal consolidation. "The Finance Minister re-emphasized the need for Goods and Service Tax (GST) to replace the existing Indirect Tax framework. This would have a far-reaching impact on the industry as a whole and hence, should be implemented on a fast track mode. It is also good to know that GSTN would be made operational by August 2012."

Explicit fund allocation to Aadhaar project was another positive indication, he said, adding that the Budget had also brought in certain changes to existing Excise and Service Tax structure.

"There was an opportunity to make some clear moves to move the needle on growth and investment. Instead, we have been given a safe budget," said Rajdeep Endow, managing director, Sapient India. The increase in excise duty and service tax, according to him, would hurt growth and likely cause inflationary pressures.

Meanwhile, Manufacturer's Association for Information Technology (MAIT) has welcomed  the allocation of Rs. 1000 crore for National Skill Development Fund. "It will help in bridging the gap in skills. Setting up a Credit Guarantee Fund to improve flow of institutional credit for skill development is also a good move, as it will help in acquiring specific skills by individuals," said Sabyasachi Patra, executive director, MAIT.

Global technology research agency Gartner has strongly criticized the Budget. "It is a fairly political budget, with very little in the way of bold (or even timid) reforms to drive economic growth," said Partha Iyengar, vice-president, India.

"The only slight silver lining is the verbal emphasis and some increase in outlays to the infrastructure sector, but, given the massive requirements here, even this is likely to be seen as too little too late.  From an IT sector perspective, there is nothing specific that is either a strong negative or positive."

Industry bodies have come up against the Budget in a more vocal way. National Association of Software and Services Companies (NASSCOM) said the budget proposal was a 'lost opportunity' for the economy.

"Budget 2012 is disappointing on various counts — there is no focus on putting the economy on a high growth trajectory; fiscal deficit reduction is through higher taxation, rather than expenditure management; there is no road map on implementation of DTC and GST; and also issues of tax simplification, litigation have not been addressed."

"It is not going to stimulate growth in the economy," Federation of Indian Chambers of Commerce and Industry President R.V. Kanoria said.

Confederation of Indian Industry president B. Muthuraman said he was expecting much more and that the excise-related proposals would push up prices. R.N. Dhoot, the Associated Chambers of Commerce and Industry of India president, said that he was expecting that the personal income tax exemption limit would be raised to 2.5 lakh per annum. "It is not done, which is disappointing."

For chairman of Power Engineering Panel at the Institution of Engineering and Technology, Prakash Nayak, the Budget was not really focused on growth, but mere tinkering. "Unless you address the power distribution side, there would be a shortfall. The Budget is targeted more on the generation part."

As India's economic growth was marred last year with slower recovery due to deceleration in industrial growth as well as external factors like euro debt crisis and political turmoil in Middle East, Minakshi Batra, director — India of IDA Ireland, an inward investment promotion agency, said, the Budget was realistic and aimed towards bringing the increasing fiscal deficit under control.