'Maintain the equilibrium rate on IT products'

BANGALORE, INDIA: The finance minister should maintain the equilibrium rate on IT products, including the excise duty on computers. MAIT executive director Vinnie Mehta said any change in the cost structure would harm somebody and hence called for the continuation of the existing tax structure.

The industry currently enjoys a benign excise duty of 12 per cent on computers, he said adding that earlier in December, MAIT had stressed the need for a stable policy regime for the IT hardware industry.

"The government can provide a stable environment by avoiding any short-term reforms in the current duty structure. Any changes in this regard should be proposed only once the government has finalized a long-term fiscal framework," MAIT official said in its pre-budget memorandum to the finance ministry.

Government has identified growth of electronics and IT hardware manufacturing as a thrust area, said President Pratibha Patil. "A special scheme has been announced to encourage semiconductor fabrication and other micro and nano technology manufacturing industries," said Patil, in her address to the joint sitting of the two houses of the Parliament on the opening day of the Budget session.

"The National e-Governance Plan, to make government transparent and citizen-friendly, is at an advanced stage of implementation all over the country. Use of IT in about 13,000 district and subordinate courts across the country has been initiated."

"An Integrated National Knowledge Network is to provide gigabit broadband connectivity will be set up to connect all institutions of higher learning and research in the country," Patil informed.

"The Special Economic Zones promoted by government have already provided direct employment to about 100,000 persons, with indirect employment estimated at twice as much. They have attracted investment of over Rs 50,000 crore, and are expected to generate exports of Rs 67,000 crore this year," she adds.

The economic growth and prosperity of any country is enabled greatly by the breadth and depth of its communication networks, said Satya Prabhakar, CEO of Sulekha.com.

The more frictionless these networks are, the more people communicate…the more they communicate, the more they find opportunities to transact and engage in zero-sum transactions that power economic growth.

Without a doubt, India's current rate of GDP can be attributed to the explosion of mobile phones, good roads, airlines and trains. Unfortunately, the growth of Internet usage, while good, has not been as spectacular, said Prabhakar.

If we want to sustain the 9+ percent of GDP growth, we have to ensure ubiquity of Internet access, he said adding that towards this end, the central government must consider scrapping sales and service taxes on computers, laptops, Internet connections, online advertising and e-commerce for a period of 5 years.

“Imagine the power of millions of our students having access to Wikipedia with its millions of pages of content and this is only possible with access to Internet that provides a unique opportunity for young and old alike to hone their skills of expression and develop powerful networks of like-minded people,” he adds.

Giving his expectations, TV Mohandas Pai, member of the board, Infosys said, ``overall last year it's been good for the industry as far as industrial growth is concerned but not good for them in terms of taxes. The biggest challenge for India right now is high level of indirect taxes," he said.

If you are an exporter you save 30 percent on the goods that you buy because they don't pay excise duty and custom duty and VAT. Indirect taxes have to be reduced so cost of good comes down, and people can buy more goods. We need mass production. There are billion people in the country and we need to lower indirect tax. That is number one priority," he adds.

Talking about India moving toward investment-oriented economy; Pai says that 65 percent economic growth comes from consumption and 35 per cent from investment.

“India set up a sovereign fund of $50 billion like China, Singapore to increase investments in domestic and foreign funds/companies and enable foreign funds to set up fund management companies in India rather than outside India; this needs a policy change. This will give a boost to foreign long-term capital to come into India especially in Venture Funds which is a small portion of the total investments in India,” said Sudhir Sethi, Founder, Chairman & Managing Director, IDG Ventures India.

Delivering his pre Budget 2008 expectations, Sethi said that outlook of the future of venture capital in the year ahead. Compared to $14 billion invested in PE/VC Industry in 2007, I expect $18 to $20 billion in 2008. The VC Industry was about $1 billion of the $14 billion in 2007; this is expected to go up by at least 50 percent.

Ram N. Agarwal, CEO & MD, WeP Peripherals said that there is a growing competition from imports due to appreciating Indian Rupee. This keeps the local manufacturer on their toes. Therefore please create stability in duty structure and fiscal regime. I wish no changes in the current duty structure in PC and related IT hardware industries. With this duty structure there is a growing interest in investing in Indian hardware manufacturing industry. "We should help those investors who are sitting on the sidelines by making no changes and creating a stable duty regime, adds Agarwal.