What the Budget holds for IT industry?

BANGALORE, INDIA: The Union Budget for 2009-10 presented by Finance Minister Pranab Mukherjee, has got a mixed reaction from the industry people, but the share market seems to get more sulky than ever, with a drop of more than 600 points.

On one hand, companies welcome the abolishment of fringe benefit tax, extension of tax holiday for STPI, the investments-based reforms and, of course, the UIDAI, while on the other, they are worried about the increase in MAT, the missing announcement about 3G or e-governance and above all the increased deficit in the nation's balance sheet.

Here is a look at what industry players and analysts think of the Union Budget:

S. Ramadorai. CEO & MD, TCS

Given the operating environment, this has been a pragmatic effort that touches rural and urban India through development schemes and personal taxation measures respectively and advances the agenda for inclusive growth through higher outlays on physical and soft infrastructure.

To ensure efficient delivery on these programs, however, there is a concurrent need to use country’s expertise to integrate technology for effective implementation. For the IT industry, the extension of the tax exemption under STPI for one more year is a step in the right direction as is the abolition of FBT.

The FM may have missed a trick by not unleashing a wide-ranging e-governance program to extract more economic efficiencies.

S. Gopalakrishnan, CEO and MD, Infosys Technologies

From a taxation perspective, increasing the income tax slabs, removal of the surcharge on personal income taxes and FBT stands out. For the IT industry, extension of 10A/10B exemptions by one more year is a move that is more emotional than of actual benefit since most STPs would have come out of the tax holidays.

The government’s focus on IT investment for enhanced governance is encouraging. On the whole, directionally it is a good budget given the current economic situation.

However, I would have liked to see a clear road map on how the FM would bring down the deficit from 6.8 per cent to perhaps 3 per cent. The second thing I would have liked to hear about is how he intends to enhance foreign direct investment (FDI).

To read Kris Gopalakrishnan's budget analysis click here

Suresh Senapaty, Executive Director and CFO, Wipro

The Union Budget for FY09-10 is a brilliant blend of aspiration and pragmatism. The Budget addresses fundamental objectives of nation-building through focus on healthcare insurance, education, infrastructure, rural development etc.

Clarification of taxation of software packages and Sec 10AA relating to Special Economic Zones etc will avoid undue litigation. Increase in MAT has been balanced by expanding the time-frame for setting-off from 7 years to 10 years which appears fair.

Pradeep Gupta, Chairman, CyberMedia India Limited

The budget presents some daring, quantifiable goals on the social sector reforms – reduction in the number of those below poverty line to half by 2014 and national mission on female literacy reduce by half in three years.

A series of initiatives on induction of ICT in education, incentives to individuals for skill building, up-gradation of educational institutions, loan waiver for those from financially weaker areas will go a long way towards enhancing the knowledge capital of the nation.

Prasanto K Roy, Chief Editor, ICT Publications, CyberMedia India Limited

This budget is stable and has some right directions, from spending on infrastructure, to rural development, to abolition of the convoluted FBT. But it could have been much bolder, coming on the heels of such a strong and clear mandate.

With no 'pain in the left' to worry about, it did not need to take short-term, baby steps. I guess the fiscal deficit sword has been dangling over the government. For instance, the one-year extension to the STPI scheme is disappointing.

I was hoping for a clearer signal, so that the services exports industry could stop worrying and focus on recovery and growth in the mid-term.

Pramod Bhasin, Chairman, NASSCOM

Many of the initiatives in this year’s budget recognize the role the IT BPO industry can play in promoting inclusive growth and creating substantial employment opportunities in the country. Increased capital outlays on the education and infrastructure sector will also address growth challenges that the country has faced.

Kapil Dev Singh, Country Manager, IDC India

Budget has little for the IT industry to celebrate. Balances short- term challenges with long-term priorities, though not a populist budget.

The strategic intent of the Union Budget 2009-10 is a fine interplay of short-term challenges and long-term direction as it aims to tackle slowdown with an eye on restoring 9 per cent GDP growth, adding 1.2 million jobs annually, cutting the number those below poverty level by half by 2014.Software exporters have to contend with “a year at a time” extension of STPI scheme.

The FBT abolition means lower administrative burden, bringing shine back on the ESOPs.

Microsoft India

There are no specific allocations on Information and Communication Technologies (ICT) adoption within the country, especially in the context of relevant societal schemes and programmes. We believe there is an opportunity to transform this reality through world-class, pervasive ICT infrastructure to accelerate inclusive, equitable and sustainable growth.

Taking the focus on education and employability further, for instance, the government could look at initiatives like encouraging telecom operators to offer an affordable ‘Education PC’ - which includes a laptop, broadband and educational software and application services - at below Rs 500 per month; a 100 per cent depreciation on capital investment in IT by companies and Income Tax rebates to individuals for acquisition of computers.

Ajai Chowdhry, CEO and Chairman, HCL Infosystems

Overall this budget is good for the IT sector with certain facets that are encouraging for the sector. However, ICT Industry was looking for more support from the Government. We had recommended a 100 per cent depreciation on financing of IT equipments which was not included.

On taxation aspect, the excise/CVD exemption is unclear as it was not stated whether VAT is included in this or not. But more should be done to give an impetus to ICT in education and literacy. It was also discouraging to see that the extension of the sunset clause was only for one year which ideally should have been extended for a longer period.

For more industry reaction, click here