Budget 2013: India's Tech Industry Responds

By CIO Feb 28th 2013
The withdrawal of MAT of SEZs and the new policy for implementing R&D in software industry have been welcomed by the IT industry. Here's how Indian techies say 2013's budget decisions will affect them.

The Union Budget has received a mixed response from the IT industry. Do the budgetary provisions address the prevailing industry concerns? Here, the Indian tech industry draws an assessment matrix of the budget:

Sujit Sircar, CFO, iGATE:

“The budget has nothing interesting to look forward to. With the economic climate demanding high-voltage reforms and measures, this budget prefers to stay conservative and indecisive. For the IT industry too, there is nothing to feel happy about. We would have liked to see our wish-list being addressed. However, the FM has chosen to remain calm and keep things unchanged than take any aggressive steps to fuel growth.” 

N. Chandrasekaran, CEO & MD, Tata Consultancy Services:

The FM’s intentions are very clear - to move India back to a higher growth plane. And given his lack of runway, he has taken lots of small measures which together could boost growth. From a technology perspective, allowing funding for technology incubators located within academic institutions to qualify as CSR expenditure as per new Companies Act will give a huge boost to entrepreneurs and start-ups and increase the engagement of the corporate sector and start-ups.

On the taxation front, removing double taxation on dividends received from overseas arms will reduce the burden on shareholders. From the perspective of the IT industry, the clarifications on taxation rules regarding development centers and safe harbor rules are very welcome as are measures to drive skill development, with a special focus on tier-2 and tier-3 towns.

Overall, it would be safe to say that with this budget, we have started our climb back to higher GDP growth levels.

Suresh C Senapaty - Executive Director & Chief Finance Officer, Wipro:

“The budget delivers on the promise of fiscal prudence, continues to drive progress on reforms and chalks out initiatives like investment allowance to ensure growth is not ignored. Reforms have progressed in the areas of Direct Tax Code, GST, financial markets regulatory authority for Road sector and Tax Administration Reform Commission to bring about a tax regime, which will be more proactive in closure of issues rather than litigious. It addresses sustainability initiatives through investments in renewable energy, waste to energy projects in PPP model and has incentives for wind energy projects. The budget has proposed steps towards inclusive growth with measures around financial inclusion, investments in education and welfare of women and children. Overall, the budget is balanced and realistic.”

Amar Babu, Managing Director, Lenovo India and Vice-President, MAIT:

“This Year’s Budget is realistic and growth-oriented, but has failed to create any strong levers for the IT and Electronics segment. On his part, the FM has attempted to address the core issues facing the economy – rising current fiscal deficit, lowered investor confidence and the need for additional revenue generating reforms. However, with technology being a key business enabler, a welcome growth booster would be an  inverted duty structure for manufacturers of IT products including PCs, which the Budget has not addressed. Positive levers include the increased investment in infrastructure, education and health reforms, which will augur well for the future.” 

Navaneet Mishra, VP – Globalisation Services, SAP Labs India:

The promise and intent shown by the finance minister to fast-track the GST bill and constitutional amendment is highly welcome. This would provide the required impetus for quicker GST rollout and subsequent simplification which will benefit the end-consumers. The Tax Administrative Reform Commission is a good initiative to review tax implications. We truly expect the commission to review the policy content and its implementability, and provide the feedback to enable businesses run with minimal disruption. Increasing the royalty tax to 25 percent from the existing 10 percent could be a visible concern for Global MNCs, wanting to setup their subsidiary and do business in India.

Jagdish Mahapatra, Managing Director, McAfee India & SAARC:

Overall, the Union Budget for 2013-2014 is a realistic one hinged on growth and development-oriented expenditure. The focus on technology infusion in agriculture and provisions regarding MSMEs will spur the growth of the economy in the right direction. The budget highlights the need for public sector banks to be compliant with BASEL3 norms which underlines the need for having a robust and connected security framework which can help banks comply with such regulatory norms.  

From an IT standpoint, this is a marginally encouraging budget. We were hoping for the discontinuation of MAT on SEZs and apportionment of more grants to ensure secure data access, which hasn’t been considered. The other disappointing aspect is the surcharge for MNCs in India has increased from 2-5 percent if the taxable income exceeds 10 crores. On the other hand,  the incentives to semiconductor wafer fab manufacturing facilities along with provisioning zero customs duty for plant and machinery is quite positive. In a nutshell, this is only a marginally encouraging budget from an IT industry perspective.

Asim Warsi, VP, Samsung Mobile:

The benefits announced for key sectors like infrastructure, agriculture and education are bound to positively impact the economy. This year’s budget initiatives focusing on women and youth also resonate well. The 15 percent investment allowance on manufacturing investment should give a fillip to domestic manufacturing. However, in overall terms, we do not see the budget reviving the consumer sentiments in the absence of any specific incentives to boost consumer sentiment itself. Further, the increase in the excise duty on mobile phones will not have a positive impact on the mobile industry and should lead to an increase in prices for end consumers.

Rajesh Janey, President, EMC India & SAARC:

This year’s budget is for the masses, yet a responsible one emphasizing on the fundamental premise of growth. We welcome the government’s focus on fiscal stimulus, growth imperatives, important areas of social development, education with an emphasis on skills building for the youth, attracting FDI, and incentivizing the MSME industries - all of which are imperative for the country’s transformation.

We believe a lot of the key initiatives outlined will leverage technology at the core, whether it's banking norms compliance or ATM expansion or transforming post offices and the textile sector or rolling out Aadhaar-enabled payments for various government schemes among others. Additionally, the fund for promoting science and technology innovation for the common man also augurs well for the local IT industry, and will improve competitiveness of industries, thereby significantly enhancing service delivery.

Pradeep Nair, MD (India and SAARC), Autodesk:

The budget was austere in character and as expected, stressed on fiscal prudence. What should please us in corporate India is the fact that the FM has laid a lot of importance on two specific areas which are imperative to boost growth, namely: Infrastructure development and medium and small enterprises. In particular, the move to extend MSME benefits for a period of three years post moving to a higher category is welcome. The exemption of 15 percent in investments of more than Rs 100 crore to set up plant and machinery should also provide a huge leg up to the manufacturing sector. The commitment to increase the availability of low cost funds to infrastructure sector is noteworthy. I am also particularly pleased with the emphasis on national skill development as well as the separate amount of Rs 200 crore to fund 'technology for common man', which is perfectly aligned to our corporate vision. Overall, not much that’s spectacular or game-changing in the budget, but well-balanced.

Sanjay Deshmukh, Area Vice President – India Subcontinent, Citrix:

“The Union Budget 2013-2014 has been an affirmative, balanced and realistic one that will boost our economic growth, even though it hasn’t been particularly relevant from an IT hardware and software perspective. On a positive note, provisions for post offices deploying core banking tech and schemes for modernization and technology upgradation in the textile sector; would benefit the sectors immensely. The budget indicates that there is a pressing need for the public sector banks to be compliant with BASEL3 norms which underscores the need for better data management that can be realised through technologies such as virtualization and cloud services. Additionally, incentivising the semiconductor wafer fab manufacturing facilities along with provisioning zero customs duty for plant and machinery is a move in the right direction.”

Nimish Soni, Executive Director, Offshore Services – Asia, Xchanging:

With about 3,000,000 professionals directly employed, the $100 billion Indian IT-BPO sector is the largest organized private sector employer in the country, and the government has recognized the importance of this industry. As technology is becoming more central to everyday lives of consumers and corporate alike, the government should strive for a growth-friendly budget and continue with the SEZ facilities that will attract investment and help create an environment conducive for further growth of the Indian IT-BPO sector in the country. The IT industry will hugely benefit with the withdrawal of the Minimum Alternate Tax (MAT) on SEZ units and the revamping of the SEZ policy, with no minimum, contiguous land requirement. This will encourage the promotion of tier 2 and 3 locations for inclusive growth to meet the land and infrastructure requirements of the industry.

Sunil Khanna, President & MD, Emerson Network Power, India:

“The commitment to bring about constitutional reforms in GST is a positive sign. The Finance Minister’s initiative to set apart Rs. 9,000 crore towards GST compensation will encourage the states to get on board with GST and hasten reforms. Another welcome aspect is no change in the normal rate of excise duty coupled with revival of investment in manufacturing sector which has been reeling under inflationary pressures. Setting up of a Cabinet Committee on Investment (CCI) to monitor investment proposals and ongoing projects, remove bottlenecks, review stalled projects and improve public-private partnership is welcoming. The budget has also taken growth inducing measures such as encouragement of IDFs and additional investment into industrial corridor projects and JNNURM which are positive signs for the sector. The proposal to introduce 15% investment allowance for high value investments in plant and machinery, and new incentives for renewable energy projects will help the industry keep pace with rapidly changing technology. Overall, it’s a relatively measured budget focussing on fiscal consolidation.”

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