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Software export to fall in long term: Karnik
By siliconindia
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Friday, 09 March 2007, 18:30 IST
New Delhi: The booming software sector might be not the same in the long term. While it is expected to meet the export target of $60 billion (Rs2,66,122 crore) by 2010, NASSCOM gravely announced its long term growth rate and profitability will fall on account of less government support and imposition of taxes.
The sector is reeling under the policies of the recently announced Union Budget 07. Among the policies include Minimum Alternate Tax (MAT) and imposing Fringe Benefit Tax on ESOPs. There are no indications that the tax holiday will be extended beyond 2009.
The present momentum should enable us to reach the target of $60 billion of exports in 2010. But in the long run, with such discouraging policies, we expect a fall in growth rates and bottom lines, since the small and medium players in particular will be seriously impacted by these changes, said NASSCOM president Kiran Karnik.
The absence of a decision on an extension of the STPI scheme (Software Technology Parks of India) for 10 years beyond 2009along with the added tax liability in the form of MAT, would increase the relative attractiveness of other countries - which are offering many incentives - as locations for the IT software and ITES-BPO industry. Earlier, a NASSCOM had said that the Indian software and services (IT-BPO) exports would clock a growth of 32.6 percent to exceed $31 billion this fiscal.