Budget reactions of IT firms
By siliconindia   |   Tuesday, 07 July 2009, 19:06 IST   |    4 Comments
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Budget reactions of IT firms
Bangalore: The budget has aroused different reactions from the IT industry. The budget hype in the industry ended leaving some relieved, while many distressed. Cisco - India and SAARC "On the face of it, the budget put forth by the government is positive and focuses on inclusive development. It is encouraging, especially the fact that there is a thrust on infrastructure development, rural development, education and social welfare. The impetus to infrastructure development - both urban and rural - is a highly visible and much welcome component of this budget. Leveraging technology as a tool for accountability, better governance, in business and administration is a step in the right direction. The allocation of funds for e-governance investment schemes like the unique identity number for every Indian and the formation of a Centralized Processing Centre (CPC) in Bengaluru to process electronically filed tax returns will enable effective delivery of public services through public private partnerships. The increased budgetary provision for the scheme 'Mission in Education through ICT' will help take the benefits of IT to the grass roots in a critical sector like education. The 'Aam Aadmi' i.e. individual tax payer will definitely appreciate the abolition of Fringe Benefit Tax and raised exemption limit for income tax," said Naresh Wadhwa, President and Country Manager - Cisco - India and SAARC. Larsen & Toubro Infotech "Given the current economic scenario, I would say the Finance Minister (FM) has presented a good budget. The expectation from a good budget is that it sets the overall tone for fast-paced growth of an economy. The extension of tax holiday and abolition of FBT are also a welcome move. What the budget has done is that it has put in quite a bit of measures to prop the domestic demand. These, along with the measures like modernization of employment exchanges, creation of Unique Identification Authority of India (UIDAI) to set up online data base for Indian citizens, etc. will create significant IT opportunities for companies focusing on the "India opportunity". However, there could have been some extension of tax holiday for exports. I would tend to believe that in the ambit of a budget, the FM has done sufficient to prop domestic demand which can hold on the economy through the times of global recession," said Sudip Banerjee, CEO of L&T Infotech. Advanced Micro Devices (AMD) "In the current circumstances, the honorable finance minister has done his best. The policies announced today will help social sector spending that is bound to kick start the economy. Measures like these will create liquidity, and bring money back into circulation. The Unique ID project is a much needed and long overdue project which can dramatically change the way citizens interact with various government and non-government institutions by bringing greater transparency and accountability. Government should invest in appropriate data mining solutions to leverage the tremendous amount of data which could be utilized very effectively. The UID project has the potential of boosting E-Governance in the rural areas by enhancing projects such as CSCs and improving the overall interaction between citizens and government. Any increase in E-Governance projects creates a potential for organizations such as ours," said Ramkumar Subramanian, Vice President, Sales & Marketing, AMD India. Cadence Design Systems Jaswinder Ahuja, Corporate Vice President and Managing Director, Cadence Design Systems, India, "The Union Budget announced today seems to be pro-development and has made some welcome allocations towards infrastructure creation and betterment as well as social welfare projects. The budgetary allocation towards schemes such as the unique identity number for every Indian enabled by the creation of the Unique Identification Authority of India (UIDAI) will set the tone for future public private partnerships as well. Apart from establishing a foundation to deliver better governance it creates new opportunities for the semiconductor sector. Reducing customs duty on LCD panels and introducing customs duty on set-top-boxes both signal a pro-manufacturing agenda, which is much needed. Scrapping the Fringe Benefit Tax (FBT) provision, increasing the slab for personal income tax and abolishing the surcharge on Income Tax are welcome measures. Extension of the STPI scheme for one more year is a good step, however the government needs to think of an appropriate scheme that incentivizes SMEs to foster innovation in the knowledge sector." Freescale Semiconductor India Ganesh Guruswamy: Vice President and Country Manager, Freescale Semiconductor India said, "Continued investment in e-governance and infrastructure projects through public and private partnerships will provide the much needed direction and sustained development in an emerging nation like ours. Setting up of Unique Identification Authority of India (UIDAI) and investments in SMART infrastructure offers opportunities for Semiconductor industry to introduce new solutions and will also generate entrepreneurs. I am particularly delighted about the increased focus on development of technical graduates which is essential in a country like ours where human capital is a key asset. Allocation of 2,113 crores for IITs and new IITs will create world-class educational centers that will nurture talent in India." ACT Television Bala Malladi, CEO, said, "The decision by the FM to increase customs duty on set top boxes to five percent, making them more expensive, will further impact the already ailing cable industry and increase bottomline pressures for a struggling sector in India. This is going to be an added burden to the customers and is regressive in nature as the customer will now not easily be able to upgrade to newer technologies in this space due to cost restraints. This also creates further barriers to India catching up with the rest of the world in the race for digitization." Cognizant R Chandrasekaran, President and Managing Director, Global Delivery, Cognizant said, "1. The extension of the sunset clause on STPI by a year is welcome. While this will benefit the entire industry, it will specifically benefit the small and medium sized companies in the industry that needed this critical impetus for growth. This is also important in this turbulent global economic environment, in the context of emerging locations such as China, Philippines or Vietnam continuing to offer attractive tax incentives. 2. A substantially higher outlay for institutions of higher learning such as IITs and NITs should increase the R&D throughput and innovation quotient in a material way. At a time when industries are undergoing structural changes globally, it is innovation that can catalyze the next phase of growth. The support provided by way of subsidy for poor students pursuing higher education should provide the required impetus for enhancing the overall employable talent pool. The modernization of employment exchange under the PPP (private-public partnership) mode will help align skills with available employment opportunities at the national level and on a real time basis. 3. The abolition of fringe benefit tax is also welcome since the administrative hassle involved in FBT compliance was very high. 4. The clarity on transfer pricing assessments and the setting up of an independent dispute settlement mechanism is something that the industry sought. That the Finance Minister has announced an industry-specific safe-harbor provision will be notified, will help in resolving assessment issues relating to transfer pricing." Intex "In keeping with the election promises, the FM has rolled out a budget heavily focused on the aam aadmi, rural population and the farmers. Considering the heavy expenditure on the sect reforms, there is little left for any major funding of IT hardware promotion or IT education schemes. He has however announced a small support of 900 crores for education mission for ICTE sector, mainly aiming at the aspirations of the young population. There is a small decrease in duty for LCD panels from 10 percent to 5 percent. To encourage local manufacturing, SET TOP Box has been imposed with a basic customs duty of five percent." Manufacturers' Association of Information Technology (MAIT) Congratulating the Union Finance Minister, Shri Pranab Mukherjee, Vinnie Mehta, Executive Director, MAIT said, "We welcome the government's decision to maintain the current excise and custom duty levels on IT products and components. The hardware industry supports long-term stability in policies and duty structures as frequent changes adversely impact the investment and business plans of the industry. Further, the focus given to education especially for the 'mission in education through ICT', increased allocation for upgradation of Polytechnics, IITs, NITs is indeed very welcome. This is as suitably skilled human resource is critical to sustain the competitiveness of the IT industry in country." Aricent Aricent welcomes the Union Budget 2009 as it delivers on quite a few of the expectations of the IT industry. We are particularly pleased with the one year extension granted to the tax holiday scheme as it would greatly benefit the SMEs especially given the tough market conditions faced due to the downturn. It is heartening that the finance minister has abolished the Fringe Benefit Tax and double taxation on the packaged software which will simplify business. We are also very pleased on the budget's focus on infrastructure, job creation and most importantly education especially to improve the quality of the existing IITs and NITs." "However, the increase in MAT is a bit of a concern as it could impact current cash flow for companies. Although, as we come out of tax holiday and the effective tax rate increases, this increase in MAT could eventually get offset against higher taxes in future years," said Sudip Nandy, CEO, Aricent. Mu Sigma "Abolition of FBT and removal of surcharge on personal income tax will make SMEs in IT services compete better for talent and in offering right performance based incentives. The increase in MAT is a disincentive. Even the extension of STPI benefits for one more year is welcome but it would help if the Government were to announce a longer term extension so that companies can take decisions with a long term perspective," said Dhiraj Rajaram, CEO and Founder of Mu Sigma. Religare Technova Maninder Singh Grewal, Managing Director said, "An overall stable Budget, it, however, has done little to spur internal IT spend on processes and applications - something that could have optimized the availability of good validated manpower now underutilized because of the global meltdown. We were hoping that this year could have been used to provide world-class processes and practices for our domestic sector, whether public or private; whether services or manufacturing. Therefore, instead of being the proactive agent of change, the Budget represents a prudent and cautious approach not reflective of the newer aspirations of the majority of our population or of the energy of our youth." Sonata Software "The most striking feature of the budget has been the expression of confidence by setting a growth objective of 9%. From the industry's point of view, scrapping of the FBT and clarification on the service tax applicability on packaged software are positives. Extension of STPI, though welcome, has fallen short of expectations," said B. Ramaswamy, Managing Director of Sonata Software. Globsyn "Increasing over all budget allocation for higher education is indeed a welcome move and clubbed with tax benefit under Section 80E for education loan will also further give a boost to the sector and bring education closer to many deserving youngsters," Bikram Dasgupta, Chairman & CEO, Globsyn Group said. Yatra.com Alok Vaish - CFO, Yatra.com said, "Yatra.com welcomes the budget announced today in parliament by our Hon'ble Finance Minister. On the whole, the focus of the 'aam aadmi' common man has been maintained with the introduction of subsidies and grants for education, employment and self help groups. Having said that, the positive expectations of a path-breaking reformist budget in dthe first year of UPA after a decisive electoral win that would have set the developmental agenda for the next five years did not come to fruition. There were widespread expectations of concrete steps towards disinvestment, freeing of fuel price mechanism as well as keeping the Fiscal Deficit under six percent of GDP. However, lack of specifics on the first two and the fiscal deficit projected to be around 6.8 percent are a bit disappointing. We hope to see more announcements on these outside the budget exercise. Also with no announcements in and around the aviation or travel and tourism sector, the industry's hopes and expectations of air travel becoming more affordable with the inclusion of ATF in the 'declared goods' segment and the removal of the service tax for selling flight tickets through OTAs, remains unrealised." MeritTrac Services Madan Padaki, Co Founder & CEO said, The Budget has bought cheer to an economy much in need of a boost. The tax benefits extended to include loans taken for vocational education will provide an impetus for growth for this sector. The growth in this sector is critical to have a large talent pool of skilled, trained and assessed human resource in the country. Large outlays for institutions like IIT and NIT will help the education sector in general. From an organizational perspective the removal of FBT and increase in IT exemption limit is a welcome move in the right direction."

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