India rolls out red carpet for Japanese hardware Cos

By SiliconIndia   |   Thursday, 26 June 2003, 07:00 Hrs
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NEW DELHI: The Indian government Wednesday rolled out the red carpet for Japanese hardware companies, saying firms relocating their manufacturing facilities to India would be offered slew of incentives.

While India's progress in software is recognised globally, there is a huge opportunity for Japanese firms to relocate computer hardware manufacturing centres to India, said Indian Minister for IT and Communications Arun Shourie.

The central government's budget for fiscal year 2003-04 has many incentives for companies considering such relocation, an official statement quoted Shourie as saying in a business seminar in Tokyo.

On India's IT exports to Japan, the minister said there was a tremendous scope for growing it from the current three percent if governments of India and Japan work together to remove impediments hampering growth.

"Imposition by Japan of 20 percent withholding tax on software export from India, presumably as a result of interpretation by Japan of such exports as service exports, is one such area needing attention," he said.

"This tax has been hurting not only Indian exporters but Japanese importers as well. While it adversely affects competition for Indian software exports, it also hurts the Japanese importers by way of increased costs."

Shourie said interpretation of the tax rules should be in line with international practice and software exports should be treated as products rather than services exports.

"If the issue is resolved, it would boost the prospects of expansion of the existing co-operation in this vital field."

The minister said India continues to be a "compelling investment destination" for technology companies globally.

"Leading companies have either set up shops in India or beefed up their existing infrastructure. Outsourcing of IT requirements by leading global companies to Indian majors also picked up pace during 2002-03, in line with world trends."

S. Ramadorai, chief executive officer of Tata Consultancy Services (TCS), said there was tremendous opportunity for cooperation between Japan and India in the fields of quality assurance, embedded software and engineering services.

He said while Japan accounted for 10 percent of world's IT spend, it only factored for two percent of India's IT exports.

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