IT hopes for indirect benefits

Thrust on tech adoption in big govt schemes to help the sector

The export-driven Indian information technology outsourcing services industry felt most of its demands were unfulfilled in the Budget proposals for 2013-14. However, some of the proposals including setting up a national innovation fund, focus on skill development, requirements by banks and financial institutions to comply with Basel-III norms are expected to provide an indirect boost to the IT industry.

"Budget 2013 is disappointing. The main issues raised by the industry like rollback of taxation on software treated as royalty; removal of the minimal contiguous land requirement for SEZs; dual levy of VAT and service tax on domestic software sales and more clarity on transfer pricing norms for the sector are left unaddressed," said Pradeep Udhas, Partner & Head of IT/ITeS, KPMG in India.

Even though the finance minister has not given any direct incentives to the IT industry, he did speak about the role of technology in some large projects. For instance, the finance minister underscored the need for ePayment and allocated an additional Rs 532 crore for the project to modernise the postal department. An indirect benefit for IT is that plans such as the national roll out of Aadhaar-based schemes such as Direct Benefit Transfer (DBT) is expected to result in increased domestic IT spending.

The increasing spend on education sector can spur avenues for software vendors that are focused on digital learning as well as PC manufacturers.

Budget 2013-14 has also proposed allowing funding for technology incubators located within academic institutions to qualify as CSR expenditure. This is expected to give a boost to start-ups, said 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," he added.

For the highly leveraged telecom industry, the Budget does not propose major changes. The investment allowance during 2013-14 and 2014-15 of 15 per cent will reduce tax burden on normal rate tax-paying telecom equipment makers if they invest more than Rs 100 crore in plant and machinery in a particular year. Smartphone prices will go up to four per cent.

"The increase in the excise duty on mobile phones should lead to an increase in prices for end consumers," said Asim Warsi, vice-president, Samsung Mobile.

Adds Mohammad Chowdhury, leader telecom, PwC India, "In turn this will impact negatively the uptake of data services in India and in all likelihood slow it down, just at a time when it has begun to gain momentum."

Nokia India Managing Director P Balaji feels that the decision is likely to increase sale of grey, unbranded sub- standard handsets which is not good for the consumer, industry and exchequer.