IT industry to benefit in the long run

IT industry to benefit in the long run

The overall thrust given in the budget to education and knowledge sectors will surely be beneficial for the IT industry

Priya Padmanabhan

Friday, February 29, 2008

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BANGALORE, INDIA: The long-standing industry demand for extension of the STPI benefits was ignored in the 2008 budget too.

However, the finance minister proposed to enhance the allocation to the Department of Information Technology from Rs 1,500 crore in 2007-08 to Rs 1,680 crore in 2008-09.

What is heartening this year is the attention paid to improve education - be it boosting standards of primary education or sprucing up existing institutions and investing in new ones.

The education outlay increased by 20 per cent this year with an investment of Rs 34,400 crore and includes investment in 6000 Model Schools, establishment of National Knowledge Network and 16 Central universities.

The setting up of three new IITs also bodes well for the industry.

Some of recommendations of the Sam Pitroda-led National Knowledge Commission finally seem to be making their way into Five Year plans and now in the Budget.

These are measures that have been proposed for the long term and so the IT industry would have to wait for a while to tap the talent pool emerging from these institutions.

Referring to this aspect of the budget, Manoj Chugh, president, India and SAARC, EMC Corporation said, "Overall, the budget looks to focus on enhancing long-term economic growth through stronger investments in social infrastructure. In this direction, investment in education for not only spread but also improvement of quality is encouraging. The setting up of additional IITs and a fund for improving employability of our workforce are positive initiatives from the Finance Minister to address the manpower needs of the technology sector."

The government has proposed to allocate Rs 800 crore to build knowledge infrastructure including broadband, SWAN and data centers to share information across the country.

The Indian telecom sector stands to gain from this opportunity.

On the downside, excise duty on packaged software has increased from 8 per cent to 12 per cent, and what's more, the government has imposed service tax on customized software.

On the taxation side, the fact that corporate taxes have been left untouched is no relief for the IT export industry whose margins have taken a beating due to the rupee appreciation.

However, in a bid to encourage domestic hardware companies, Chidambaram has announced reduction in custom duties for IT hardware components which in turn would lower hardware prices and boost local sales.

There is an exemption of customs duty on specified parts of set top boxes and certain raw materials used in IT/ electronic hardware, as well as reduction in excise duty on wireless hardware cards and customs duty on convergence products.

Domestic manufacturers and resellers surely have a few things to cheer about this year.

(cmn@cybermedia.co.in)

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