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IT Scope: Looking beyond the budget

FM’s whopping farmer loan write-offs and focus on increasing consumption by lowering excise duties and raising the income tax slabs demonstrated the expected intent – a conscious shift in expenditure, writes Ganesh Natrajan.

india Updated: Mar 11, 2008 23:19 IST

It would be naïve to say that the budget was a surprise. With one eye firmly on the vote banks, the Finance Minister’s whopping farmer loan write-offs and focus on increasing consumption by lowering excise duties and raising the income tax slabs demonstrated the expected intent – a conscious shift in expenditure towards health, education and the rural sector!

After the expected applause from the manufacturing, pharmaceutical and healthcare sectors, and a temporary sulking in the stock markets, it has to be business as usual for corporate India as we move towards the end of the financial year. The question now is – how wills the future shape up with the cloud of a global recession darkening the horizon?

There are many good initiatives announced by the Finance Minister that will have medium term positive impact on business. Substantial outlays in Education with more IITs and higher education universities announced will boost the availability of talent and hopefully elevate the levels of research which are abysmal at present. The focus on vocational education if implemented well in conjunction with the ITI schemes will alleviate the paucity of skilled manpower that is plaguing most of the growth sectors. Wide-ranging public private partnerships in education can see the beginnings of the long awaited total reform in the education sector and provide succour to resource starved sectors like retail,healthcare and business process outsourcing (BPO).

So why the anxiety in the IT and BPO industries? The double whammy of service tax on customised software purchases, which will make the nascent domestic demand relapse into inertia all over again is one big dampener. And the lack of any clear direction on the continuing of 10 A / 10 B benefits under the STPI scheme have left many insiders puzzled. What does make the sector mad is the fact that the development of entrepreneurial start-ups and the spread of employment to smaller towns in the country will be derailed if the STPI (Software Technology Parks of India) scheme does not continue beyond March 2009 and the weaker profitability of BPO units, already shaken by the change in dollar-rupee conversions, will make the industry less attractive to global customers with competing countries offering every incentive under the sun to move their business there.

It is important to dispel the myth that the possible withdrawal of STPI benefits will bring the industry crashing down. Most significant IT firms have established strong beachheads within their client bases in key geographies and will adopt a judicious mix of SEZ (special economic zone) and other investments to continue to grow their bottom lines, albeit at a lower clip than the continuing 25 percent revenue growth that can be expected till the end of this decade.

However, in the interest of inclusiveness, it is essential that a level-playing field is created for the smaller players as well. As the year progresses, we hope and expect that the persistence of NASSCOM in pushing the cause of these weaker segments of industry will be rewarded with success. The industry continues to be strong and a little help from the powers-that-be will enable it to grow to true global supremacy status.


(The author is Vice Chairman of NASSCOM and Global CEO of Zensar Technologies)