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IT Scope: Rediscovering the leadership path

In the forthcoming budget, the biggest hope for all small and medium firms in this sector would be an extension of the visionary STPI scheme, writes Ganesh Natrajan.
By IT Scope | Ganesh Natrajan | Hindustan Times
UPDATED ON FEB 12, 2008 11:24 PM IST

The Indian IT and BPO industry and its unprecedented success from the early 1990s until now is often seen as a story that owes much to both its independence from government policies in the initial phase and also to supportive government policies in its years of maturity. The fact that this is no longer the only success story that India can boast of, with many other export sectors taking wing and many Indian entrepreneurs putting their companies on the global track, is a matter of pride for all of us.

However, even as our ministers and industry chiefs at the annual global business summit in the Swiss resort of Davos assert that the low export dependence of the Indian economic growth will see it sustain in the face of a global slowdown and a potential US recession, let us not forget that IT showed a whole generation of youngsters that we could be proud of the ‘Made in India’ label and hold our heads high anywhere in the world.

It is heartening to note the renewed interest in IT stocks that we have seen in the recent past, which is possibly a realisation both of the ability of the industry to withstand currency shocks and keep the revenue and profit numbers growing, in addition to the huge potential of the industry to garner more market and opportunity share in the years to come. While the marketing capability of Indian IT and BPO firms has already been proven with the majority of the Fortune 1000 firms choosing Indian providers for managing both technology and context processes, there is some support needed from the government to enable this industry to rediscover the leadership path in the face of global competition which is nipping at our heels and getting phenomenal support from their governments in places like China, Vietnam and Eastern Europe.

In the forthcoming budget, the biggest hope for all small and medium firms in this sector would be an extension of the visionary STPI (Software Technology Parks of India) scheme that enabled entrepreneurs to succeed without the huge investments that could now be necessitated by moving to SEZs (special economic zones) in a bid to stay competitive.

The creation of a level-playing field by providing STP users the same benefits as SEZs, not just in India but in other countries, can give opportunities for innovators to turn their dreams into successful businesses and keep the industry buoyant in the years to come while creating employment in many parts of the country.

There are many other small but niggling issues that the Finance Ministry can and should address in the forthcoming budget – such as refund of service tax paid on inputs utilised for export of software and BPO services, clarification of all the ambiguities that still plague the FBT (fringe benefit tax) on employee stock option schemes, clarification on taxes payable on foreign remittances, rationalisation of transfer pricing rules and permission for consolidated tax filings -- all of which come in the way of streamlined operations and profit predictability in the sector.

But the one of paramount importance remains the STPI, because a wise extension of this scheme can once again open up the floodgates of inclusive success that have made this such a great industry

The author is the Global CEO of Zensar Technologies Ltd

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