Disappointment and expectation- Present budget has it all

When most of the IT vendors and partners seem to be satisfied with this year’s financial budget, some partners still seem to grudge saying that more reduction in IT hardware was necessary to make IT products more affordable. 

Below is a mixed bag of response from some leading vendors: 

More of an election budget than IT   

Ramesh A. Vaswani, Executive Vice-Chairman, Intex Technologies (India)-  

 "As expected, the budget is focused on election year issues. Write-off of farmer loans to the extent of 60,000 crores satisfies a pressing demand but, continuing to exempt agricultural income from tax, places the entire burden on the small tax payer base. Increasing shortage of employable educated and trained manpower has been addressed by increase of 20% for education and setting up of a non-profit corporation to initiate world class programs for development of workforce skills in mission mode. In IT hardware, it is disappointing that exemption from customs duty has been restricted to very few items. Whereas, additional funds have been allocated for broadband Common Service Centers, Data Centers and SWAN’s to take benefits of Internet to the rural areas, a coordinated approach to bridge the digital divide is still missing. A special program to take Internet to every Panchayat and school and make the basic PC more affordable is the need of the hour." 

Stimulating Economy 

Vijay Kumar, CFO, Sify Technologies-

“This is the right time to stimulate the economy further to continue our growth path, and that is exactly what the Finance Minister has attempted. The measures on income tax revision, reduction in the general CENVAT rate on all goods from 16% to 14% to stimulate the manufacturing sector, reduction in duty on convergence products from 10% to 5% and full exemption from duty specified parts of set top boxes and specified raw materials for use in the IT/electronic hardware industry are all welcome steps. It is disappointing that corporate taxes have not been reduced to stimulate growth even further. It is also unfortunate that the service tax on cyber café and broadband services have not been removed, nor has the duty on PCs and laptops been brought down further. These would have been positive measures to spur the growth of PC and Internet penetration and use in the country at a time when we are faring very poorly compared to even other developing countries. Overall the budget is neutral to positive and the finance minister has done a fine job of balancing between a long term growth perspective and political and social needs.”  

Promises a move to the digital world 

Makarand Padalkar, Chief Financial Officer, i-flex solutions- 

“The budget also recognizes the importance of a knowledge society and the necessity of moving India from the analog to the digital world. It also promises a more inclusive digital future and a reduction in the digital divide. The allocation of substantial funds for various education schemes, the opening of new IITs will certainly help the IT industry to get qualified manpower even from Tier two and three towns. The use of smart cards for disbursement of funds is good for e-governance and should help minimize leakages in disbursements. The buoyancy in tax collection has encouraged the finance minister not to impose any substantial new taxes. However, the application of service tax on custom software is a major issue as it will potentially lead to a lot of domestic income coming under this taxation regime and we believe this can substantially raise costs for customers. Further, this is one area where there is a necessity for clarity as it can potentially lead to multiple instances of taxation by state and central authorities. The IT industry was waiting for was the extension of the STP scheme. Unfortunately, there is no mention of it at all in the budget. We believe that this was one opportunity to strengthen India’s competitive position.” 

Expected more reduction on IT hardware 

S Rajendran, CMO, Acer India- 

Full credit to the Honorable Finance Minister in balancing various competing requirements and making some bold announcements that benefits the important sectors of education, health and agriculture. We welcome increased allocation to SSA and Education, and expect this to have a positive result for us as Acer is the leading brand in this space. In the same context we welcome one lakh rural information centers, Allocations for SWAN and the state data centers. It is a pointer that Honorable Finance Minister appreciates the importance of deeper penetration of IT as a leveraging force for Economic development. We would have liked minor obstacles to have been put out of the way for deeper IT penetration. These are: 

• Continuation of 4% Special additional Duty, which in any case is to be refunded subject to some laborious documentation. 
•MRP related CVD payment has pushed up IT hardware cost by 4% to 7%. 
• Excise increase on operating system from 8% to 12% that has been newly introduced. 
• Though some relief has been mentioned on CENVAT and duties for some hardware items, at this time we are not clear what are these and we will have to wait till we are able to see the particular notifications.
We wish there was relief in the budget to reduce IT hardware cost and make it more affordable.

So as a whole, although this year’s budget has paved some facilities for IT market, yet the vendors believe that a lot could have been done to reduce hardware prices and thus paving way for more IT acceptance. 

Added on March 3, 2008 Comment

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