Before we speculate on the outlook for the IT sector in the forthcoming Union Budget, let us first look at the pressures on the Finance Minister:
- Inclusive growth remains a top priority for the UPA government, as it should. India’s economic growth is impressive, but remains lopsided. We have already seen social tensions due to the economic gap and a political backlash. Given the losses for the Congress recently in several states and the general elections next year, measures popular with the aam aadmi can be expected to take priority.
- The government continues to pursue liberalisation and India’s participation in a global economy. This favours general tax relief measures rather than those specific to certain sectors, such as Information Technology (IT).
In theory, the United States (US) slowdown could reduce the growth in the IT sector. However, the IT sector has achieved a high level of maturity, is fundamentally strong, and could actually see increased business if the slowdown in US is moderate. IT Application Development and Maintenance, the bread and butter for most IT companies in India, is becoming saturated. IT Infrastructure Management and Outsourced Product Development will be the two major areas of growth by Indian companies.
With these considerations, I expect the following:
- No major sops or new initiatives for the IT sector specifically. The STPI scheme may get extended for small and medium IT companies, especially given the decline in US dollar. While this is desirable, there are pressures for incentives in other areas. As such, I would not bet money on any extension. In November 2007, NASSCOM provided the Ministry of Finance a great list of “Top Five Most Critical Issues” and another 10+ critical issues requiring urgent attention of the government. This is a reasonable list and most items do not reduce taxes collected by the government. Hence, I expect many will be approved. For the report.
- Tax relief for the aam aadmi. While one can speculate on the rates and slabs, it is almost certain there will be relief on the personal income tax front.
- Continued general liberalisation of duties with the expectations that Indian industry needs to be competitive globally.
If I had a wish, I would add only one item:
India has successfully changed its large and young population from a liability to an asset. Yet, when we look at our young generation with hope in their eyes, the desire to learn and the willingness to work hard - we have a long way to go in fulfilling the dreams of this generation and achieving India’s human potential.
Government schools remain dismal. A large fraction of graduates from colleges and universities do not have the skills to be productive citizens in the economy. Given the large number of articles and reports on this topic, I think we will all agree that the government’s ability to show solid results through increased investment in education is tried, tested, and failed.
At the same time, the IT sector has shown remarkable ability to take our young minds and convert them into productive citizens. Citizens that pay taxes. Citizens that generate secondary employment. Citizens that care about the communities they live in. 1.6 million and growing! Citizens that make the entire nation proud
Instead of bringing the IT industry under government taxes, here is my wish: Ask the IT industry to directly set aside funds it would have paid in taxes and to sponsor projects that help raise the human potential of India, with special emphasis on inclusive growth.
Give the IT industry a chance to fulfill the dreams of our young generation. We know how to guide young minds. We are tried, tested, and successful.
The IT industry can help take India to a day when every child has access to high-quality education. To the day when we won’t need reservation because every child will be able to compete fairly on merit.
What do you say?
(Dr. Anil Gupta is the Chief Operating Officer of Aditi Technologies)
Comments
0 comment