News / IT expenditure boost will help domestic industry
Jul 10, 2009

The Budget has been promising, with a pragmatic approach in terms of taxation and some measure of economic stimulus. There has been a lack of big announcements in terms of disinvestments by the Government, increase of FDI etc. However, there has been a hint, through mention of the committee to explore the FDI limit in insurance as well as the importance of FDI and disinvestment (with the figures of the non-tax revenue expectations) and this has raised hopes of some development in these areas in the near future.
The beneficial tax treatment extended under Section 10A and 10B of the Income Tax Act (under the STPI scheme) has been key to the rapid growth of the Indian IT industry. This was set to expire in 2010 and if not extended, would have made the Indian IT sector lose competitiveness against the emerging IT countries. The extension of this scheme is an important and necessary step to ensure continued growth for this sector. Further, the long-awaited clarification on vital definitions on this point can prove to be highly beneficial.

Another step highlighted in the Budget relates to the imperative increases in infrastructure investment. It is paramount that there is adequate investment in infrastructure and facilities in order to enable growth of the industry. The boost in infrastructure expenditure would enable growth to smaller towns with the addendum benefits.

The boost in government IT expenditure, with announcement of key projects, would assist the domestic IT industry in part to tide over the global reduction in demand and is seen as a positive. There has been an increase in focus (and spending) towards higher education and R&D investments. This will enable India in maintaining availability of a highly skilled labour force as well as ensuring adequate emphasis in R&D.

With encouraging reforms such as removal of Customs on packaged software products, the Finance Minister has ensured in part that the services of the IT sector meet the requirements of the demanding international customers.

Upinder Zutshi, Managing Director, Infinite Computer Solutions India Ltd

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