Union Budget 2012: Reactions from the IT Industry

IT News Online,

Naresh Wadhwa, President and Country Manager, Cisco India & SAARC:
The government’s focus this year on enabling “faster, sustainable and more inclusive growth”, through the twelfth five year plan is welcome.

Scaling up of the Aadhar project as well as enabling it to support PDS will greatly benefit the common man. Leveraging technology to transfer subsidies directly to beneficiaries is definitely a positive step.

The budget lays considerable focus on infrastructure and rural development. The increased infrastructure spending at Rs. 50 lakh crores, Rs. 10,000 crores allocated to NABARD for refinancing regional rural banks and the plan to set up ultra small branches under the ‘Swabhiman’ campaign is encouraging.

Quality healthcare is a crying need so it’s good to see the NHRM provision being increased from 18,115 crores to 20,822 crores. Measures to boost both basic education as well as skill development initiatives through an allocation of Rs. 1000 crores for National Skill Development Corp. is laudable too.

On the industry front, setting up a Rs. 5,000 crores venture fund for MSME sector is a welcome move, given that SMEs employ a sizeable population. We are also hoping that the GST roll out is on track for August this year.

Overall, it is heartening to see that the budget addresses some key areas like education, healthcare and infrastructure which are critical to national growth and development.

Partha Iyengar, Vice President, Distinguished Analyst, Regional Research Director, Gartner India:
The budget overall is a fairly ‘political budget’, with very little in the way of bold (or even timid) reforms to drive economic growth. Given the current economic climate it seems to be focused on not upsetting anyone (read political ‘allies’) too much, by not trying to please anyone too much. The only slight silver lining is the verbal emphasis and some increase in outlays to the infrastructure sector, but, given the massive requirements here, even this is likely to be seen as too little too late.

From an IT sector perspective, there is nothing specific that is either a strong negative or positive. Some of the key areas of concern for the industry, like skills development have not received any major focus

Overall would rate the budget as a 3/10.

Hanuman Tripathi, Group Managing Director, Infrasoft Technologies Ltd.
The Finance Minister has announced no benefits for corporates. With global downturn, IT sector should have been given some benefits so as to boost the segment. The increase of service tax from 10% currently to 12% will cause further burden. Delay in GST implementation is merely increasing problems. It’s nice to see though that the budget is friendly to the middle class to some extent with benefit of Rs. 22,000 on taxes on an income of Rs. 10 lakhs, interest income from banks tax free up to Rs. 10,000 and Income Tax deduction of 50% on investments of up to Rs. 50,000 in saving scheme named after Rajiv Gandhi.

While the economy is not growing at the proposed pace and global economies are not in good shape raising continuously the cost of living by hike in purchases of retail and food items, restaurants, travel, etc. is going to only make life difficult for everybody especially for the middle income segment. There is a commitment of government to IT enable several sectors like LPG distribution, payments for government schemes and continued investments in Aadhar (UID), which is heartening to note as it will create more projects in domestic IT business.

All in all, the relevance of doing Annual Budgeting exercise by putting so much of government focus and expenditure is increasingly getting lost as no substantial landmark changes have come forth in budgets for years now; something that will boost corporate performance or bring prices down in the country.

Rajesh Nagpal, MD, Service Uncle, Austrlalia: Looking India from outside as an NRI, I always used to feel that India has a great potential of becoming the biggest business hub of the world. We have everything be it natural resources to human resources to honest capabilities! However, the only problems were ‘lack of good infrastructure’ and ‘the black money’.

After looking at this year’s budget, I’m quite pleased to see that both these issues have been recognized and addressed by the Finance Minister Pranab Mukherjee. His two statements: “Lack of infrastructure is a major constraint in economic growth” and “Government is serious in tackling the menace of the black money. Special cells to be set up to track black money” provide the much needed kick-start to put Indian economy in fast-track.

Kudos to the FM on this front. But, I’m sure he’ll have some sweat flowing while explaining reasoning behind increasing service tax and the excise duty. My business in India, being a Service Industry one, will definitely see an impact with this 2% Service Tax increase (from 10% to 12%).

Dr. Ganesh Natarajan,President and CEO, Zensar Technologies: Nothing much in the budget for IT and not enough focus on incentives for skill building or Tier 3 cities. The announced advance pricing agreement may help transfer pricing decisions and the $1 billion venture capital fund focused on Micro, Small and Medium Enterprises (MSME) is good for entrepreneurship.

Dinesh Agarwal, Founder and CEO, IndiaMART.com:
We welcome the Union Budget 2012-13 presented by the Finance Minister (FM) today.

While the FM called for speedy reforms today, the Budget did not indicate much in that direction. The key highlight, however, was ‘GST’, which is now expected to be operational by August 2012. We hope that this timeline is met as it would certainly help address the multiple taxation issue faced by the MSMEs currently. We had also expected some effective mentions to simplify taxation and also consolidate multiple departments to allow better compliance by MSMEs. This still remains to be looked at by the government.

Another positive for MSMEs in this budget was allocation of Rs. 5,000 crores to SIDBI for venture fund, which would enhance equity availability to MSMEs. Exemption of capital gains tax from sale of property when proceeds are used for investment in SME would also help augment funds for SMEs to a certain extent.

The fillip to handloom, powerloom and leather clusters is seen as a positive move for growth of small enterprises in these sectors.

With the manufacturing sector facing deficit in skilled manpower, the FM’s proposal to provide weighted deduction for expenditure on skill development will help bridge some gap.

Also, the move to raise the turnover limit for compulsory tax audit for SMEs to Rs. 1 crore from Rs. 60 lakh would also bring relief to many SMEs.

We believe that there was a scope for bolder announcements for MSMEs, which could have brought a sea-change in their productivity and growth by eliminating the challenges faced by them.

Vikas Khanvelkar, Managing Director, DesignTech Systems Ltd.:
There is nothing exciting or new in the budget for IT enabled Industry. Increase of 2 % in service tax and Excise duty is bound to affect MSME industry adversely. This will put further pressure on already sluggish Auto and manufacturing segment and in turn will affect their MSME suppliers adversely.

Introduction of Goods and Services Tax (GST) from August 12 is a welcome indication provided Government does not slip on this new date like the earlier promises.

Akshay Mehrotra, Chief Marketing Officer, PolicyBazaar.
This year’s budget has been a quite a non-event and not aimed at boosting fiscal consolidation, food security or DTC. It will be difficult for the Finance Minister to keep the fiscal deficit at 5.1%. The highest saving possible will get around Rs. 22,000 more in your hands, but this will be nullified with the increase in service tax and inflation.