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Monday, March 4, 2002
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Price of IT products may increase, feel experts
Tribune News Service

VARIOUS companies reacted to the Union Budget 2002-03 in different ways. Here are the reactions of various companies

Nasscom

National Association of Software and Service Companies (Nasscom), the apex association for the software and service companies in India, welcomed the Budget proposals as one that consolidates the ongoing reform process, focuses hard on key infrastructure issues and recognises the need to strengthen agriculture and rural development. However, Nasscom is worried that inconsistencies in tax regime could hamper India's competitiveness in global markets. Phiroz Vandrevala, Chairman, Nasscom said: "We recognise that this provision is valid only for the coming financial year. However, such inconsistencies in the tax regime will affect the confidence of overseas investors in the Indian software industry; especially since other countries such as China, Ireland, Philippines are pulling all stops in providing incentives to attract FDI in this sector. Domestic companies will find it difficult to plan their future strategies and investments in light of the uncertainties created by inconsistent policies. Hence, we are confident that the government will withdraw this provision and abide by its commitments made to the fast growing, globally competitive software industry."

Adobe India

Mr Naresh Gupta, MD, Adobe India, commented that 10 per cent tax on the software industry is quite reasonable, as compared to other sectors in the economy that are paying much more. Adding tax burden on the software industry will not benefit the industry but Finance Minister needs to find ways to collect revenue for the exchequer. Tax burden does not change the competitive advantage; the Indian software industry has in terms of availability of high quality manpower at very low prices.

 


Compaq India

Mr Balu Doraisamy, Managing Director, said: "With none of the expected benefits of this Budget coming through, an increase in memory prices in the last three months and the falling rupee prices vis-à-vis dollar, we expect the price of IT products to increase in the coming days. Though the Government has indicated that the special excise duty of 16per cent has been reduced on a number of items, we need more clarity on the items to decide the impact on computer and IT products. Overall, a set of policies for the hardware and communication industries similar to the beneficial policies that allowed the Indian software industry in India to grow exponentially is still missing.

Motorola India

Mr. Pramod Saxena, Country Head, opined that this year's Budget is a balanced one with a clear focus on fiscal discipline that is growth oriented. "This is clearly reflected in the Government's commitment to promote investment in infrastructure and continue with second generation reforms, which Motorola believes will have a positive impact on India's GDP growth rates in these tough times. On the telecom front, Motorola appreciated the Government's outlook in recognising the telecom sector as an integral part of the infrastructure sector and a key driver of economic development in India. "We welcome the Government's decision to reduce the overall duty impact on the import ofmobile handsets. We believe that this will help control the grey market menace in India and benefit all - the government will be able to grow taxes from the sale of more legal handsets, consumers will get warranted handsets at economical rates and it will give an impetus for growth to the market.

ICICI Infotech

"I am of the opinion that the overall impact will be somewhat adverse effect by changing the dividend tax paradigm, apart from that there doesn't seem to be a clear direction as to how it will overall effect the countries economy," Mr Srinivasan, CEO & MD, ICICI Infotech said. "On the IT industry front, I think that the deduction available under Section 10A of Income Tax Act which has been reduced from 100 per cent to 90 per cent would result in a minor disadvantage for the IT industry. There are no significant measures announced for the industry, hence there is no noteworthy impact on ICICI Infotech as an organisation per se. The overall long-term implications of the budget are not very clear. In developed countries there is a general expectation of a stable tax regime, to enable the corporates to make long term plans and projections. Frequent modification of various elements of tax, excise and customs duties do not help in energizing the economy as it makes it difficult for companies to plan ahead predictably," he says.

BT Worldwide (India) Ltd.

Mr. Arun Seth - Managing Director, BT Worldwide (India) Ltd, said the Finance Minister has chosen to focus on the implementation of 2nd generation reforms announced last year, rather than making any positive announcements in this year's Budget. "It is surprising to find that at a time when the IT industry is going through a period of slow growth, the Government has proposed a reduction of tax exemption for software exports from 100 per cent to 90 per cent under Section 10(a) and 10(b) - even though this is applicable for the assessment year 2003-04, it will impact the profitability of all our software companies. He should however be complimented for the increased realisation and effort towards developing our core infrastructure sector via enhanced public expenditure in Power, Transport and Urban Infrastructure as this will help enhance the quality of the Indian Business experience. I also welcome the move to exempt cellular phones from CVD and the decision to layout a 75,000 km fibre optic network, as that will facilitate the availability of cheap bandwidth and give a further boost to India's growing IT-enabled services sector.

I-flex solutions

"Overall, this is an average Budget and not very exciting. On the other hand, it is not below expectations either. From the IT industry's point of view there are a few disappointments. The extension of tax holidays u/s 10A/10B have not come through, and there is nothing to acknowledge the rough times the IT industry is going through," Deepak Ghaisas, CEO- India Operations, said. However, a positive outcome of this Budget is that no fresh taxes have been proposed for the software industry, which ensures its continued growth. Among the top benefits introduced by the Budget is the flexibility Indian software companies will now enjoy in terms of investments abroad. Doubling the investment limit abroad to $ 100 million per annum through the automatic route from the existing $ 50 million and allowing overseas investments in joint ventures abroad by market purchases up to 50 per cent of the company's net worth will provide a boost to the growth strategy of Indian companies.

Cisco Systems

The focus on infrastructure, continued thrust on education and reduction in hardware duties augur well for India. Execution of these will be the key to success. Effective implementation will provide the much needed impetus for growth to the IT hardware industry. We at Cisco believe that the Internet and Education are the two key levelers. The Government's stated intention to broad base and encourage Education will go a long way in helping India build the skill sets required to become a knowledge superpower, Mr Manoj Chugh, President , Cisco Systems (India & SAARC), said.

HCL Perot Systems (HPS)

Ms. Padamaja Krishnan, vice-president of the company said: "This has not been a surprise since we had indication of it coming. Basically. this will impact the bottomlines of companies. This is also an indication that IT industry is coming of age and we need to stand competing on equal terms."

Hughes Network Systems India.

Mr Pranav Roach, president of the company, said that the FM has announced that, except for specified sectors, the FDI and FII investments will be delinked. Telecom is already a specified sector where maximum foreign investment (both FDI and FII combined) cannot exceed 49 per cent - and though it has not been specified whether today's announcement recommends any change in that policy but we do hope the FII and FDI investments for telecom will be delinked to help boost investment in this sector.

Vintron Informatics Ltd.

According to Mr Manish Aggarwal, Director, Vintron Infomatics Ltd, duty reduction in hardware items of 5 per cent is encouraging but the specific items have not been mentioned. It is not very clear at the moment which items are covered. Zero per cent duty on IT products till 2003 being extended to 2005 will give respite to the domestic hardware industry. This will also give time to the domestic industry to reach global standards. We do not see any major change in pricing for the consumers."

Aztec Software

Mr A. G. Muralikrishnan, Chief Financial Officer, asserted that the Union Budget 2002-2003 was an average Budget as far the IT Industry was concerned. "Restricting the deduction u/s 10A/10B to 90 per cent is definitely not a step in the right direction. The message so far conveyed to the IT industry is that 100 per cent deduction will be available till 2010. Investments that have been made based on this premise would be affected. Although 10 per cent of the profits being taxed are not so significant, it definitely sends a signal of uncertainty vis-à-vis the quantum of deduction for the subsequent years. On the other hand the Budget seems to have addressed the infrastructure sector. Commendable is the small beginning that has been made with respect to the reduction of Government workforce by 12,500.

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