If you leave out the whopping Rs 60,000 crore write-off that a vote-hungry government has promised to farmers in India, and the negative impact that the lack of policy direction and the service tax extension to software will have on the IT and BPO outsourcing industry, one could say that the finance minister has presented a marvelous budget. With a conscious shift in expenditure toward health, education, and the rural sector and enough steps in the form of duty reduction and tax reduction to boost domestic consumption, and hence investments, all seems bright and sunny. Substantial outlays in education, with more IITs and higher education universities announced, will help boost the availability of talent and hopefully elevate the levels of research that are abysmal at present. The focus on vocational education, if implemented well, in conjunction with the ITI schemes, is expected to alleviate the paucity of skilled manpower that is plaguing most growth sectors. Wide ranging public-private partnerships in education can see the beginnings of the long-awaited total reform in the education sector and provide succour to resource starved sectors like retail, healthcare, and BPO.

So, why the angst in the IT and BPO industry? The double whammy of service tax on customized software purchases, that will make the nascent domestic demand relapse into inertia all over again, and the lack of any clear direction on the continuing of 10 A/10 B benefits under the STPI scheme have left many insiders puzzled. The cause behind the uncertainty of the IT and BPO sector is the fact that the development of entrepreneurial startups and the spread of employment to smaller towns in the country will be derailed if the STPI scheme does not continue beyond March 2009. The weaker profitability of BPO units, already shaken by the change in dollar-rupee conversions, will make the industry less attractive to global customers, with competing countries offering every incentive under the sun to move their business there.

Ganesh natarajan

The BPO industry, in particular, has had less opportunity to enjoy the benefits under the STPI scheme than the older IT sector and it is important for the powers to recognise that this is an important sector with the potential to transform the national landscape by taking jobs to every corner of our country. Disgruntled captives and large outsourcing firms are already making a lot of noise about taking their businesses to other countries

As we near the end of one more financial year with the threat of both a global slowdown and a potential backlash against outsourcing hovering like a dense grey cloud on the horizon particularly in the US, taking into account the Obama campaign which is not very encouraging the imperatives for all the export sectors of our industry are clear. The search for new products and services, and new markets to overcome any weakening of our traditional happy hunting grounds in the US, exploring new and more profitable models of delivering business and the continual watch over cost and utilization, hovers like an eagle to protect profits and jobs in the event of any unanticipated shifts in the dollar or any other hurdles that may come in the way of a continuing run to success for the industry.

The good news is that this is no longer a fledgling industry and the entire eco-systemlarge and small companies, educational establishments, local and state governments, financing entities, and, of course, Nasscomis ready for the challenges of the future. Subjectively speaking: We shall prevail!

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