This years budget is unanimously being called populist. IT companies in India too seem to agree with the common view that Budget 2008 is not for the Dalal Street but for the common man, in the real sense; a budget for a farmer as much as a corporate employee. There is also no denying the fact that the budget would have a positive impact on the IT industry, albeit indirectly. With the tax relief given under the new slab, affordability of the common man will increase, pushing consumerism.

Industry opinion leaders believe that fund allocation to the tune of Rs 350 crore toward e-governance initiatives would be a boom for the industry in the coming years. But barring that, the budget has not been applauded by the ITeS sector, with major expectations left un-addressed. The inclusion of employee stock option plans under the Fringe Benefit Taxignoring the industrys demand for removalmight be debilitating to overall growth. The counter-productivity that the MAT imposition on the IT industry may cause, and the possible increase in the cost of IT, thanks to levying 12% service taxes on customized software and higher excise duties, have raised some serious concerns, the SMBs, especially, being at the receiving end.

e-Gov on the Priority List
The IT sector is jubilant as far as the allocation of funds to e-governance initiatives are concerned. The government has shown its keenness on bridging the urban and rural digital divide. Sanctioning one lakh broadband connections in rural areas, allocations of Rs 75 crore for common services centers and Rs 275 crore for state data centers will take the benefits to the grass root level.

The government has also giving impetus on infrastructure development like power and construction of roads, rural development, healthcare and employment, with a promise to build an environment for balanced growth. All the above e-gov initiatives will eventually make the domestic market attractive for the IT industry.

S Mahalingam, CFO and ED, TCS, says, The budget has highlighted the big opportunity for IT in the domestic market with the decision to allocate additional funds towards the state wide area networks, common service centers, data centers as well as smart cards for benefits management like PDS scheme at the state level.

He is also happy that the budget has payed attention to infrastructure development. The Rs 14,000 crore Rural Infrastructure Development Fund, emphasis on rural roads, etc, would strengthen the much needed tertiary backbone of the economy and create greater global confidence in India. According to Mahalingam, this would also go a long way in ensuring inclusive growth to spread the benefits of prosperity to wider sections of the society.

Krishan Dhawan, MD, Oracle India, says, Given the positive growth trajectory rate, there was no need for a dramatic change in the budget. It is good to see the fiscal deficit under control. I would first like to congratulate the finance minister for boosting the share of education and healthcare, both essential for overall development. Proper training and skill sets need to be imparted to our youth, if India is to attain and maintain top rank in the global digital economy. The increased budget allocation for e-governance at the center and state levels is a step in the right direction.

Moon B Shin, MD, LG Electronics, says, Budget 2008 would result in the upliftment of the economy, as steps have been taken towards improving the lifestyle of farmers. This would further create additional markets, which is an encouraging sign. This budget will provide an impetus to inflation control. Specific to LG India, there will not be any major changes in terms of product pricing, as there has been no major relief in duties.

Full credit to the Honorable Finance Minister in balancing various competing requirements and making some bold announcements S Rajendran, CMO, Acer India	The budget has highlighted the big opportunity in the domestic market by allocating additional funds toward SWAN, CSC and data centers S Mahalingam, CFO and ED, TCS
Smaller companies should have been given tax relief to counter the impact of a sharply appreciated rupee. Also, increase in excise duty for packaged software will lead to increased piracy Kris Gopalakrishnan, CEO and MD, Infosys Technologies	Investment in education for not only spread but also improvement of quality is encouraging Manoj Chugh, President, India and SAARC, EMC Corporation

The Darker Side: Tax Chaos
The contribution of the IT industry to Indias economy is substantial, especially the amount of money contributed to the government in terms of taxes and receipts. As the decision pertaining to the STPI scheme is clouded with confusion and the government is not opening its cards on the extension of the scheme, entrepreneurs in the SMB segment are in a dilemma. As a result of this they may be deprived of the concessions they are getting under the scheme.

India Inc, including the IT industry, wants the Fringe Benefit Tax to go completely, but this year too that was overlooked. Rather, the inclusion of ESOPs under FBT will add to the challenges being faced by the IT industry in attracting and retaining talent. The imposition of Minimum Alternative Tax (MAT) on the IT industry is another problem that has not been properly addressed in the budget.

MAT would especially impact the SME that are not paying any tax till now and constitute a large proportion of the industry. MAT would upset their business and investment plans. Also where the IT industry was expecting a tax holiday, MAT would prove to be counter-productive. Although the reduced tax burden has come as a sigh of relief for most individual players, it could have boosted the performance of the IT industry if a similar treatment was given out to corporate taxes.

In the case of IT hardware, custom duty has been restricted to only a few items. PC have to become more affordable to pave the way to bridging the digital divide, and this can be achieved only by exempting all IT hardware from customs duty. Customs duty would also lead to an unchecked growth of the grey market.

Som Mittal, president, Nasscom, says, The real disappointment is the absence of any discussion on the extension of the STPI scheme. This is extremely critical for small enterprises and the BPO industry, as well as for the expansion in tier-2 and tier-3 cities, as they are unable to avail the benefits of the SEZ scheme. The STPI benefits are available till March 31, 2009 and we are hopeful that through continued dialog, we will be able to convince the government to consider our proposal and help India garner the large opportunity in this sector.

There is the other issue of imposing service tax on customized software and higher excise duty on packaged software. This would increase the cost of IT usage, especially in the domestic sector. The computer hardware industry would remain unaffected, with the excise duty reduction from 16% to 14%. The supply chain has been made simpler by the announcement of the uniform Central Sales Tax (CST).

Shin of LG Electronics though welcomes the relaxation in excise duty, says, For a manufacturer, as we are exposed to competition from the ASEAN countries, some relief on raw materials and intermediate goods would have made our industry competitive, globally.

Som Mittal of Nasscom also says that the imposition of a 12% service tax on customized software and higher excise duty on packaged software could lead to increased cost of IT and could slow down the IT usage in the domestic sector. This affects, in particular, small and medium enterprises who have just started deploying IT.

According to Kris Gopalakrishnan, CEO and MD, Infosys Technologies, The budget has not been positive for the IT industry. Smaller companies should have been given tax relief in this budget to counter the impact of a sharply appreciated rupee. The increase in excise duty for packaged software will lead to increased piracy.

S Mahalingam, CFO and ED, TCS, also feels that by being under the service tax net will increase the cost of technology for users and push up the cost of automation not just in the private sector but also in the public sector and government departments. Another factor that could push up costs for deploying technology is that customs duty for importing packaged software has been increased from 8% to 12%. This would increase the input cost across industries, not just the IT industry.

According to S Rajendran, CMO, Acer India, Though some relief has been mentioned on duties for some hardware items, at this time we are not clear what these are. We will have to wait till we are able to see the particular notifications. We wish there was relief in the budget to reduce IT hardware cost and make it more affordable.

A Knowledge Nation
The government has done a laudable task at strengthening the education system. In this sector, the government has allocated Rs 13,100 crore to the Sarva Shiksha Abhiyan (SSA). Till now, the focus of the SSA was to provide quality basic education and opportunity for improving human capabilities to all children, in a mission mode but now the focus will shift from access and infrastructure at the primary level to enhancing retention, improving quality of learning, and ensuring access to upper primary classes. The education sector needs greater attention as the future of our youth, and in turn of our country, depends up good quality of education. Announcements for IITs, IIScs and high schools for secondary and higher education shows the governments commitment toward quality education and growing the talent poola challenge facing the IT industry as well.

S Rajendran of Acer India says, Full credit to the finance minister in balancing various competing requirements and making some bold announcements that benefit the important sectors of education, health and agriculture. We welcome increased allocation to SSA and education, and expect this to have a positive result for us. In the same context, we welcome one lakh rural information centers, allocations for SWAN, and the state data centers. It is a pointer that the finance minister appreciates the importance of deeper penetration of IT as a leveraging force for economic development.

Mahalingam of TCS says, The good news for IT and the people-intensive industries is the incentives to education with 20% more outlay. The Rs 85 crore scholarship scheme for students pursuing science education is good news for IT, and especially for TCS, which has been tapping into the science streams through its own from science to software transformation program for students.

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