The Union Budget 2012-13: A Mix Bag

The Union Budget for IT placed in parliament by the Finance Minister, Pranab Mukherjee of UPA II government today tabled its third Union budget in the parliament. It was expected that the budget would be more political and less reformative. After, its dismal performance in just concluded state elections in five states, Pierre Audoin Consultants (PAC), the leader in consulting and analysis of Software and IT services (SITS) market believes that the government wants to save some of the must needed reforms for later, may be before the next general elections to be held in 2014. They believe that the FM has missed one big opportunity to re-establish the credential of the Prime Minister Manmohan Singh as a major reformer. Rather, he has made the noises laden with tax structure and fiscal consolidation. These noises just became an admission of the government’s hands being tied given the political compulsions.

As per Sandeep Nair, the President and MD of Emerson Network Power, with Excise duty increase; the required Stimulus for growth has been curtailed and would be inflationary. This puts pressure on the already slow manufacturing sector. Initiatives to bring down Subsidies from current 2.5% of GDP to 2% in 2012-13 and 1.75% in 2013-14 is welcome but GST & DTC reforms still not aggressively pursued as expected by the Industry and People. Another welcome aspect is the 12th Plan period promises 50 Lakh Crore Investment in Infrastructure with 50% private participation-implementation would still remain a major challenge.

As per area Vice President – India Subcontinent, Citrix Systems India Pvt Ltd, Sanjay Deshmukh, as a foreign corporation with an Indian subsidiary, the government’s plan to introduce tax reforms for the enactment of Direct Tax Code Bill is encouraging for us. The move to set up the GST network as a National Information Utility and operationalize it by August 2012 is also favourable for the industry. The budget has also recognised the role of technology in creating a citizen centric governance framework, reflected in the subsidy provided for Aadhaar tablet enabled payments for various government schemes in atleast 50 districts within next 6 months. This is particularly of interest to us as we at Citrix are helping customers to enable on-demand access to desktops, applications and data on tablets in their workplace which results in increased productivity.

He added, “There have been no mentions of clearing the ambiguity around treating software as goods (subject to VAT) or as service (and subject to service tax). We were also hopeful of revisions around the Minimum Alternate Tax (MAT) on SEZ as last year it saw the investments in SEZs going down. Amendments towards this end would have helped the industry create a conducive environment to attract both local as well as foreign investments into the country.”

As per Jagdish Mahapatra, Managing Director- India and SAARC, McAfee, this year, the Finance Minister has proposed a fair bill which is for the most part populist in nature. It bodes well for new investors and also creates a wonderful picture in the health, education, NREGA etc. sectors. For the IT industry however, this is a moderately encouraging bill and has made few strides in the development of the sector.

In the views of N. Chandrasekaran, CEO & MD, Tata Consultancy Services, the FM has presented a pragmatic budget with doses of good intentions for long-term growth but lacked short term punch to get growth going.

As per Dr. Alok Bharadwaj, Senior Vice-President, Canon India and President, MAIT. India has built a robust IT & ITeS sector, which has added enormous value to economic growth in last decade. Unfortunately we missed the buss here. We expected a budget that adds some fuel to our fire. Electronic and IT hardware manufacturing is another focus area being watched by the world as companies are looking at China, Indonesia, Thailand and Bangladesh. Although it was a subdued expectation after the visible domestic politics dynamics, yet we expected some reforms and simplification to get this going. Especially the excise duty hike might result in an inflationary situation. The announcements during this budget fall short and yet another year lost in making India take the industrialization 6 lane-highway route.”

As per Naresh Wadhwa, President and Country Manager, Cisco India & SAARC, this Union Budget is a good one. He welcomes the government’s focus this year on enabling “faster, sustainable and more inclusive growth,” through the twelfth five year plan.  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 crore, Rs 10,000 crore 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 crore to 20,822 crore. Measures to boost both basic education as well as skill development initiatives through an allocation of Rs 1000 crore for National Skill Development Corporation is laudable too.  On the industry front, setting up Rs 5,000 crore 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 & development.

To Rajesh Janey, President, EMC India & SAARC, it is a good budget, which emphasizes on the increased outlays on education with an emphasis of skilling the youth are necessary steps to leverage the demographic divided in the future and tap emerging opportunities in the areas of Information Technology such as cloud computing and Big Data. The decision to increase investment in Aadhar and leverage technology more in larger service delivery initiatives will also provide impetus to the domestic IT sector. Additionally, overall social development and improving India's competitiveness in the areas of manufacturing, research and innovation augurs well for the overall inclusive growth of the economy.

For Vsevolod Rozanov, President and CEO MTS India for your perusal and consideration, The Union Budget Presented for 2012-13 is not so encouraging because the increase in service tax from 10% to 12% would increase cost of ownership of a mobile phone. This becomes all the more significant for CDMA based mobile services which to a large extent services the telecom needs of customers who are at the bottom of the pyramid.