Industry reactions on Union Budget 2010

February 26, 2010

Presenting industry reactions on the union budget 2010, sent by friends in the Indian PR community.

Jaswinder Ahuja, Corporate Vice President & Managing Director, Cadence Design Systems (I) Pvt Ltd
The 2010-11 Union Budget announcements will find broad-based appeal due to the provisions for social reform and increased allocation for primary education, health and rural infrastructure. Raising the tax slabs should positively impact consumption and as a result the overall economy.

Although there haven’t been any significant incentives or reforms for the IT sector, the tax reforms for R&D expenditure is a good step towards encouraging innovation in India across sectors, as well as in our national research bodies. The proposal to simplify the current foreign direct investment (FDI) policy is also a positive step.

This budget reflects India’s increasing commitment to environment sustainability and the raging issue of climate change. The focus on clean energy investments – with the increased allocation towards renewable energy and the setting up of the ‘National Clean Energy Fund’ for funding research in clean technologies – is a welcome measure.

For the semiconductor and solar industry in India, the proposal to set up solar, small hydro and micro power projects in the Ladakh region of Jammu & Kashmir seems encouraging. Significant budgetary allocations towards the Unique Identification Authority of India (UIDAI) project is likely spur investments in smart card technology in India. Other steps that stand out for the semiconductor industry include the reduction of Central Excise duty on LED lighting and the CVD tax exemptions on all medical equipment.

The reform process and policy announcements by the government are no longer just an annual exercise but a continuous, evolving process and we expect that other measures will be announced through the year that are take into consideration, the recommendations put forth by the ISA (India Semiconductor Association).

Tiger Ramesh, CEO & MD, Vignani Solutions
We welcome the Finance Minister’s acknowledgment of LEDs as a highly energy-efficient source of lighting for outdoor, indoor and street lighting and applaud the government’s decision of lowering the Central Excise duty from 8 percent to 4 percent ,as this will accelerate adoption rates for LEDs by reducing the capital expenditure for the end-users. This encouragement of the LED industry is significant as we expect the market share of LEDs to rise to 15-30 percent of the overall lighting industry by 2014 from a current 2-3 percent market share. We are actually on the threshold of a revolution in the Rs 10,000 crore Indian lighting industry!

The launch of the National Clean Energy Fund is also as per our expectations as we have always requested government’s support for funding research and the support of innovative projects in clean energy technologies. These two steps can act as important catalysts for energizing the LED market in India as well as stimulating R&D in clean energy technologies in India.

MAIT
MAIT, the apex body representing India’s IT hardware, training and R&D services sectors, welcomed the thrust given in the Union Budget towards sustaining the national economic growth and making it inclusive. The industry body expressed satisfaction for the thrust given to infrastructure development, upliftment of the rural economy and significant outlay for promotion of the social sector, especially education and healthcare. Further, it also appreciated the focus in Budget on New and Renewable energy and announcement of proactive measures for environment conservation.

Congratulating the Union Finance Minister, Pranab Mukherjee, Vinnie Mehta, Executive Director, MAIT, said: “We are glad that the Hon’ble Finance Minister has unveiled the roadmap for GST with a definite date for implementation i.e. April, 2011. Unification of the rate on excise duty and the service tax has been a step in the right direction towards implementation of the GST. The rate of service tax as well as that of excise duty will now be 10 percent. This will also help mitigate the issue of CENVAT overflow for manufacture of IT products in the country.”

Elaborating on the outcome, he added: “Exemption of Special additional Duty (SAD) on pre-packaged goods for retail is also a welcome step as refunds for SAD were not forthcoming. However, to sustain hardware manufacturing in the country in the long run, it is critical that SAD on the input components be exempted as well.”

“It is heartening that the Hon’ble Finance Minister has recognised the strong potential of the electronics industry and its role in energy generation. In this regard, the announcement of concessional customs duty of 5 percent on machinery, equipment etc. for setting up photovoltaic and solar thermal power generating units is welcome”, added Mehta.

“Lastly, MAIT welcomes the setting up of the Technology Advisory Group under the chairmanship of Mr Nandan Nilekani for monitoring effective IT implementation in projects of National eminence. Timely completion of IT implementation in Government projects is not only critical to the growth and development of the country but also essential for delivering services to the citizens”, mentioned Mehta.

Some of the other noteworthy outcomes of the Union Budget 2010-11 are:
* Extension of weighted deduction on expenditure on in-house R&D from 150 percent to 200  percent.
* Exemption from basic customs duty, CVD and SAD on parts of battery chargers and hand-free headphones for the mobile phone industry until March 2011. This will enable backward integration in the sector.
Amar Babu, Managing Director, Lenovo India
The Government’s Union Budget 2010 underscores the focus on development, especially on infrastructure, rural development, urbanization and social welfare, aiding India’s development and further stimulating the vital industrial sectors. The attention on e-governance with the UID project and the Technology Advisory Group indicates the Government’s continued move to leverage Information Technology in critical projects.

It is also setting an example by generating thrust in the renewable energy sector. Spends allocation in the SME sector is welcomed, as that will allow for the sector to invest in IT for productivity and competency. Assigning GST will help clarify pricing norms and duty structures across the board. The budget concentrates on the sustained growth and momentum in the industry, and is welcomed.

Padmaja Krishnan, director, Sales and Marketing, CSC India
There is good focus on the banking sector as more banks will be encouraged. The budget is also a step in strengthening the Manufacturing sector. Both banking and auto stocks have led the rally as the stock market gave a thumbs up to the Union Budget 2010-2011. The allocation for the power sector has also increased by more than double. The National clear energy fund for funding research and innovative projects in clean energy technologies is a good initiative too. Overall, to me, the budget looks good and I hope all this focus in these sectors will also mean a share in the IT pie.

NASSCOM
Pramod Bhasin, Chairman, NASSCOM says: “We are delighted that the Finance Minister has recognized the key role our industry can play in driving technology led inclusive growth across the country, apart from directly contributing as an employment generator and foreign exchange earner. The announcement of the Technology Advisory Group under Nandan Nilekani, automation of central excise, GST and commercial taxes will enable the vision of citizen centric governance. Our industry will partner with the government to drive inclusive growth within India, while continuing to be the leader around the world in IT and business process solutions.”

Som Mittal, President, NASSCOM says: “There are numerous positives for our industry in this budget, particularly on simplification. The removal of anomaly in Section 10AA of the SEZ Act and the Finance Minister’s reaffirmation on the importance of SEZs will help the industry to take forward its SEZ plans across the country. The enhanced deduction on R&D investment will propel greater thrust on innovation and IP creation helping India to realize its vision of being the global R&D services hub.”

He adds: “The reduction in personal income tax will greatly benefit the employees in our industry who will help to drive both enhanced savings and consumption within India. At the same time, the clarification on duty applicability for pre-packaged software as well as service tax refunds will provide the much necessary simplification of policies.”

While the overall the budget is positive, we are disappointed with the increase in MAT which will be a burden on small and medium businesses who are still struggling with the impact of the global recession.

There was also no move toward announcing parity of incentives between the STPI and the SEZ scheme which is again necessary for small companies and development of tier 2 and tier 3 cities. In line with our recommendation, the IT Taskforce formed by Department of Technology (DIT) had also strongly recommended that the STPIs be brought at par with the SEZs.

The tax benefits under the STPI Scheme are available till March 31st, 2011 and we will engage with the Government and through the Ministry of IT to represent for an equitable benefit to the SME sector.

Sandeep Menon. Country Head – Novell India
At a broad level, I think this budget reflects the governments confidence in the Indian economy. I am particularly please to note that there has been no knee jerk reaction to withdrawing the fiscal stimulus, as I don’t think the time is right yet. The increased outlays to Urban development, RRBs and Clean energy are steps in the right direction. A fiscal deficit target of 5.5 percent is not too bad. All in all, I would call it a pragmatic budget. From a packaged software industry perspective, it would have been good to see a move towards rationalization of levies and taxes. But we’ll perhaps need to wait and watch how the GST rollout progresses, for that issue to be addressed.”

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