India's Economic Prowness Can Win Globle Customers
Folling is the response from Eddie Chandhok, President Global Delivery Organisation, Infogain Corporation on the up-comming budget 2009.
CXOtoday: Pranab Mukherjee had admitted in the VOA that the global economic scenario is not very encouraging. Considering this, and coupled with the regular Obama rhetoric against India, what should be the incentives the IT sector is expecting from the new FM?
India should leverage its economic prowess to oppose the protectionist measures in overseas markets. The $50 billion industry has been facing a severe slowdown in the US and the UK - which together account for nearly 80 per cent of its export basket which has left so many people jobless as a result Obama’s reaction was quite obvious. However I certainly do not think that it is really going to make much difference on a bigger scale. We are still seeing lot of companies still coming to India with much bigger projects and setup as compare to earlier. We just need to ensure the world especially to US that outsourcing can be the only reason by which companies can grow fast and eventually overcome from this downturn blues. We just need to strengthen our economic and political relations with rest of the world.
The industry has for long demanding extension of STPI? It has been promised in principle. Do you think that a year’s extension is enough?
Industry at least needs five-year extension of the STPI scheme. The scheme is set to come to an end on March 2010. Companies will still need some time to make the recovery of losses incurred in past 18 months moreover it will enable India to effectively compete with other rival offshore destinations which are doling out various tax sops to encourage investments.
The government has also promised to give a boost to the fab-labs. But considering the luke-warm response India received from global semi-conductor industries, what is the industry expecting from the government in this budget?
Tax exemption, relaxation in export duty and various subsidies in raw material will be needed. Also a relief package will certainly result in improving this sector.
The government is spending a considerable amount of money on e-governance. While the infrastructure is being set, there are a lot of reports where the projects have failed? Is an audit policy in the offing? Does the industry want some kind of an audit policy? Or what kind of transparency are we looking at?
Government should embark on a $5-10 billion investment program in e-governance initiatives. Simultaneously they should have one governing body comprising of both private and government officials that will monitor the effectiveness of these programs initiated by the government without any influence. This body will be responsible for the failure and success of these programs and yearly audit of each program will give us the real insight of the program rather than waiting for next government to come after 5 years and then disclose these matters. Moreover to ensure the smooth running of this governing body it should directly report to the PM.
What exactly are your expectations from the finance minister?
We have a stable government finally after such a long time I think now it has to play a significant role in making India a stable economy. The Indian IT sector wants to sustain industry’s growth through extension of tax benefits, particularly for SMEs; removal of biased and abrupt taxes like FBT, Service Tax rates. They require a uniform policy environment that enhances India’s competitiveness and will attract foreign investment .
My expectations are not restricted for IT only as other industries has a direct impact on us since we have so many customers from non IT sectors. So I think govt. should continue giving relief packages to other sectors and eventually help these hard hit sectors gain their momentum back with a bang.
What are the measures you would suggest government take to improve competitiveness of IT exports?
The SME sector is also expecting the newly elected government to take steps to revive the export sector, which fell by 33% in March and April 2009. The export segment is demanding a hike in the drawback and Duty Entitlement Pass Book (DEPB) rates by 5%. In addition, the segment also seek government to exempt the exporters from fringe benefit tax (FBT)
Government can provide new Tax subsidies for service employees, so that cost to the company will reduce for the organizations.
Yes by providing direct tax subsidies like income tax to the service employees will surely reduce the employee’s cost to the company for an employee, especially in case of new recruitments.
Which other changes in regulation do you think can the government make that will help the IT-ITeS industry?
* The Government - armed with a decisive mandate - should focus on education reforms and infrastructure.
* It will have to restore GDP growth back to the 8-9 per cent, so that a larger number of people can benefit and more jobs can be create
* Funding support, export-incentives and rationalization of tax structure are required to help the sector sustain the growth momentum and compete in the global market
* Tough stand against growing protectionism by Barack Obama.
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