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February 14, 1999
One sector actually looking forward to this 'hard' budget is information technology.
IT Minister Pramod Mahajan has promised the techies "maximum possible tax benefits" and they aren't complaining that the Vajpayee government has emphasised on the importance of their sector.
The IT industry is expecting a stable and transparent tax regime from Finance Minister Yashwant Sinha in the coming budget.
Dewang Mehta, president, National Association of Software and Service Companies, says, "India has already committed, under WTO [World Trade Organisation] rules, to lower taxes on IT by 2003/4 (April-March). But the minister has said that the government will try and hasten the process and try to find a way to speed up mergers of companies.
"This is good news because the Indian IT industry is growing at a rapid rate -- the Bangalore experience is there for all to see. There are dotcom companies mushrooming at every corner. It's time the government came up with a transparent, and of course stable, policy."
India's information technology firms are witnessing swift revenue growth, aided by a booming computer software services sector. In the year 1999-2000, NASSCOM expects the IT industry to post revenues of Rs 357 b ($ 8.18 b), up from Rs 247.8 b the previous year. A NASSCOM report said India`s computer software services firms will continue to contribute over 60 per cent of the IT sector's revenues in 1999-2000.
India's infotech firms have, in recent years, received special treatment from the federal and state governments in the form of lower taxes, simpler policies and end to state monopolies in the sector. Industry representatives maintain that India needed to build crucial infrastructure such as telecom and power to boost technology firms.
NASSCOM Chairman Atul Nishar says, "India`s telecommunications infrastructure have to be developed into a state-of-the-art system with higher capacities and larger bandwidths. The report of a panel on venture capital funding, formed by market regulator Securities and Exchange Board of India, should be implemented soon. The group had suggested easier norms for offshore venture capital investors."
Nishar adds, "The government should do away with the need for Indian courts to approve mergers of companies because that caused long delays."
The NASSCOM-McKinsey report on the Indian IT sector forecasts a continuing growth rate of 50 per cent. Says Mehta, "Even with a higher base of Rs 158.9 billion, the size of the Indian software industry during 1998-99, the industry will be able to grow by more than 50 per cent and could register revenues of Rs 245 billion in 1999-2000. This will include Rs 172 billion in software and services export and Rs 73 billion in domestic market revenues."
NASSCOM also indicates that due to increased government spending in IT in the domestic market, as well as increase in sales of personal computers, the domestic market will fetch a record revenue of almost Rs 110 billion in 2000-2001. This would be almost a record 50 per cent increase in the domestic market.
According to the NASSCOM report, exports will continue to grow in 2000-2001 and focus on e-commerce, IT enabled services and ERP. Exports during 2000-2001 will almost touch Rs 250 billion, it stated. This means that even during the next financial year, exports would continue to grow by almost 50 per cent.
It is projected that during 2001-2, the Indian software industry would be worth close to Rs 555 billion. At current levels of foreign exchange, this translates to almost US $ 13 billion industry in a year.
It may be recalled that in 1998-99, India exported almost 61 per cent of its total software exports to the US. Exports to Europe stood at 23 per cent and more market opportunities were discovered in Japan, South Africa, Canada, France and the Middle East.
With the progress the industry is making, industry leaders aren't worried that the government will do anything to hobble them. Killing a golden goose always has painful repercussions.
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