Indian IT steps beyond sops, tax incentives

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SummaryThe Indian information technology industry with a size in excess of over $100 billion is now at a stage where mere tax incentives or sops would not actually spur the sector.

The sector is looking at the Budget that can streamline regulatory procedures and improve investment climate needed for next level of growth. The industry is seeking certain long-term directions from the government especially in areas such as investments into research & development, entrepreneurship and innovation which would result in garnering some crucial advantage for the technology sector in the country

The Indian information technology (IT) industry with a size in excess of over $100 billion is now at a stage where mere tax incentives or sops would not actually spur the sector. Instead broad policy initiatives in the forthcoming Union Budget in addressing issues like infrastructure, e-governance or health will have a longer term bearing on the sector.

The IT industry in India which grew very rapidly over the last two decades given its inherent strengths of cost competitiveness with a large technical talent pool, not to forget the favourable tax regime, is now at a crossroads as the changed economic scenario has called for new business models to meet different kinds of demand.

Partha Iyengar, country manager —Research, India, Gartner, said, “The IT industry has reached a tipping point in terms of scale and maturity today, where the issues it is grappling with as the next impediment to growth do not have much to do with granular industry level issues like taxation, ‘sops’ etc. The issues that will enable or inhibit the next level of growth for the industry have to do with fundamental issues like infrastructure improvement, education, skills development, streamlined regulatory procedures and improving the investment climate. Therefore I would look at an increased focus on budget allocations or clarity of future direction of the government on these macro issues as the new indicators for the future success of the IT industry.”

Today, industry is seeking certain long-term directions from the government especially in areas such as investments into research & development, entrepreneurship and innovation which would result in far reaching advantages to the technology sector in the country. In its pre-budget wish list, Nasscom has focused on issues related to enabling entrepreneurship, enhancing global competitiveness of the IT-BPM industry, helping India emerge as an innovation hub and meeting growth and development goals.

Nasscom President Som Mittal said that for enabling entrepreneurship the compliance burden has to be eased through the removal of unfair levies and the royalty on internet downloads, which will act as a barrier to usage, needs to be

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