The grey market will be further encouraged and there will be an increasing pressure on the hardware manufacturers. This will lead to reduction in government revenue. Also, the government has not announced any incentives for manufacturing IT products within the country.

Infosys Technologies Ltd deputy managing director S Gopalakrishnan endorsed this, saying: ``Overall, for the capital market, it is a favourable budget because the capital gains tax has been reduced from 20 per cent to 10 per cent and also the tax proposals for the mutual fundindustry.''

But Compaq India managing director Som Mittal has a different story to tell. He said the finance minister had managed to give something away with one hand, and take it back with the same. ``In the case of infotech industry, this is absolutely true. The allowing of writing down Y2K expenditure as revenue is the only bright spark in what is otherwise a bleak budget for the information technology industry,'' he added.

``Though we welcome the budget, the actions have not been bold enough. Given the strategic importance of the IT industry, we strongly recommend that excise duty for IT products be charged at the lowest rate of 8 per cent. The tax concessions on expenses incurred on addressing Y2K problem are a belated step in the right direction,'' Intel India director (South Asia) Atul Vijaykar said.

B Rama Raju, managing director of Satyam Computer Services Ltd, said the proposed rationalisation of transaction cost involved in export transaction is a welcome step and should help boost exports.The measures announced on mergers and acquisitions should create a congenial investment climate in the country, he said.

The Finance minister's move to recognise all expenditure incurred by IT companies for being Y2K compliant as revenue expenditure is a welcome step, Rama Raju said. The institution of national award for corporate governance, the forte of IT companies, is also a welcome move, he said. Pentafour Software & Exports chairman and managing director V. Chandrasekaran believes that the government has lost a golden opportunity to attract massive NRI investments into the country by not giving them dual citizenship status.By giving them the status and charging a fee of $ 1000 per year for renewal would at once bring in anywhere between $ 5 to 10 billion every year, he said speaking to the Financial Express on the budget. Such restrictions as they must stay for a minimum of 180 days in the country to keep the NRI status must be removed, he feels.

He said the IT sector will get a boost with therationalisation of excise duties for various products. For example component parts which attarcted duties raning from 10 to 40 per cent will now have only 5 per cent duty. Similalry duties for CD-Roms have been cut to 5 from 10 per cent.

Again companies doing multi-media work can claim 80 HHC benefits for content preparation which was not earlier allowed. Such content preparation for films, animation and special effects has lot of expenses involved and the tax benefits can be claimed for such expenses, he said.

Chandrasekaran was however unhappy that no initiatives have been taken by the budget to boost computer education in schools and colleges. The goernment could have given corporates some tax benefits for companies which choose to invest in computer education and run such schools/colleges.There is no boost in the budget for the IT indsutry, according to Future Software P. Ltd's managing director K.V. Ramani who is a member of Tamil Nadu IT Task Force and also an activist of the Madras chapter ofNasscom.""This is a lassi in lota budget" Ramani said reacting to the budget. While measures to provide incentives for rural development, creation of water-sheds etc are welcome, " a major disappointment" he said is there are no steps to boost the T sector.