But the point is, the Budget has tried to offer differential tax treatment of various industries based on the country's comparative advantage in them. It was the economist Alfred Marshall who, in the first edition of his "Principles of Economics" pointed out the need for "a tax on those industries which show diminishing returns, and a bounty on those which show increasing returns." It is another matter that the economists' uneasiness with increasing returns led to that concept being deleted from the subsequent editions.

The rationale is to tax those industries which are declining, and to help those which have potential. There is yet another angle to helping IT. The Budget has precious little scope for capital expenditure by the government, especially if the defence component of capex is taken out of the reckoning. But in the US, the bulk of investment demand has come from companies applying IT to their businesses. That is also the root of US growth in productivity. The concessions given by the Budget to the infotech sector are aimed at spurring investment demand in the economy and productivity growth by companies getting wired. The sops may not be enough, but they are steps in the right direction.