The Indian economy is in a better situation and can achieve a 10% near term GDP growth. This opening statement of finance minister Pranab Mukherjee highlighted the optimism in the macro environment. The optimism is further fuelled by the fiscal deficit having met expectations. IIP figures are impressive and there is buoyancy in tax collection. The Budget proposal is clearly a reflection of the finance minister?s confidence in the improved economic management going forward.
Increased thrust in key areas like primary education, health, infrastructure, rural development, social sector schemes would fuel broad-based domestic growth. We welcome the focus on financial inclusion and the impact of all proposed measures to bridge the urban-rural divide. I see technology playing a key role in driving inclusive growth.
The IT industry is on a growth trajectory-the pace might be slower than in the past but the worst is definitely behind the industry. Recruitment has begun and companies are investing in infrastructure to meet the next phase of growth. In this environment, the IT companies did not want to see negative sentiments and the finance minister has not disappointed them. Increased focus on investments in SEZs to drive exports and boost employment would further fuel growth .
Clarity in the tax regime is a positive aspect of the Budget. The IT industry has been asking for the need to resolve the dispute between finance and commerce ministries over tax exemption for export profits from SEZs under Section 10AA dealing with SEZ benefits. After much deliberation, the finance minister has resolved the issue. This would remove all existing ambiguity and would lay out a clear guideline that would aid savings for IT companies.
We do not expect any major impact of the increase in MAT on export-focused IT outsourcing companies. However, small and mid-sized companies with a deeper domestic focus are likely to get impacted. Further, the STPI scheme was left untouched, which means that the tax holiday on STPIs would expire at the end of the current fiscal. This would significantly increase the tax burden on the smaller players.
The Budget clearly brings out the focus of the government on e-governance. The proposal to establish the Technology Advisory Group for unique projects to better monitor and manage ongoing and upcoming government IT projects is a good news for the country. Development and inclusive growth are the high points of the Budget. Technology would be a key element of the government?s vision for social transformation.
Views are personal