For the IT sector, much has been expected to ensure that India’s leadership position in global sourcing is retained.

With global economies continuing to be slow and competitors such as China, the Philippines, Latin America and Eastern Europe nipping at the heels of all software exporters, clear continuation of the SEZ benefits and providing incentives for Tier-2 and Tier-3 cities and product entrepreneurs would help in accelerating exports. The Budget has been silent on this although benefits were announced for insurance companies investing in smaller locations.

The second expectation was the Government would announce confidence building measures to ensure that customers continue to give India the lion’s share of their offshore allocations whether it is through their own Global In-House Centres or enhanced work with third party solution providers from this country. Transfer pricing clarifications and the implementation of the Safe Harbour provisions enacted in 2009 would ensure that both the Indian industry and multi-nationals operating in India grow their operations in this country! Deliberations have already begun in the Rangachary committee on this topic and the Finance Minister’s promise that this would be completed and Safe Harbour completed in this year is some encouragement for the industry.

There are some other minor advantages from the Budget as well including the tax on dividends from subsidiaries and the special encouragement provided to women through various initiatives. Overall the Budget does not move the needle much for the IT sector or for that matter for any other industry segment in the country, but if a clear path to fiscal consolidation emerges and the various departments of the Government show the will to implement on time and put in the necessary Governance mechanisms, we can all be relieved that the Finance Minister has put us on the path to renewed confidence and a return to higher growth numbers!

(The author is Vice-Chairman & CEO, of Zensar)

Related Topics