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Budget losing relevance, feel IT bigwigs
Priya Ganapati in Mumbai |
February 04, 2004 13:00 IST
Finance Minister Jaswant Singh's Interim Budget invoked little interest among the bigwigs of the information technology sector in India.
India's top IT companies' CEOs confessed that even at the end of the day, they had not had a look at the interim budget presented on Tuesday.
"The IT industry has grown up in an environment that is independent of government intervention and where the government had very little role to play. Naturally, the importance the industry gives to the budget has been decreasing," said S Ramadorai, CEO of Tata Consultancy Services, India's largest unlisted software services company, adding that he had not gone through the budget even by the day end.
Other industry honchos agree with Ramadorai. Many said that they were busy with their company affairs to have a look at the budget. Making matters more difficult for IT CEOs was the fact that the annual event of the National Association of Software and Services Companies, the industry's apex body, was on the same day as the interim budget.
Satyam Computer Services' co-founder B Ramalinga Raju was another of the industry's veterans who confessed to not having found time in the day to look at the budget.
"I am going to the US tonight (Tuesday night) and so was busy with my meetings all day. Then I had to come to Nasscom so I did not find any time to go through the budget," Raju said, on Tuesday evening.
The only proposal in the budget that did catch the attention of the CEOs was the one pertaining to business process outsourcing.
Jaswant Singh exempted the earnings of foreign companies from business process outsourcing if the services were ancillary. But in case of earnings from outsourcing core business activities, he said companies would have to pay taxes.
"BPO has a scope for employment generation. It has been clarified that if outsourced services are ancillary and auxiliary in nature and adequate remuneration is paid to the Indian call centre, there shall be no tax on such foreign company as has outsourced its activity to India. This policy is on the lines of Organisation for Economic Co-operation and Development norms and double-taxation avoidance agreements," Singh said while presenting the interim budget.
Singh's announcement only reiterated the Central Board of Direct Tax notification earlier to tax the earnings of outsourcing core activities by a multinational company. Indian BPO companies wanted exemption from taxes irrespective of their activities.
Industry executives said that the definition of 'core' activities was unclear and they would seek greater elucidation from the ministry on the issue.
Infosys CEO and Managing Director Nandan Nilekani was among the few stars of the IT industry clued into the details of the budget.
When asked for his reaction to the finance minister's proposals, Nilekani was quick to rattle off his response. "That the fiscal deficit had come down to 4.8 per cent was a pleasant surprise. But the feeling that the industry got on the BPO bill was ambiguous. I think we need some more clarity on that issue. But overall, the budget continued with the broad theme of reforms and infrastructure development," he said.
So, is the budget dwindling in significance and importance for the IT industry?
Yes, say industry executives.
"The budget becomes important only if it affects your business in the next two to three months. In the past, industries depended on the budget for policy guidance and reforms. So about seven to eight years ago, the budget was looked at much more intensely. Now the budget does not affect business much," says Ashank Desai, CEO, Mastek.
Desai even as his interest in the budget has been waned through the years, his areas of interests have changed.
Moving away from announcements related to taxation and excise duties, he says, he now watches out to see how infrastructure is being augmented or what the government plans to do about issues like literacy and credit for rural areas.
"The budget is no more about a short-term thing. We look at it differently today and it is more a statement of the government's economic vision. The curiosity that used to be there earlier about the budget is not there anymore," says Desai.