Budget: Thumbs down for hardware

While there are a couple of sops here and there for the software industry, the hardware sector has got practically nothing. At least, this is what a wide spectrum of industry analysts feel about the budget.

Abraham Thomas, Country Manager, IBM India Ltd

The Finance Minister has presented a progressive budget. The emphasis is on continuity with an eye on economic growth. A notable aspect is the government's commitment to liberalization and the increased focus being given to infrastructure, education and social securities. The five year tax holiday extended to the telecom sector and the proposed Convergence Bill to cover telecom and IT are welcome moves. Tax exemptions extended to ISPs and broadband network providers is a positive step. The enhancement of investments on income from ESOPs upto $ 20,000 will help in attracting and retaining talent. The proposed expansion of IITs and the strengthening of RECs will help in furthering technical education. The proposal to step up IT implementation in core government departments and organizations by March next year will bring in efficiencies in cost and time. From an IT industry perspective, one expected more changes in the import duty structure, particularly keeping the WTO deadline in mind. However, the changes have been very marginal.

Ajai Chowdhry, Chairman and CEO, HCL Infosystems Ltd

In the software segment, the acquisitions and mergers would definitely get a fillip as will the onsite services which has been given income tax benefits under Sections 10A/10B. As far as hardware is concerned, there's a very insignificant change in this area, which would effectively translate into a one percent reduction in the price for the end consumer. The price of the imported high-end servers too would fall by only 1.8 percent. However, the consumer would stand to gain a price benefit of around eight to 10 percent in telecom products from this budget.

Anil Bakht, CMD, Eastern Software Systems

Budget 2001-2002 has a positive impact for furthering the growth of the IT industry. Extending infrastructure benefits to ISP and broadband networks is a commendable move. It will help in spreading the use of Internet at home and in offices. ESOPs have been sweetened further to enable employees to participate further in the wealth created by their companies. As acquisition rules have also been relaxed for IT companies, this will enable Indian IT companies to move quickly for overseas acquisitions. Given the tough bind the government is in, I feel our industry has done well to get these further benefits.

Balu Doraisamy, MD, Compaq Computer (India) Pvt Ltd

The budget has been a let down for the hardware industry. The hardware industry has been looking forward to the rationalization of tariff with a reduction in excise duty to eight from the existing 16 percent, and abolition of the four percent SAD. But the drop in surcharge in the present budget results in a reduction of only 1.8 percent on finished goods. The impact on raw materials will be a negligible 0.5 percent reduction. MAIT's suggestions that the duty on imported parts and components including items of dual usage be brought down to nil, or that the terminal year for nil duty be extended to 2005 have not been considered. A positive point of the budget is the mass computerization of banks promised by the Finance Minister. This will be a good opportunity for the hardware industry, if carried out.

Dinesh Puri, MD, Citrix Software Ltd

This is a very visionary budget, spelling out the Government's intention of not only carrying out 2G reforms, but also spurring investment in infrastructure, and kickstarting demand in the market. The key now is on speedy execution. Proclamation that all government departments, banks and institutions interfacing with customers must fully computerize by April 2002/2003 will kickstart domestic demand for IT. Fifteen year tax free status for infrastructure projects will funnel investments into this sector spurring demand for IT. The only downside is inadequate focus on making IT hardware more affordable.

Harsh Vij, MD, SD Computers Ltd

The budget has nothing great in it for the hardware sector and will not have much impact on the prices in the market. But there is some ambiguity regarding the CVD that has been imposed on the MRP of the finished products. The confusion remains for certain components, which are termed as computer parts and not as finished products. For example, the keyboard and the floppy disk. This might even result in an increase in the prices by one percent. So even when the surcharge has been lifted, there would not be much effect on the prices. Otherwise, the budget has been a demand-creating budget, which is good for the industry, which has been going through a lull from the last quarter. So I hope that the situation might change for the industry in the long run.

Jasjit Sawhney, CEO, Net4India

The move by the government to reduce the duties on telecom infrastructure equipment and the tax holiday for telecom projects is a positive step towards giving a fillip to the growth of the telecom and Internet infrastructure industry. This would enable companies like ours to pass on the benefits to our customers and increase the penetration of these services.

JP Modi, Director, Modi Peripherals Pvt Ltd

The budget has been greatly disappointing as far as the hardware sector is concerned. The budget does not have anything in it, which is beneficial for the sector. On the contrary, the budget can result in an increase in the prices by about 0.5 percent because of the import tax imposed on MRP of each products. The reduction in the custom duty will not have any effect on either an increase or decrease in the prices in the market. I feel that it has been the absence of a strong lobby for the hardware sector in the finance ministry that has resulted in the segment getting no sops from the budget.

Manoj Chugh, President (India & SAARC), Cisco Systems

The government's initiative to reduce duties in import of IT and telecom products augurs well for both operators and end consumers, due to lower capital expenditure on key infrastructure. Also, the tax holiday being extended to telecom service providers, ISPs and broadband players will help trigger the rapid spread of communication networks across the country. I personally am pleased by the clear commitment at the highest levels of the government towards technology education. The government's stated intention to broadbase and encourage IT education at the school and college level will go a long way in meeting the huge requirement for knowledge workers for the new economy.

Manoj Khanna, Secretary, CMDA

The budget has been presented as an effort to please everyone on the face. The two percent reduction in surcharge actually does not help in reducing the MRP for IT products. Resellers have a very negative impact because they do not get much of margins anyway. So by further reducing the excise on them, it worsens the problem. The budget aims high to please WTOs and other international organizations, as these are from where the funds flow during scarce times for India.

Ravi Aggarwal, VP (BCSO), HP India Ltd

There has been some reduction in the customs duty on the finished IT products (from 20 to 15 percent) and the removal of surcharge on customs duty across the board. Their impact on the prices of IT products will be very little, if any, since most of the PC products are being manufactured by us in India. However, the Finance Minister has certainly given a strong message on financial discipline within the government and has specifically singled out IT as means of providing improved services in all departments handling public interface. There is clear focus on IT and technical education which will lead to long term competitive advantage for India in the world market. Reduction in the surcharge on corporate tax combined with higher spending on infrastructure development should lead to positive sentiments across all segments and should give a boost to growth in the economy in general.

RK Aurora, Executive Director, C-DAC

Overall a very good budget. Industry should be satisfied. Infrastructure and agriculture have definitely got a boost this time. IT also continues to get a boost.

RR Joshi, Director, Modular Infotech Pvt Ltd

Overall a good budget. There are three-four issues for the IT sector here. The entire sector has been short of trained manpower. The educational loan scheme would certainly make available HR resources for the industry. The reduction of dividend tax from 22 to 10 percent will also boost the software industry. The removal of corporate surcharge will also help industry to get better liquidity. The only negative aspect about this budget is the announcement of the minister that the domestic sales of 100 percent EOUs will be taxed.

RS Pawar, Chairman, NIIT Ltd

The strong emphasis on tech human resource development in this year's budget is welcome. Strong enablers for higher education in the form of loans and 18 percent higher budget allocation for education will go a long way in developing a large skilled manpower pool. Initiatives to grow all integral parts of the burgeoning IT industry will need a continuous support from the government.

Souma S Das, Country GM, Lotus Development Corp

The budget reflects the government's commitment to further the growth of the IT industry. The reduction of customs duty on IT and telecom products and the governments encouragement to increase the role of the private sector in IT education will surely go a long way in taking the Internet revolution to the masses.

Vinnie Mehta, Director, MAIT

The increased government spend on IT is very encouraging and will help to dispense the depressed market sentiment for IT sales. However, the market growth will not be price-cut led as there will be only a marginal drop in prices of servers and other fully-imported high end IT products. The grey market will continue to grow unabated as local levies continue to remain high. The industry also appreciates the accelerated move by the government towards VAT and simplification of procedures for excise collection.