Finance minister P. Chidambaram announced the Union-Budget recently for the fifth consecutive time. And it had most of the country beaming with pleasure. But even with IT and the outsourcing industry terming the budget as “populist” they aren’t all that happy with it.

What the Budget has in store

This year, the union budget has been kinder, compared to last year where it had set aside 1,500 crores for the IT department, this year the sum rose up to 1,680 crores. In addition the Fin Min has announced three new schemes

 

• The budget has allocated Rs 1,680 crore to the Department of Information Technology in 2008-09 as against Rs 1,500 crore in 2007-08 and has announced three new schemes to establish 100,000 broadband internet-enabled Common Service Centers in rural areas and State Wide Area Networks (SWAN) with Central assistance and to increase the number of IT educational institutions. This can translate into plum contracts for the IT companies.

• It has launched a new scheme with budgetary allocation of Rs 275 crore for State Data Centers.

• Customized software has been brought under the service tax net with an attraction of 12 per cent service tax.

• It has also increased the excise duty on packaged softwares from 8 per cent to 12 per cent to bring it at par with customized softwares.

• But the drawback, there is no mention about the extension of the Software Technology Parks of India (STPI) scheme

Impact on the outsourcing sector

• The IT and ITES sectors are all set to cash in huge benefits. The budget promised huge investments in the education sector. This will result in larger talent pool of professionals. This spending on education will take care of the constraints on the supply side that is plaguing leading companies as a shortage of quality professionals.

• And though the service tax on customized software comes negative for technology companies but eventually, it will be passed on to the clients. But this can lead to increased piracy.

Impact on companies

Technology companies will have to sustain adverse impacts because of the stop on tax benefits
But the future is bright for e-learning companies as the increasing thrust in raising the talent pool of the country will work for them

 

Michael Henderson is a known name in the KPO industry in India. He has worked with several outsourcing firms and has considerable expertise in KPO processes. His sphere of knowledge includes data cleansing, e mail list building and other means of internet promotion. He has worked with many international clients from across the globe.