labels: union budget 2007, it news
No major signals on IT infrastructure upgradationnews
28 February 2007

By Deepak Ghaisas, CEO, India Operations and CFO, i-flex Solutions.

This budget from long-term perspective provides positive incentives to increase investment in the educations system - both in secondary and higher education. That is a vital requirement for the IT industry in the coming years as the shortage of talent is a major constraint.

However, there have been no major signals on upgrading infrastructure especially as we need large investments in infrastructure. Some estimates put the requirements at over $100 billion and the IT industry needs infrastructure if it is to continue to grow.

The planned expansion of expenditure on e-governance is a good signal for the IT industry. It will serve to expand the domestic market and IT companies will see government spending coming their way which is a good thing.

The IT industry had some expectations. One of the hopes was that the government would consider extension the Software Technology Park scheme and Section 10A of the Income Tax Act beyond 2009. This would be especially important for IT SME sector.

Most IT industries are already paying tax but the MAT imposition on the IT industry would negatively impact those of SME enterprises who are not paying any tax

The imposition of fringe benefit tax on ESOPs is most surprising. This will make current ESOPs expensive and would also make it difficult for IT industry that uses ESOP as a major tool to attract talent.

There has been no further clarification of the SEZ scheme and this will continue to keep many IT companies from finalising their capital expenditure plans.

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No major signals on IT infrastructure upgradation