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News
Budget 2006: soft on hardware
The biggies of the Indian IT sector are happy with this year’s union budget
for its focus on infrastructure development. But there is some bad news too.
The good news is that the budget speaks of giving the desired push to the hardware
segment. Finance Minister P Chidambaram has promised funds for the same. He
said that with the spread of IT and BPO, the time is ripe to make India a preferred
destination for the manufacture of semi-conductors and high technology IT products.
Viability gap funding and the India Infrastructure Finance Company will be put
to use for creating a window that will provide equity participation or funding
for the new ventures. The window will be open for three years in order to accelerate
investment. The decision gives a clear sign to investors that the government
is interested in promoting the hardware industry.
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According to IDC’s India Quarterly
PC Market Programme 4Q 2005 February 2006 preliminary release,
the Indian Client PC market witnessed a 26 percent year-on-year
growth in unit shipments in 2005 over 2004.
On the commercial desktops front, all major vendors revealed
an enhanced go-to-market spend on the SMB segment which recorded
a 21 percent year-on-year growth in unit shipment terms. A
significant area was the introduction of sub-Rs 10,000 PCs
in the Indian market and the resultant impact.
Another was a 148 percent year-on-year growth in notebook
PC shipments. In 2005, Indian PC shipments crossed the 4 million
unit landmark to close the year at a record 4.3 million shipments.
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The bad news is that 12 percent excise duty has been levied on computers and
4 percent countervailing duty on imports. But local PC manufacturers can offset
the duty on components by claiming Cenvat credit. The ministry feels that this
should not lead to an increase in the prices of PCs, but manufacturers are predicting
prices to go up by 3 to 5 percent.
Along with this, 8 percent excise duty has been levied on packaged software.
Many feel that this will impact the growing domestic IT industry at a time when
PC sales had gone up and the government was looking at IT penetration through
low-cost PCs and cheap software. However, DVDs, flash and combo drives have
been given excise exemptions, thus making them affordable.
The budget has also taken steps towards accelerating the e-governance initiative.
The national e-governance plan will be approved shortly, and 25 projects in
mission-mode will be launched in 2006-07.
Among them is Project MCA-21 to enable companies to file returns electronically,
and a project for setting up common service centres and assigning a unique ID
to below-poverty-line families.
The FM said that it is the government’s intention to bring a number of
services online in a Web-based mode, including applications under the Right
to Information Act, applications for house sites and ration cards, for transfers
of teachers, for inclusion in the electoral roll, for filing of police complaints,
and for the issue of birth and death certificates and copies of land records.
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