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The Financial Express Article, February 2013, Ganesh Natarajan

An often repeated refrain from other industry players about the IT sector is that the sector has been the blue-eyed boy of the government for many years and now there is no need to do anything for the IT guys—let them fend for themselves! And as a new set of budget announcements is just around the corner, it may be a good time to assess how government policy has facilitated the growth of our industry to its hundred billion dollar level and what more needs to be done now.

There is no doubt that the visionary Software Technology Parks of India (STPI) scheme formulated by the erstwhile department of electronics provided the initial fillip to the industry and encouraged early investors to chase the pot of gold at the end of the software exports rainbow—a pot that many enterprising entrepreneurs did find and continue to fill even today! There are also many excellent initiatives the industry can thank successive IT ministers and the bureaucrats in the ministry of IT for—the IT SEZs, the collaborations to create the Data Security Council of India and the National Institute of Smart Governance and the mission mode e-government projects announced with much fanfare and slowly seeing implementation.

However all this has not just resulted in success for the industry but also provided substantial collateral benefits for the country. Over ten million direct and indirect employment opportunities created, enhanced balance of payments position through exports earnings and foreign exchange repatriations and the ability to say that at least in one industry segment, India is the undisputed number one are just three of the many advantages that a robust software exports sector has given India. Surely a case of symbiotic government-industry relationships that have helped the country a great deal!

The industry is today at a cross-road and will need among other things, some visionary government policy support to continue its leadership and widen the gap with competitors. Today we have competitors like the Philippines, Vietnam, Mexico and of course China nipping at our heels, all aided by government incentives and subsidies for the sector. The IT services industry has matured and is proudly paying its share of taxes all over the world and through initiatives like Nasscom Foundation and company specific CSR and employability initiatives, doing more than its share to work for the cause of national progress. So what do we expect from the Budget? Nothing much, just an effort to pave the way for faster growth and initiatives to help some of the newer entrants to the industry to join the success story!

On the policy front, extension of the good work already initiated by the Rangachar committee with clear interpretations of transfer pricing and safe harbor clauses would be welcome. Continuation of the SEZ schemes to enable large investment decisions to be made and enabling large scale training and manpower development expenses to get tax relief would ensure that the industry growth path is smooth.

To meet the growth and development goals for the country special schemes need to be announced for Tier 3 cities to enable industry to create employment in these locations and special incentives for new entrepreneurs, particularly in high potential segments like software products, embedded systems, engineering services and gaming. A government-industry joint mission on entrepreneurship supported by state governments like MP, Bihar, Rajasthan and many others who would like to claim their place in the IT sun would be welcome. New entrants to the industry would also be motivated by opening up more domestic spending, easing the compliance burden and elimination of dual levies like VAT and service tax that tend to make product development uncompetitive.

A strong movement towards intellectual property creation and promotion for the country would be an initiative that needs to be started this year but would probably need a longer runway than the coming fiscal year. The government and industry, supported by well-meaning entities like Nasscom and the National IT and Knowledge Committees of the CII need to partner to demonstrate that the future course of the industry will be built on solutions rather than just services and IPR sensitivity should be established through extensive training and incentives for creation like the very noble Multiplier Grants Scheme that facilitated industry academia partnerships for the creation of new products. Most important, the government can allocate significant budgets for promotion of the “Made in India” brand and enable thousands of young companies to reach the next level of stability by providing customer opportunities in and outside the country for their products.

A special closing word for the software product fraternity. Companies like Tally have made us proud by holding their own in a market cluttered with multinational product offerings and successful start-ups like Zoho have shown there is value in the India product initiative. The outstanding product conferences held every year in Bengaluru show that there is no lack of enthusiasm. The industry needs to close ranks and work to make this a ten billion dollar segment in the very near future!

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