The benefits to IT and ITES organisations following today’s budget will probably emanate more from some of the broader announcements more generically applicable rather than IT sector specific reforms. Also these would tend to be more longer term gains for the sector rather than any “quick win” or windfall with immediate monetisation. (Read: LIVE Union Budget 2015-16 by Finance Minister Arun Jaitley News Updates: FM ends the speech with a Sanskrit shloka)
First and foremost, the economic survey sets an immensely positive tone not just across all industries but even more so for the IT sector, which has been walking up the escalator throughout the relative slowdown – just that the economic – growth-“escalator”will now move faster, hopefully at near – double digit rates. Secondly the reduction in TDS for royalties will encourage knowledge transfer and will be a very powerful element together with other skill – development initiatives announced today. It will truly help monetise the demographic dividend through skill development with a specific inclusive focus on people from rural areas.
Thirdly all industries including IT and ITES will benefit from the eventual lowering of the corporate tax rate over the next four years. More directly, the good progress reported on Digital India will enhance domestic market opportunities for the sector. Finally, tech startups now get the focus as well as the fiscal incentivisation through the proposed Rs 1000 crore investment, together with the new mechanism for techno, financial and incubation platform assistance. This will certainly garner more innovation in the IT and ITES sectors, clearly with monetisation opportunities.
In this way the budget has actually ended up addressing all the critical success factors the sector was looking for – skills, resources, domestic market opportunities, innovation and startup incubation – in a more favourable macro economic context with lower inflation, lower corporate income tax and hopefully a more friendly tax regime.