The Hindu Business Line : Education-related proposals, a big plus for ITES industry

For the ITES industry, the Budget proposals’ focus on the higher education segment is a big plus. Coming as it does on the back of the increasing outlay over the past few years, it augurs well for enhancing the supply of talent to the industry.

The tax proposals though represent a mixed bag for the ITES industry. It provides for extension of exemption for STPIs, abolition of Fringe Benefit Tax and clarification in profit calculations for units in special economic zones. However, minimum alternative tax has been increased sharply almost nullifying the impact of these measures.

The education-related proposals are a positive move and will be welcomed by the ITES industry.

Proposals such as enhanced allocation to IITs, expansion of the IT deduction to all fields of study post-schooling, creation of Central universities in hitherto uncovered States and the overall increase in plan expenditure for higher education are measures that would result in increasing the long-term supply of qualified talent, the back bone of competitiveness for the Indian ITES industry.

On the direct tax front, normally, the ITES industry will not be looking to the Government to help enhance its competitiveness and profitability.

Also, direct tax transfer measures may have a limited short-lived impact compared to structural measures such as investment in education, public health and infrastructure.

These are, however, unusual times and there was considerable expectation that a larger set of proposals will be unveiled.

This is especially so given the value addition to the economy provided by the sector as well as the potential to augment foreign exchange earnings.

The increase in fiscal deficit and the increase in market borrowings could prove inflationary. This will increase the operating cost for the industry.

Rising cost structure, when revenues are sluggish due to difficult global environment, is a larger challenge the industry has to face.

We believe that with viable business models that target continuous value addition and innovative business practices, industry is well positioned to address these challenges and come out a winner.

G.V. Mani,

Senior Director - Offshoring,

Crisil-Irevna

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