Protectionism impacting $143-bn India's IT-BPM sector

Country's USD 143 billion IT-BPM sector is being impacted by increased protectionism even as India is being urged to open up its markets under various trade agreements, the Economic Survey said today.
According to the report, tabled in Parliament by Finance Minister Arun Jaitley, the "alarming trend" of increased protectionism results in barriers to free movement of skill and data.
"The IT-BPM (Information Technology-Business Process Management) sector is increasingly being challenged in its global journey... Misconstruing mobility of skilled people as an immigration issue is a deterrent to the growth of this global business," the survey said.
It said total revenue (exports and domestic) of the Indian IT-BPM sector for 2015-16 including and excluding hardware is expected to touch USD 143 billion and US 129 billion, with growth of 8.3 per cent and 9.3 per cent, respectively over the previous year.

The sector is expected to touch an estimated share of 9.5 per cent of GDP and more than 45 per cent in total services export in 2015-16, it added.
The survey suggested resolving visa issues like the impact of the Grassley-Durbin Reform Bill (if passed by US Congress) on H1-B and L1 visas and US visa fee hikes through bilateral negotiations.

It also said the industry should focus on high-end software products to be competitive and promote domestic apps to grow the industry.
Some of the other suggestions included bringing in clarity under the proposed GST given the dual levies of value added tax (VAT) and service tax, resolving taxation issues of eCommerce companies and easing receipt of outstanding payments for government work.

The Survey also suggested extending the 200 per cent weighted deduction on R&D expenditure to the IT industry as offered in the UK and other countries.
"Extend the Services Exports from India Scheme (SEIS) to the IT sector in the light of proposed phasing out of SEZ (special economic zone) benefits and phased out STPI (software technology parks of India) exemptions; uniformity in exchange rate calculations for different taxes; addressing pending issues related to transfer pricing; and streamlining exit route for STPs," the Survey said highlighting issues and suggestions for the sector.
Besides, the Survey estimates India's R&D globalisation and services market to almost double by 2020 to USD 38 billion.