Budget wishlist: IT sector

KEY DEVELOPMENTS

• Rising share: The IT-ITeS industry's share of India's GDP is expected to touch 9.3% in FY16, at a consistent 13.9% CAGR from FY09 to FY15. In FY16, it is estimated to grow 8.5% to $143 billion from $132 billion the previous year.
   
• Drivers: E-commerce is driving rapid growth for the IT-ITeS industry; attracting unprecedented global interest and funding. Along with mobile apps, e-commerce is expected to grow at more than 30% annually. 
   
• Government steps: The govt revealed technology-centric initiatives last year - 'Digital India', and 'Start-up India' - to accelerate India's plunge into the connected digital world.
   
• Digital transformation: India’s technology services industry is projected to reach revenues of $350 billion by 2025. Also, it is expected that by 2025, about 80% of tech expenditure will be driven by digital technologies (analytics, cloud, social media, internet of things).

KEY ISSUES

• Challenges:  The industry is facing challenges from newer technologies that have disrupted the traditional services and forms of delivery
   
• Software challenge: Indian players have traditionally been services firms with limited focus on software products. This has slowed down IT adoption due to higher prices from Western software providers.
   
• Delivery models: Indian IT-ITeS firms need to introduce new delivery models like storage as a service to continue growing
   
• Focus: While the concepts of cloud computing, big data and mobility are becoming popular in the market, India’s IT-ITeS firms will need to increase their focus on digital security.
  
   

EXPERT VIEW: Sandeep Ladda

PwC expert answers Business Standard readers' questions on what to expect from the Budget

RUHANA: A challenge for IT is proving education online. People in rural areas are in the greatest need of e-education. What’s your take on this?

Issues like access to computers, poor internet connectivity in rural areas, inability to make payments online, etc, create roadblocks. The govt has been emphasising on the need to skill through online education. With more availability of affordable mobile handsets with internet, the number of people from rural areas benefitting from online education will rise.

Nagkar: How are some firms selling smartphones at unbelievably low prices? The production cost would be much higher...  
Smartphones, in today’s times, have seen a steady decline in the price and rapid increase in availability. Previous attempts at drastically reducing prices have not been very successful. Firms try to control production costs by including limited features, using cheaper hardware, using local supply and economies of scale to anticipate demand and control manufacturing cycles.

Sandeep Ladda
Partner & Leader (Technology & E-commerce), PwC India

“The sunset date for activities in relation to Section 10AA and 80IAB of the Act in the govt’s proposed road map is to be set at March 31, 2017. For projects where investments have been made, SEZ development might not be complete by then. So, phasing out of benefits should be deferred to March 31, 2019, and coincided with cut in tax rate to 25%”

C P Gurnani
Managing director & chief executive officer, Tech Mahindra