Of Stars and the Sky

The first intent states that in order to increase efficiencies, the use of

information technology in government activities with large public interface will

be maximized. Operations like GPF, pension, pay and accounts office, passports,

income tax, customs and central excise will be fully computerized by March 31,

2002. Public sector banks and insurance companies are also being asked to

complete computerization of operations within this period. This is nice. And not

only for the hardware vendors who may get some extra sales. These are huge

sectors and have a great impact on the lives of ordinary people.

Their computerization can make life easier and better for them. It is great

that a time-frame has been put and specific departments named. That shows the

intent or rather restates the intent. Now, the talk has to be walked. Words like

"fully-computerized" will have to be defined. Many of these

departments are already computerized to some extent and may well claim that they

have computerized all they can.

There is also the issue of speed. Recently I got the PAN account number and

card for my father from the computerization cell of the IT department. It had a

nice letter and all that and a stamped signature–probably to ensure that

delays due to the need for signing of the letter are avoided. All that was good–except

that my father had passed away two years back. And he must have applied for this

number/card before that. This is being churlish when the finance minister is

getting bouquets all around. The intent and its clear enunciation are welcome.

And the finance minister can probably do no more. It is up to others to take up

the intent and convert it into action.

The second good provision of intent is related to IT education. There are

various measures in this area, including loan provisions, 100% deduction from

income tax for payments made to engineering institutions by the private sector,

upgradation of colleges and computer literacy schemes. Partly by accident and

partly by design, India has invested heavily in the past on providing its

students good education at very affordable rates. Initially, when these trained

people were going abroad, it was seen as a loss on investment. Some of that has

started paying back–at least in the software export sector. It is time,

therefore, to invest for the future and that intent is also clear. It is also

nice that the private sector is being enticed to help this spread. It would be

great if we see a good amount of funds flowing into this area from software and

service companies. It gives them a better chance to be good corporate citizens.

And the best would be if Nassscom, on their behalf, were to make some forecasts

about the amount of money that would flow into this venture. Here also, the talk

has to be walked–but more by the private sector and less by the government.

The software export sector continues to remain the blue-eyed boy. Thanks to

its own performance and the packaging of this performance, it is almost

unthinkable that the software sector would not get encouragement. After all,

success always has many fathers. So there are some more nods of approval

provided by way of capital account liberalization and one taxation benefit–which

many claim is merely a clarification. Of these, investments abroad by employees

and corporates are the key changes. Extending tax deductions to on-site services

is also welcome. But taxing the newborn services sector, especially for leased

circuit line-holders and online information and database retrieval services, is

premature. The latter seems like taxing something that does not exist. Online

information and database services hardly exist–and where they do, no one pays

for them as a service. The wording is also confusing and what will be included

and what will be excluded is a question mark. The big one in this is the ISPs.

They do not appear to be there on the list but there are always interpretations

possible. For instance, if an ISP provides some information on its site–as

some of them do–can that part of the service be taxed as online information?

The details of this proposal may help. Either way, this appears to be a case of

killing the golden goose that does not exist.

Hardware custom duties have been rationalized and that is nice. But the local

"manufacturing" sector gets no benefit since the differential duty

between parts and computers is now nil. Actually, the whole issue of hardware is

de-focused. What is the objective? There seem to be three–one is to make the

duties zero by the year 2003, two is to encourage local manufacture or

assembling, and three is to improve PC penetration by making them cheaper. The

budget moves towards getting the first objective closer, the second one not

helped at all and the third one is closer but by a mere percent or two. Excise

duty remains where it was. All in all, nice, but nothing to get excited about.

Or is a case of falling between three stools? Probably, the government feels

that it's long-term policy on customs duties is already stated and there is no

need to change it.

It would be prudent for hardware vendors/assemblers to take that as a given

and work their strategies around it. But all this is not good news for

encouraging the growth of IT usage–and that is different from the growth of

the software industry. It is time that we differentiated between the two.

What one does get to cheer about is the indirect benefits to the IT industry.

The proposed measures on labor laws and contract labor would be a great benefit

to the software sector. Not that it is in any danger of wanting to lay off

people. But who knows; if Uncle Sam sneezes hard enough, a few companies across

the world could catch the cold of the US recession. But the whole business of

getting rid of laws whose needs have long gone is nice. Of course, these have to

get past the penchants (and that is a mild word) of those political parties for

whom time stopped a few years back. Similarly, the feel-good factor that made

the sensex jump like a startled horse and made more than a few industry chiefs

praise the budget is a great thing. If the overall scenario is positive and the

economy grows, IT can only benefit. More than that, it can contribute to this

growth.

That is the greatest win of this budget. So the finance minister has done his

job well. The follow up now has to happen and the experience of the last few

years has shown that the 'aiming for the stars to get to the sky' strategy has

worked for us. There is no reason why it should not work this time as well.

Shyam Malhotra Editor-in-chief, Cyber Publications and director,

Cyber Group