resilient Indian IT industry has shared the grave concerns
expressed by Infosys' chairman emeritus N.R. Narayana Murthy and
Wipro chairman Azim Premji on policy paralysis in the UPA
government holding up reforms and growth.
"Our concerns are no different from what Murthy and Premji have
expressed. Key policy issues and executive decisions pertaining to
our industry have been pending for long. They require urgent
attention of the government if we have to remain competitive in a
challenging environment," Som Mittal, president of the National
Association of Software and Services Companies (Nasscom), told
Along with IT bellwethers Tata Consultancy Services (TCS), Infosys
and Wipro, the $100-billion Indian software and services industry
contributed significantly to the Indian economic growth story,
creating over two million direct jobs and accounting for 25
percent of the country's merchandise exports, generating $69
billion in fiscal 2011-12.
Alarmed over the failure of the federal government on many fronts
and its prevarication over taking tough or quick decisions to
revive growth, Murthy was quoted recently as saying that he was
saddened by the state of the Indian economy and the crisis of
confidence gripping the country due to lack of "big ticket"
reforms since 2004.
"There was a huge expectation on the introduction of many reforms
by the (UPA) government. There was a lot of confidence that India
would do whatever was necessary because the person (Manmohan
Singh) who was the face of economic reforms in 1991 is our current
prime minister," Murthy told global financial services firm Morgan
Echoing Murthy, Premji lamented how policy paralysis was hurting
investor sentiment. "We are working without a leader as a
country," Premji was quoted as saying at his company's meeting
with analysts in Mumbai.
Murthy, who co-founded the $7-billion global software major in the
1980s, observed that the government decision to apply tax laws
retrospectively had sent a wrong signal to overseas firms on
investing or doing business in India.
"The government would have to take steps to do something very
positive. It should indicate that it means business, and foreign
investors are welcome. This has to happen in FDI (foreign direct
investment) because portfolio investments are fickle," Morgan
Stanley quoted Murthy saying in its research report.
Endorsing the views of Murthy and Premji, Mittal said that policy
paralysis and lack of reforms were hurting even the IT industry as
the government had, for instance, not yet resolved the transfer
price issue or introduced the safe harbour provision for past and
"Given the widening current account deficit, we also need the
government to take pro-active measures to boost exports and give
incentives to promote entrepreneurship in innovative product
firms. Providing basic and social infrastructure, especially in
tier-two and tier-three towns is another area where the government
initiative is wanting," Mittal asserted.
As a former chief executive of HP India Ltd. and an IT services
expert with Wipro earlier, Mittal expressed concern over the lack
of government support to small and medium enterprises (SMEs) after
tax holidays were withdrawn to the industry since 2011.
"Though Special Economic Zones (SEZs) were announced with much
fanfare in place of the Software Technology Parks of India (STPI)
for the industry, Minimum Alternative Tax (MAT) on SEZ income
discourages firms from opting for the scheme," Mittal said.
Sharing the industry's concerns, former Infosys director and
Manipal Global Education Services chairman T.V. Mohandas Pai
regretted that the UPA government had been simply watching the
deterioration of economic activity during the past six months.
"The inability of the political leadership to assume control, take
responsibility for economic matters and push the development
agenda forward have created an atmosphere where decision-making
has almost stopped. Though the government promised to act, we are
yet to see any action on the ground," Pai told IANS here.
Noting that the budget for this fiscal (2012-13) had increased
taxes by a whopping Rs.45,000 crore when industrial production was
declining and under-provided for subsidies to reduce the fiscal
deficit, Pai said the government had also brought in retrospective
amendment in income tax laws on 28 items.
"What's more, the government had amended the IT (Income Tax) Act
from 1961 to nullify the Supreme Court decision in the Vodafone
case. The retrograde measure raised the question whether the
government could be trusted in policy matters when it was prone to
changing the rules with retrospective effort," Pai recalled.