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Budget Impact: Telecom, IT majors happy with their good deal

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Budget Impact: Telecom, IT majors happy with their good deal

The removal of mobile phones from one-of-six requirements for filing of income-tax returns has been lauded by CEOs of telecom companies. Finance Minister P Chidambaram has finally addressed their long-standing demand. Most of them believe that improving tele-density penetration across all villages by 2007 will positively impact connectivity. This is what leading telecom, IT honchos had to say:

Sunil Bharti Mittal, Chairman, Bharti Group

This is a well-thought out budget with an eye on infrastructure development, growth and employment creation. For the telecom sector, the removal of mobile as a criterion for income-tax return filing -- a long-standing demand of the industry -- has been met. The Finance Minister's endeavour to boost job generation in sectors such as IT and textiles, and convert Mumbai into a major global financial hub is a welcome step.

Vikram Mehmi, CEO, Idea Cellular

The removal of mobile phones from one-of-six requirements for filing of income-tax returns will also remove entry barriers for a section of potential mobile customers, which is positive for improving tele-density and penetration. Similarly, the provision of Rs 1,200 crore for USO fund will increase demand for telephony in the rural areas. With this, the target of 250 million phones can be achieved much earlier than expected.

Sanjeev Sharma, Managing Director, Nokia India

We appreciate the consistent policy direction shown by this Government and are confident that the reasonable tariff structure will help us keep the grey market under check and increase handset sales through the legal channel. The decision to remove mobile phone from the one-in-six criteria for filing income tax returns and increasing the Government's contribution to the USO fund are also welcome developments.

Sanjay Kapoor, President & CEO, TeleTech India

It's overall a good budget. The proposal to introduce world-class educational institutes will give a boost to the BPO sector by encouraging more companies to route their outsourcing through India. The focus on national urban renewal by focusing on seven mega cities in terms of infrastructural development strengthens the scope of growth in the sector. However, the Government's decision to tighten 'fringe benefit tax' on employers including foreign travel expenses and conferences might act as a deterrent to the BPO business prospects.


The IT industry had a small list of demands and some of it has been met. Withholding fees on technical services has been reduced to 10 per cent from 20 per cent and this should be extended to the double taxation treaties also. Zero custom duties on ITA items will reduce costs, though restricting the countervailing duty set-off only to excise duty is restrictive. The fringe benefits tax is worrisome because of definitional issues. Umang Das, MD, Spice Communications

The Government has undertaken positive steps to ensure further growth in the telecom sector to empower end consumers with affordable telecom solutions. The zero per cent duty on mobile handsets is a step in the right direction. The zero duty on capital equipment and other inputs will bolster domestic manufacturing, increase access and enable operators to extend affordable telecom solutions to consumers.

Rangu Salgame, President, Cisco Systems (India & SAARC)

This is a progressive and balanced budget from the economic perspective. The announcement regarding implementation of VAT across all states from April 1, 2005 is a welcome step towards simplifying the tax regime.

The Government's decision to increase tele-density across all villages by 2007 will positively impact connectivity. The revision in duties, particularly the exemption of customs duties on ITA-bound items is likely to be welcomed by Indian enterprises, which are aggressively increasing their IT budgets this year to make them globally competitive.

S. Ramadorai, CEO & MD, Tata Consultancy Services

What is laudable is the attempt to focus on creating world-class infrastructure that is critical for the sustained growth of knowledge-based industries like IT. Much of India's global recognition has come from the country's IT prowess and if the industry has to grow at a strong pace, it is imperative that our cities, both Tier I and Tier II, keep pace. The Budget has addressed this through creating SPVs for funding critical urban infrastructure projects that is a necessity to grow businesses, like IT and IteS services where India has gained a pre-eminent position.


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