The Hindu : Budget belies promise of 'IT for all'

Online edition of India's National Newspaper
Sunday, Mar 02, 2003

Business

Business

Budget belies promise of 'IT for all'

By Anand Parthasarathy

BANGALORE MARCH 1. The Union Budget which comes at the half way stage in the much touted Indian Government's 1998 initiative to provide `IT for all by 2008', has done little or nothing to take the process forward. The information technology industry is busy showering praise on the Finance

Minister for his `goodies' like the continued tax holiday for software export earnings and a 10 per cent reduction in customs duties for IT-related capital goods. But for the average Indian, who is always being told that IT is the magic `mantra' for self-empowerment, good governance and leaps across the so called `digital divide', the budget offers next to nothing by way of good news. For those of us wondering when we can afford to buy a personal computer (PC) or how we can e-nable our children's education, the bad news is The `big news' in the budget that the excise duty on `preloaded' software has been removed is mostly hype about a routine administrative act that corrects a bizarre anomaly imposed by a previous tax regime: All software in any case was duty-free — and it was only a typical `babu' interpretation that just because the operating system or other tools came pre-loaded with a PC, it should be treated as hardware for excise purposes. This grotesque piece of nonsense has been ditched by this year's budget — but it will not immediately cut Rs. 500 or Rs. 600 from the price of a PC as some captains of the IT industry have rushed to suggest. For the simple reason, that no leading PC vendor was passing on the excise duty on preinstalled software to the customer: The provision had been referred to a tribunal and most PC makers were awaiting the decision which has now been rendered infructuous.

— The reduction of customs duty on IT-related capital goods from 25 per cent to 15 per cent may marginally help those who import such goods to assemble PCs in India. But the basic duty is only a starting point. On the 15 per cent customs duty there is a special additional duty of around 4 per cent on key items such as memory, topped by a 16 per cent countervailing duty ... . making a grand total of 35 per cent. In other words, Indian customers will continue to pay for a mark-up of over one third on major elements of the PC that are imported. While assemblers and indigenous manufacturers may effect a small savings on the price of a typical multimedia PC, this is no big deal for the customer, because the entire global market in memory and storage technologies — those `RAMS', and `gigabyte hard disks' that go into the machine — is highly volatile and price fluctuations usually force up the end costs because many popular items are in perennial short supply.

Any savings still emerging will be swallowed up by the regular increases that the market leaders in microchips and software — Intel and Microsoft — dictate with every upgrade. Thus the next Pentium chip will be more powerful and inevitably more pricey, just as any new version of Windows will flaunt an array of `digital delights' for which we will have to pay more, even if we are never going to use them.

— The Economic Survey which preceded the Budget by a day, included a `puff' for `free software' like Linux as well as Indian language computing But the actual budget provisions include nothing to encourage the use of either.

— The final bit of bad news for lay users of IT is the announced intention of charging 8 per cent service tax on Internet cafes. This flies in the face of the government's pious pronouncements that a nationwide chain of `Cyber dhabas' would bridge the gap for the `digital have nots' — those who could not afford an Internet connection of their own. Internet service providers (ISPs) were already under the ambit of service tax at the earlier (5 per cent ) level — which is why most of the big players have been sneaking in price increases in the last few months which have typically hiked the cost of one hour of surfing by Rs. 3-5. At least one of them has been quoted as saying today it would certainly pass on the 3 per cent increase in service tax to the consumer and others will probably follow suit.

— The `unkindest cut' of all is a matter of some ambiguity: The Finance Minister has embraced commercial vocational institutes and training centres in his `service tax sweep'. This would imply that the thousands of private computer training institutes country wide, that fill the yawning gap in government — organised IT education will now have to hike their fees and pass on the 8 per cent service tax to young aspirants for computer `shiksha'... a case of the Finance Minister's left hand disposing what the Education Minsiter's right hand has been proposing, namely a positive fillip for IT-enabled education.

However the small print in the Finance Bill appears to leave a loophole for institutes which offer a recognised diploma or certificate and as of today, leading IT trainer has come out with a reaction or interpretation. In any case the hope of buying a PC at below Rs. 10,000 (the `lakshman rekha' of affordability for many middle class Indians) or accessing the World Wide Web at an attractive price must remain a distant dream for lakhs of Indians. `IT for all'? In 2003, we are not even half way there.

Printer friendly page
Send this article to Friends by E-Mail

Business

Stories in this Section

Car prices slashed

Budget belies promise of 'IT for all'

Hero Honda sales up

Export growth dips in Jan.

Further rise in forex reserves

FutureSoft inducts two key personnel