Will the Union Budget 2018 Address the Growth Concerns of IT Industry in India

It is expected that Nifty will deliver returns somewhere in the range of 10 -15% by the end of December 2018 due to the immense support by the global IT industry

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By Sumit Peer


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Information Technology industry has been a ray of sunshine that has put India on the global map for all the good reasons. The Gartner report claims that we can expect growth in the IT spends by 4 to 4.5% in the coming year. With the current wave of automation, digitization and growing awareness of the benefits of technology and e-commerce, the coming years are slated to be an exciting time for the technology industry and are expected to transform the way India and the world operates. Realizing the immense potential in the IT sector, the Government of India initiated programs like "Digital India', "Start-up India' to propel the growth story of IT industry.

Need to Address the Demand-Supply Gap

With the fast-paced developments in the IT industry, coupled with changing consumer buying patterns, the industry is going through a demand-supply gap. The industry is in dire need of complete re-skilling of the entire IT population. Another crucial facet of the IT industry is the application side of technology. This evolving aspect of the IT industry brings in immense opportunities but requires a special attention for its optimal utilization.

Suitable Incentives

The Union Budget 2018 should provide incentives for infrastructure in the IT sector so that high level of technology and talent development can take place in the digital space. It can be seen that the proposed reduction of the corporate income tax rate to the slab of 25% has a long way to go in helping technology companies; especially those in the lower tax bracket range. With this reduction, companies falling under lower tax bracket can use more funds towards their product and business growth.

Increasing Budget Expenditure

IT sector will witness a big boost if the government could increase its budget expenditure for the development of smart cities. The Karnataka government has already designated INR 1,188 Crore for developing six smart cities, which will encourage other states to invest. Such projects are extensive and may take anything between 20 years to 30 years for completion. This further means that the industry will reap benefits for more than a decade. Any announcements on timelines around Smart Cities will be a welcomed opportunity for the companies focusing on the same. Gaining government's help and support at the policy level brings hope in ensuring various economic interests that would be beneficial for the industry.

Role of the Government

For better development and profit growths in IT sector, the government should focus on the issues related to POEM, service tax, tax refunds, etc. The IT industry representatives are looking forward to the imposition on duties on various technology and telecom products which inherently fall outside of the purview of the IT agreement signed by India. This will lead to better development and profit growths in the IT sector.

Such moves will go a long way in boosting the IT and telecom manufacturing industry of the country. The IT sector itself is predicted to be bright for India. We have seen the S&P, Sensex and NSE Nifty, each rising over 30% in past year and it is expected that this "Bull Run' would continue in 2018 too. It is expected that Nifty will deliver returns somewhere in the range of 10 -15% by the end of December 2018 due to the immense support by the global IT industry.

In a nutshell, it is going to be a really good 2018 for the IT industry if not miraculous. We can expect some significant changes which will be reaped as benefits for the industry.

Sumit Peer

Founder and CEO, Aurelius Corporate Solutions

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