India Gives Electronics Industry Tax Bonanza

By NARAYANAN MADHAVAN

NEW DELHI: Finance Minister P Chidambaram proposed a tax bonanza for India's booming electronics industry February 28, abolishing import duties on computers and software and cutting tariffs on electronic parts.

"The spread of information technology has radically altered conventional wisdom on growth strategies," Chidambaram told parliament in his budget speech for 1997/98 (April-March) which presented radical tax cut proposals for the industry.

"If there is one science that will dominate the 21st century, it is information technology. If there is one industry in which India can emerge as a world leader, it is information technology," he said.

The growth in the computers and software have cut corporate costs across the world to spur growth. For India's high-skilled, cost-efficient engineers, it spells opportunities.

"Computer prices will definitely come down," independent telecommunications analyst Mahesh Uppal told Reuters after the budget.

"The budget is extremely encouraging for the Indian information technology and will definitely boost the growth of the domestic industry," Ajai Chowdhary, President of India's computer-maker Hewlett Packard said in a statement.

The complete removal of import duty on software came three days before the scheduled arrival of Bill Gates, Chairman of Microsoft Corp, the world's biggest software company.

In January, Gates met Prime Minister HD Deve Gowda at Davos in Switzerland. India's software industry is expected to grow by 50 percent in 1996/97. Exports are expected to fetch Rs 39 billion and domestic sales Rs 25 billion, making up a total of $1.8 billion.

In 1995/96, India exported Rs 25.2 billion of software and sold Rs 16.7 billion worth at home, accounting for $1.2 billion.

The budget exempted exporters from a minimum corporate tax, which would help software exporters, analysts said. The duty cuts take effect from April 1, 1997, but would first have to be approved by Parliament.

The government planned to cut the duty on integrated circuits, color monitor tubes, cartridge tape drives, digital video disc drives and computer parts other than populated printed circuit boards (PCBs), to 10 percent from 20 percent.

The duty cuts proposed also covered the telecommunications industry and paved the way for an easier entry for private and foreign telephone firms which were allowed into India under an economic reform program launched in 1991.

The government proposed cutting the import duty on populated PCBs as well as components used in telecommunications equipment, mobile phones and radio pagers to 20 percent from 30 percent.

The import duty on color picture tubes would be slashed to 30 percent from 35 percent, and that on telecommunications equipment to 30 percent from 40 percent, the government said.

"All these things would certainly help people whose telecom projects may be delicately poised (in finances)," Uppal said. Robert Kerley, the head of India operations for global communications firm Harris Corp welcomed the budget.

"The lowering of duties for telecom infrastructure imports supports Harris's overall strategy for India in the light of the numerous delays occurring related to the issuance of basic service licenses," he said in a statement. (Reuter)

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