BENGALURU: Karnataka, which is home to nearly 80 per cent of the country’s IT/ITes industry, will see a major fillip in its revenue if the Union budget brings in measures to promote exports, extend tax benefits, incentivise research and development and re-skill the workforce, analysts said.
With 62 formally approved Special Economic Zones (SEZs) and three software tech parks, the state is the largest software exporter in India with exports valued at $30.41 billion in September 2017, according to an Indian Equity Brand Foundation report.
Inarguably, a robust IT sector favours the economy of Karnataka which has been wooing investors globally and from within the country.
The IT and IT-enabled services sector which accounts for 5.6 per cent of the annual GDP, clocked $177 billion revenue in the last financial year with $136 billion coming from exports.
The sector added 1.7 lakh employees and the revenue grew at a compounded annual rate of 7.6 per cent between financial years 2015 and 2019, National Association of Software and Services Companies (NASSCOM) said.
However, India’s share in the global revenues from the industry is still low despite it having advantages of talent and cost competitiveness.
India currently has approximately 18 per cent share in business processing management (BPM) and 13 per cent share in global IT services segment, with significant headroom for growth, NASSCOM observed.
Extension of 15 per cent corporate tax rate to new IT firms in SEZs, continued tax holidays for five years, regulatory reforms for IT services firms to avail tax benefits as well as credits will be crucial to spur investments in the sector and beat the competition from other software exporters such as the Philippines and China, according to NASSCOM.
“Technology, as a sector, has a potential to be the strong arm of Indian economy. Hence the government should invest more towards building indigenous technology solutions, along with defined regulations to foster growth. We are optimistic about the upcoming announcement and wish to support the government in our capacity to make India a digitally first nation,” Deepak Kagliwal, Director & Head, Sales and Marketing, Blazeclan Technologies, a cloud services company, said.
India’s thriving startup ecosystem would benefit from a government-supported investment fund that supports firms working in deep/advanced tech like artificial intelligence (AI), machine learning and cloud computing spaces, analysts said.
“Indian startup ecosystem is bustling with innovative concepts. The most visible challenges for these startups are go-to-market strategies and scaling-up. With the Modi government promoting Make In India, it’s time they mandated all government establishments to use innovative technologies the start-ups have created,” Vikram Pawar, co-founder and CEO of Techchefs, a software development firm, said.
For India to match the innovation capabilities of competitors like the USA, China and Israel, the government should incentivise research and development by means of favourable tax policies, according to experts.
The government is expected to support the reskilling of the IT workforce to help them stay relevant in the global industry, experts said.