The Hindu Business Line : `IT, construction sectors in the lurch'

`Agriculture is actually growing at a low 1.75 per cent, though the Government claims 2.5 per cent. There are many major issues that need to be sincerely handled.'

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Hyderabad March 2 The IT and construction industry seem to be the worst-hit, while the salaried class has very little to cheer from the Union Budget, said experts at a panel discussion.

With the economy on the roll and several sectors in good shape, the Finance Minister, Mr P. Chidambaram, should have come up with a bold budget. He has definitely missed an opportunity to put India in a different trajectory, felt Mr C.S. Subramanyam, partner in M. Bhaskara Rao & Co, a leading firm of chartered accountants.

Instead of giving impetus to the infrastructure sector, Mr Chidambaram has proposed some sweeping changes in Sec. 80 (IA), which have cause widespread confusion, denying benefits to sub-contractors and regular civil contractors. The fall of share prices of several construction companies on budget day clearly reflected this, he said.

Participating in the discussion `Budget Blues or Blooms', organised by the Jaycees, Walker Town and Vertex Securities Limited, here yesterday, Mr Subramanyam said this time high net-worth individuals would have to pay tax for buying expensive art objects, painting, jewellery etc. Similarly, in the case of ESOPs, contrary to IT companies' views now, they would not be able to pass it on to employees.

`SEVERE BLOW'

The CFO (Chief Financial Officer) of Satyam Computers, Mr V. Srinivas, said the IT industry was at the receiving end this time. The proposals on MAT and ESOPs, while not impacting the big companies, can hit the 6,000-odd small and medium enterprises real hard. "It is like killing the goose that lays golden eggs," he said.

Mr Chidambaram's silence on the SEZs, the service tax and the Government going back on its assurance of tax benefits till 2009, were retrograde moves, that can have a negative effect on the IT industry, which has been doing so well, he said.

Stating that the IT associations were representing the Finance Ministry, he felt the ESOPs burden should be with prospective effect and not retrospective. The IT industry has been a pioneer in this, to both attract and retain talent. This is under severe threat now, Mr Srinivas said.

On the positive side, Mr Srinivas said if the growth story progresses as estimated, India would soon be a trillion dollar economy. The emphasis on inclusive growth, infrastructure and education are other positives of the budget, he said.

Mr Anantha Narayan from PricewaterhouseCoopers said the reduction in CST was a good step and in line with the road map of introducing the Goods and Services Tax (GST) from 2010. The reduction in duties in several items in line with WTO are welcome, as also removing the biotech and software engineers from the net of service tax.

However, the service tax on rent, policing in terms of compliance of direct taxes, taxes on design services (especially after the recent semiconductor policy), as well as the increase in education cess were the real blues in the budget, he said.

The Director of the Institute of Public Enterprises (IPE), Prof R.K. Mishra, in his presentation felt education continued to get paltry allocation, though it got high mention and intent. Even the recommendations of the Knowledge Commission on higher education seem to have been ignored. In the past few years, there is not much for higher education, which puts a question mark on future growth, he felt.

Agriculture, which again got a lion's share in time and proposed allotment from Mr Chidambaram, is actually growing at a low 1.75 per cent, though the Government claims 2.5 per cent. There are many major issues that need to be sincerely handled, such as farmers' suicides, low productivity and utilisation of resources, Prof Mishra said.

The moderator of the discussion, Mr Umesh Kumar Gupta, Vice-President, Vertex Securities, said the Union Budget continued to evoke lots of expectation and needed to be thoroughly analysed in its fine print.