The Hindu Business Line : `Policy booster vital for hardware sector growth'

CAUTIONING against a possible $50-billion demand-supply gap in electronic hardware by 2009-10, the hardware industry has asked the Government for income-tax exemption for five years to encourage investments in manufacturing.

It has also sought a uniform eight per cent excise duty across the entire electronic hardware value chain to correct imbalances in the tax structure.

"We cannot only be a services-led country. This thinking is strong in the Government and we are starting to see a thrust on manufacturing. We have advocated that IT hardware manufacturing should get a priority as IT usage and manufacturing contributes to the GDP. As much as 29-57 per cent economic growth of the US is contributed by IT usage and manufacturing," Mr Ajai Chowdhry, Chairman and CEO, HCL Infosystems Ltd, told Business Line.

In its pre-Budget memorandum, the Council for Electronic Hardware Association (CEHA) that includes MAIT, CETMA, ELCINA, and TEMA said that there should be no differentiation between IT and non-IT segments of electronic hardware.

It has further sought abolition of Central Sales Tax on all electronic hardware, said Mr Vinod Sharma, President of ELCINA, and President of the Council. Pointing out that while IT products attracted four per cent VAT, for other electronic items the same was pegged at 12.5 per cent. The industry has pitched for a four per cent VAT on all electronic items, he said.

"Income-tax benefits should also be given to hardware. With its ambitions to become a superpower, India cannot survive on imports of electronic hardware," Mr Chowdhry added.

Citing the automobile sector, he said the industry had flourished due to favourable policies. "The Indian automobile industry is now becoming global and exploring new avenues in the automobile industry itself and thus flourishing. There is a requirement to utilise the capabilities to the fullest and bring the investments in the Indian manufacturing sector. Just as there was tax holiday for the software industry during its initial phase of development, the same should be for those who are investing in hardware," Mr Chowdhry said.

According to an analysis by Ernst and Young, the demand-supply gap in electronics hardware (including components, consumer electronics, strategic electronics, computers, and communication and broadcasting equipment), which stood at $15 billion in 2003-04, could widen to a whopping $50 billion by 2009-10. Even with a conducive environment , India is estimated to witness a demand-supply gap of about $22 billion.