Government likely to extend STPI incentives for three more years from 2011: Mr A Raja, Union Minister for Communications & IT

“State Governments should be given more role in channeling Foreign Investment in ICT Sector”

“The Union Ministry for Communications & Information Technology is for extending the tax benefits enjoyed by the STPI registered ICT units by three more years from 2011. The proposal is, however, pending for the Cabinet approval,” said Mr A Raja, Union Minister of Communications and Information Technology, Government of India. Delivering the Inaugural Address at Connect 2009, India’s premier ICT event, being organized with the theme of “Resurgence of the Indian ICT Sector” by the Confederation of Indian Industry (CII), in association with Government of Tamil Nadu, here today, Mr Raja said that the State Governments should be given equal responsibility and opportunity in bringing in proactive policies and regulations related to foreign investment in the ICT sector.

The Union Minister said that 2008-09 proved to be the year of transformation for the Indian ICT industry. The industry witnessed a process of re-engineering in response to the changing macro economic environment. However, despite the global economic meltdown, the Indian IT and BPO sector grew by 12% in the financial year 2009 to earn aggregate revenue of US$ 71.7 billion. The export of IT-BPO grew by 16% to reach US$ 47.3 billion during 2008-09. The growth proves that the basic business model of the Indian ICT sector is efficient. Mr Raja said that the Central Government is focusing on developing semi-conductor fabric hubs across India in a big way. So far the Central Government has approved 7 to 8 projects with Rs 70,000 crore worth of investment. In order to incentivize the semi conductor sector, the Central Government has decided to invest 20% of the total cost of each of these projects.

In his Keynote Address, Mr Kip G Thompson, Vice President, Global Facilities & Strategic Growth, Dell Inc, said that there is a great opportunity for India to become the world class manufacturing hub for electronics and the greatest change agent. “India is in an inflection point. With right government incentives and policies, it can create an irresistible investment environment and become a world class IT hub globally” he said. Compared to its competing nations such as China, India has two additional advantages: proximity to European Middle East and African markets and English competency. However, the country needs to focus on investment in infrastructure development, improving regulatory efficiency, introducing fiscal incentives, stipulating domestic market demand, creating market for exports and taking initiatives to become a Green IT leader. He said that India’s export of electronic data processing and office equipment has to grow by over 37% for it to reach the size of US$1.2 billion by 2020.

Sharing his observations of changing trends in the ICT sector, Mr Thompson said that the hardware price in India has come down by 55% since 2004 – there has been a 46% drop in hardware prices internationally. However, the laptop prices are 11% higher in India, compared to that of global markets. The PC penetration is still 3.6% in India. He said that virtualization, mobility, flexible compuyting, 10G Ethernet, software as a service, etc are some of the disruptive forces shaping the global ICT market. Globally the ICT sector contributes to 2% of the carbon footprint. But IT can drive carbon avoidance by up to 5 times its carbon footprint in other sectors.

In his address on Broadband Roadmap for Inclusive Growth: India 2009-2014, Mr Manoj Kohli, Chairman, CII National Committee on Telecom and Broadband, and CEO & Joint Managing Director, Bharti Airtel Limited, said that in the last 10-15 years, India’s telecom sector has created half a billion customers and has reached telecom connectivity to 4.5 lakh Indian villages, becoming the second largest growing telecom market in the world, second only to China. He said that the telecom sector can bring back India’s GDP growth from the current 6% to 9-10%. He added that broadband is key to economic growth and its penetration has strong correlation with GDP growth. In India, the broadband penetration is just 0.57%. Though there are over 500 million telecom users, there are only 7 million broadband customers – currently 1% of the households and 18% of businesses have access to broadband. For the government to achieve the 2014 vision of reaching broadband to 214 million users by 2014, it needs a 30 fold growth. Since broadband has the potential to create about 20 million jobs, the government should be committed to e-governance projects and move from providing voice-led to data-led services.

Mr Kohli said that the levers for growth include: investment in laying down high speed back haul via Fiber to the Kerb infrastructure across the country using Universal Service Obligation and investment in wireless broadband. The broadband revolution in rural areas will create the world’s single largest market of 700 million people, and hence it will be bigger than the urban telecom revolution.

Ms K Kanimozhi, Member of Parliament, Rajya Sabha, emphasized the need for inclusive development of the ICT sector. In her special address, she said that the Dravidian Movement had contributed to the entrepreneurial spirit of the State, apart from providing equal opportunities in education and skill development for people of all social and economic backgrounds. In her Special Address, Dr Poongothai Aladi Aruna, Minister for Information Technology, Government of Tamil Nadu, said that the State Government is determined to take the IT revolution to tier-II cities, townships and villages. It has spent about Rs 540 crore to create IT infrastructure in tier-II cities such as Coimbatore, Trichy, Tirunelveli, Madurai, Hosur and Salem. The Government has plans to create 5440 community service centres (CSCs) so that there will be one such centre for every three panchayats. Currently, there are 2000 CSC that are set to be operational.

Delivering the theme address, Mr S Mahalingam, Chairman, Connect 2009 & Executive Director and CFO, Tata Consultancy Services, said that despite the global economic downturn, the Indian ICT industry is less affected. However, the compound annual growth rate, which was 27% in 2007-08, had come down to less than 20% in 2008-09 and it is likely to go down further to about 7% in 2009-2010. In 2007-08, the ICT industry had created over 3,80,000 jobs but in 2008-09, it is likely to create only 1,00,000 jobs. Nevertheless, the domestic market growth will continue to be 20%.

Mr C R Swaminathan, Chairman, CII Southern Region & Chief Executive Officer, PSG Industrial Institute welcomed the speakers and participants, while Mr C K Ranganathan, Chairman, CII Tamil Nadu & Chairman and Managing Director, CavinKare Pvt Limited offered concluding remarks.

On the occasion of Connect 2009, a CII Report on “India 2009-10: Broadband Roadmap for Inclusive Growth” was released by Mr A Raja, Hon’ble Union Minister for Communications & IT. The Minister also presented the Export Promotion Awards 2009 of Government of Tamil Nadu for leading companies in the ICT sector.

Chennai

September 11, 2009

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