The Govt should aid the IT sector by offering R&D incentives

The Govt should aid the IT sector by offering R and D incentives

Should provide partial refund of training costs for skill upgradation in the IT sector.

  • February 29, 2016  
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Pankaj Murarka, Head - Equity, Axis Mutual Fund

From being low-cost outsourcing vendors in the early 90s, to being strategic partners of Fortune 500 companies, Indian IT firms have come a long way, capitalising on India's skilled talent base.

With almost $100 billion in exports and three million employees, the Indian IT sector is helping global companies navigate the technology transition that is currently under way. Technology changes in the enterprise landscape (especially in cloud, mobility and analytics) are prompting changes in the IT services delivery model and a rise in investment in evolving technologies in our view.

Changes are under way - right from overhauling of training programmes and rearchitecting of delivery processes to propagating a culture of innovation to meet the demands of changing times. Through development of newer products and platforms Indian players are competing effectively against their Western peers in the 'digital' space.

It is here that the government should aid the sector through steps such as partial refund of training costs for skill upgradation and R&D incentives for development of new software products.

Keeping in view the changes in the technology landscape, Indian players are also becoming aggressive in the M&A space to stay ahead in the game. Given the inherent strength of their asset-light model, coupled with investments in the right areas, we believe that the medium- to long-term growth prospects remain robust. Another face of the Indian technology sector, in the form of homegrown start-ups, has emerged in the recent past.

Using cutting-edge technologies, new-age companies are competing head-to-head with global peers. These companies have completely changed consumer behaviour in India and are forcing old-age companies to rethink their strategy. Growth in this space will continue to accelerate as more and more Indians come on the digital platform.

In this light, initiatives such as 'Start-Up India' and '10K Start-Ups', to further the investment activity in this space, are noteworthy.

Written by Pankaj Murarka, Head - Equity, Axis Mutual Fund