Harish Kohli, Managing Director of Acer India, says the government should help the industry reach out to this huge untapped market.
Given the current challenges, what, in your opinion, would make for a good budget? What measures or proposals would you like to see?
Considering the economic scenario, Union Budget 2013/14 should focus on a holistic, stable, long-term fiscal policy framework, and reforms that are inclusive. The government will also need to incorporate a fast-track mechanism for certain large projects, primarily focusing on power, ports, connectivity, road and rail networks that would spur the growth of the IT (information technology) sector. Bearing in mind the fluctuation in the oil market, a more liberalised regime with uniform pricing of petroleum products and fertilisers would help the government to avoid losses on subsidies given to certain affluent sections of the society.
The long-promised GST (goods and services tax) should also be implemented, which will consolidate VAT (value-added tax) and service tax levied by the central government. This will help in reduction of compliance costs through simplified tax procedures, which will increase revenue for both the Centre and state governments due to a wider tax base. With the implementation of a standard GST rate, prices of commodities can be bought down and dealers can pass on these benefits to consumers by slashing the prices of goods.
India, being an emerging country, it is important for the government to invest in the education and health care segments for progressive growth. To capitalise on India's potential as a leading democracy, it is important to implement long-awaited reforms pertaining to police and law. Such reforms will help curb corruption and encourage foreign investments and provide a conducive environment to attract new investments.
Given the constraints the government faces in raising revenue, do you see a case to increase income tax rates on the rich?
Today, the government is not in a position to rein in inflation. In such a situation, if the government makes any attempt to increase corporate tax rates, it will not only be counter-productive, but also stifle trade and industry further. In the end, the country's GDP (gross domestic product) growth rate will suffer too. The government should now consider equality in tax treatment, as better compliance will come with reasonable tax rates across income groups. Such taxation has proven to be successful in many other countries, such as the US, France, Germany and others.
To improve tax collection, the government should also streamline its collection procedures and implement a better collection mechanism to ensure all eligible tax payers abide by tax norms.
Please identify the cut-off in income beyond which you would classify the person as rich.
The government will need to give the tax bracket scale a relook. In my opinion, an individual earning above Rs 5 lakh per annum can be considered rich and can be taxed accordingly.
If the budget does not meet expectations, do you fear that business sentiment would once again dip?
Considering the current economic scenario, individuals and corporates are looking forward to an inclusive growth opportunity. The government will need to focus on job creation and have stable policies to attract businesses to invest. If the budget does not provide effective reforms and stable policies for all-encompassing growth, there is a distinct possibility citizens will be disenchanted.
Specific to your sector, what could the current budget do to improve conditions
The IT industry has been largely affected by the Thailand flood and Rupee devaluation in financial year 2011/12. This has already affected the overall growth and performance of the industry. With this situation there are certain irrational policies being forced on the industry. The industry is now fighting a battle with non-tariff based trade barriers.
With the penetration of PCs (personal computers) at just six per cent in India, there is an enormous opportunity to deepen our presence. The government should help the industry reach out to this huge untapped market. This can come about through higher depreciation rates; set-off of the PC cost against the income-tax payable in a block of two years (much like LTA); and enable easy loans for purchase of PCs. All this will result in improved PC penetration, which is woefully low even compared to peers in the BRIC - Brazil, Russia, India, China - group. And pave the way to attract FDI (foreign direct investment) in local manufacture of key components such as processors, memory, storage, optical drives, displays and motherboards and create a healthy ecosystem for a robust domestic IT manufacturing base.
To overcome this scenario a variety of additions and modifications to the tax system will prove to be extremely beneficial. These include: abolition of special additional duty of four per cent; correcting the inverted duty structure, where finished goods are subject to a lower rate of customs duty; introducing an exchange rate variation (ERV) clause in the case of government/ public sector units to procure IT products. All this will give a boost to manufacturers and the PC industry.
Which budget, in the recent past, do you remember as having been a good one?
The government delivered a balanced and reasonably progressive, growth-oriented budget in 2006/07. It gave due attention to agriculture, promoting and creating rural employment by enhancing investments and augmenting infrastructure spends.