Software Industry in Budget 2008

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The Union Budget of India for the year 2008-2009 was announced on 29th February 2008. Information Technology - the sunshine industry of India, has been registering tremendous growth over the years. New budgetary allocation and new policies for the development of the Indian software industries and its allied sectors was a major focus area of budget 2008. The Indian Rupee appreciation factor and the rising wage issue have been taken in to account during the latest Union budget of India.

The apex body- NASSCOM and the IT-BPO industry of India have responded positively to the Union Budget 2008-2009.

The Department of Information Technology (DIT), under the Ministry of Information Technology, Government of India has been allocated Rs 1,680 crores in 2008-2009. Further, three new schemes have been announced for the development of IT in India. Two schemes for the establishment of one lakh broadband Internet-enabled 'Common Service Centers' in rural areas and another scheme called 'State Wide Area Networks' (SWAN) have been announced. The former scheme is supposed to get assistance from the Central government of India. A third scheme for the 'State Data Centers' has been announced with a budgetary allocation of Rs 275 billion. The IT and ITES sector of India is expected to benefit from increased spending on education as allocated in the Indian Union Budget 2008-2009, since this is expected to add to the present talent pool of India.

The tax regime for the Indian information technology sector has been broadened in the Indian Union Budget 2008-2009. Customized Software will attract 12% service tax from the financial year 2008-2009. Further, there has been an increment of Excise Duty from 8% to 12% for Packaged Software.

The Indian Union Budget suggests that there is huge potential for further growth of the Indian software industry, since its share in the global market is still quite low. India should leverage the knowledge extensive cheap labor force that it has to the fullest. Outsourcing business is growing at a steady pace and huge growth opportunity still exists. Particularly, areas like consulting, package implementation and systems integration holds tremendous opportunity along with traditional areas like Software application development and maintenance. The main concern for the Government is too much dependence on US market which imports around 60% to 65% of Indian Software Products. The back-lash against outsourcing jobs to India has further lessened competitiveness amongst the clients. Further, high attrition rates due to dissatisfaction and higher salary expectation is reducing profit margin of companies. Talent crunch is also eating away profit, since a substantial amount of money is being invested in imparting basic training. The present attrition rate of the Indian IT industry stands at 18%, which is much higher in comparison to other Indian industry.