The Budget presented by the Finance minister has left most industry segments, not least the IT sector with mixed feelings. There is an overall feeling of satisfaction that the ‘inclusive India’ agenda has been addressed and the increased outlays on infrastructure and education will play a major role in ensuring that the commitments to providing access to skills development as well as employment are met in the years to come. While the continuance and increase of the Minimum Alternate Tax and the absence of any definitive statements on FDI in key sectors and disinvestment proposals may have let down the somewhat unrealistic expectations of the stock markets, there is no doubt that this is a budget that puts India on a firm track to economic recovery and a higher growth trajectory in the months to come.

The IT sector, particularly the SMEs and the BPO sector will have some reason to cheer with the one year extension given to the Software Technology Park scheme though nothing short of full equalisation of the benefits available to firms operating out of Software Technology Parks with the larger players using SEZs will be required to provide a level playing field within India and also to enable Indian firms to compete with growing international country aspirants to offshore outsourcing. As the global economies continue to be buffeted by recessionary storms and the demand environment for knowledge industry exporters remains soft, it is expected that the Government will address this expeditiously so that investment decisions can be made and the industry resume its double digit growth.

Recent negative trends in the global stock markets after the early summer euphoria at the green shoots of economic recovery show that much more needs to be done to give investors some confidence in the pace of economic recovery in the US and Europe. The loss of momentum in stocks and the replacement of the recovery trade where optimistic bets were being taken on better days ahead by a more cautious trade show renewed uncertainty about the stemming of job losses and the timing of an economic recovery. There are already calls from many including Nobel laureate Paul Krugman for a second economic stimulus package in the US even as the benefits of the first are yet to be seen on the ground. The speed at which China and even France have been able to put some of their displaced labour to work by initiating new infrastructure creation and modernization projects should serve as a spur to American and British action. We in India have a strong stake in a quick Western recovery as the future of many exports jobs depends on this.

The Indian domestic opportunity for knowledge services has been for many years in a state very similar to the Indian economy itself through the nineties – threatening to take off but never quite gathering the momentum to make the leap of faith. One of the biggest benefits of this budget has been the exemption from additional customs duty given to the packaged software industry, which will give much cheer to international software majors like Microsoft, Oracle and SAP and enable better IT adoption in the domestic sector. The e-Government opportunity in the domestic sector has already thrown up many mega projects like the national passport issuance plan and the unique identity scheme which will both provide significant downstream opportunities for large as well as small companies to get a share of the pie.

Two significant areas of domestic transformation in the country, which will call for significant innovation – in thinking, planning and implementation will be education and healthcare. While the role of IT in Healthcare will have to transcend hospital computerization and patient records to enabling telemedicine and other distributed healthcare services, the real value of IT will be seen in enabling scale in the higher education delivery processes across the country. The creation of new blended learning models incorporating transformational solutions like CISCO’s Webex and Telepresence and demonstrating that technology delivered content can truly develop a learner centric model of skills building in the country is the challenge as well as the new multi billion dollar opportunity that awaits the industry.

Indian IT and BPO vendors have been very comfortable serving the needs of large global customers in areas of applications development modernization and support and implementation and support of enterprise package software, but the business rules and in many cases even the application architecture have been designed and provided by the client. In the domestic context it will be important to adopt a much more consulting led approach particularly in the new impact sourcing assignment s where process transformation is required with commercial rewards being tied to outcomes rather than inputs in many cases. For the SME segment, new skills will be needed on building hosted services out of centralized data centres and supporting the pay-per-use model through customized services and payment models. Addressing the ten billion dollar plus market that the Government of India now presents is an exciting opportunity but is not without its challenges either!