Recap of Union Budget 2011–PCs to Become Dearer, Double blow for small, medium IT firms

The Indian government has set ambitious target for Rural broadband penetration, i.e. to provide broadband connectivity to 2,50,000 Panchayats in the country in three years.

“The government will dig into the Universal Service Obligation Fund established in 2002 to improve rural connectivity, to launch the broadband project. It is estimated that nearly Rs 25,000 crore is lying idle in the USOF” [source].

Improving broadband connectivity has found the pride of place in the government’s to-do list because studies have shown that for every 10% increase in internet penetration, GDP climbs by 1.38%, though definition of broadband needs a relook given the QoS of Indian telecom providers.

Important to note that Average Internet Speed in India is 849KBPS [Global average is 1.7 MBPS].

Telecom revolution yet to reach over 62,000 villages

As per the economic survey, there are still about 62,443 uncovered villages, which would be provided with village public telephones (VPTs) facility with subsidy support from the Universal Service Obligation Fund (USOF).

The country’s total telecom subscriber base stood at 764.77 million at the end of November 30, 2010 [source].

Double blow for small, medium IT firms

Higher Minimum Alternate Tax (MAT) and slapping of the tax on special economic zone (SEZ) developers and units has only rubbed salt into the wound. IT industry argues that MAT is globally only one-third of corporate tax, whereas in India it is more than half.

This, in turn, would deplete financial resources. [source]

PCs to become dearer

The Union Budget has withdrawn excise-duty exemptions on a slew of hardware items including computer microprocessors, floppy disc drives, hard disc drives, CD-ROM drives, DVD drives/writers, flash memory and combo drives — a move that could push up computer prices marginally for some players. These IT items/products will now attract a concessional excise duty of five per cent [source].

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