NEW DELHI
FEBRUARY 5, 2007

MAIT, the apex body representing India's IT hardware, training and R&D services sectors, announced the findings of its Industry Performance Review for the first-half of financial year 2006-07. The total PC sales between April and September 2006, with desktop computer and notebooks taken together, were 2.96 million (29.6 lakh) units, registering a growth of 19 percent over the same period last fiscal. The buoyant mood in IT consumption was led by significant growth in notebook sales, which grew by 180 percent, while consumption of desktops grew by 8 percent. PC sales are projected to cross 6.5 million units in fiscal 2006-07, given the strong macroeconomic conditions and buoyant buying sentiment in the market, led by demand from various industry verticals.

The Second Quarter (Q2) ending September'06 witnessed PC sales exceeding 1.75 million units, registering a growth rate of 46 percent over the previous quarter and 19 percent year-on-year. Desktop sales crossed 1.5 million units with 48 percent sequential growth while notebook sales totaled 0.25 million units with 38 percent sequential growth.

Demand was highest from telecom, banking and financial service sectors, education, retail and BPO/IT-enabled services, and rose also on account of some major e-governance initiatives of the Union and state governments. The southward trend in pricing continued during the year due to technology reasons. Further, significant consumption in the small and medium enterprises contributed to the industry growth and consumption in the home market remained buoyant.

The bi-annual MAIT Industry Performance Review - ITOPs, conducted by India's leading market research firm IMRB International is a survey of the IT hardware sector's efforts to manage the business environment, gauge the market potential and consumer trends. This round of the study involved face-to-face interviews with over 24,500 respondents selected randomly across 22 cities in India. The MAIT-IMRB study was initiated in 1996-97 and encompasses five broad product segments - computers, networking products, printers, other peripherals and Internet connections. Apart from the half-yearly review, a supply-side estimation module has also been introduced to monitor industry performance every quarter, alternating with the half-yearly review.

Commenting on the need for a strong domestic IT market to strengthen India's hardware manufacturing industry, MAIT Executive Director, Vinnie Mehta said: "Domestic demand is likely to gain tremendous momentum in 2007, which has been declared the 'Year of Broadband'. We welcome the slew of encouraging policy measures announced by the Government to promote development of content in the local languages. MAIT is geared up to facilitate more effective engagement by the industry across verticals. It works to ensure that the growth in market translates into manufacturing opportunities and, as such, welcomes the clearance of the Fab policy. We expect the details of the policy to be announced without much delay. The industry is also eagerly awaiting the long overdue policy for the manufacture of IT and electronics products. The above two policies could play a critical role not only in boosting highly capital-intensive activities like the manufacture of semiconductors, LCDs, storage devices and so on, but also in expanding the consumption of IT goods and services in the country."

Stressing the need for a stable policy regime, MAIT President, Mukul Singhal added: "MAIT members have unanimously emphasized in our recommendations for the forthcoming Union budget that status-quo be maintained on tax structures for IT products including the continuance of a reduced excise duty of 12 percent on PCs. Since 2004, the PC industry has witnessed changes in the excise duty structure; however, it is only in the last one year that an excise regime was introduced to establish a level playing field between local manufacturing and imports. It is imperative that this continues. In the same spirit, all IT products should attract the same rate of VAT across the country and the confusion over applicable VAT rates, which has arisen from the changes in Harmonised System of Nomenclature (HSN) from January 01, 2007, must be cleared. Accordingly, the VAT rate on IT products must be restored to the earlier 4 percent level immediately. Further, the levy of central sales tax (CST), which with its cascading impact, is a major deterrent to local manufacturing, must be removed immediately."

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