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Bangalore
March 1, 2007
India has been the most favorite destination for IT off-shoring as well as
business process off shoring, which can be seen by the 65 per cent and 46 per
cent global market share respectively. Growth in the last few years has created
over 700,000 direct jobs and 3 million indirect jobs.
Consequently the country's GDP has grown over 9 per cent. While the finance
minister has taken credit for growth, he has ignored the IT and the healthcare
sectors, as well as the young middle class talent that has really fuelled the
engine for the country's growth.
It is unfortunate that the FM has chosen to tax the IT companies with MAT
(Minimum Alternative Tax). With stiff competition and with inflation and
salaries shooting up, it has not been easy for the IT sector. Real estate prices
have been escalating rapidly, resulting in exorbitant land prices for companies
to set up offices. These factors are already driving down India's competitive
edge over countries like China, Russia, Eastern Europe, Philippines and
Indonesia, which are being enthusiastically supported by their respective
governments.
Taxing IT companies would be like throttling the golden goose while enjoying
the eggs. High wages and taxes, spiraling real estate prices, inadequate
training and low employability of our graduates will mean a big decline in the
growth of knowledge based industries. No wonder the Bombay Stock Exchange Sensex
lost 300 points in less than ten minutes ever since the FM uttered the word MAT!
This Rs 600,000 crore budget shows no concern for the talented middle class.
With real estate prices skyrocketing, apartment prices in the usual middle-class
areas have become so prohibitive, that people are forced to stay in faraway
layouts on the outskirts of the city.
Today, a young newly married couple cannot even dream of a house within the
Bangalore city limits. Everyone working in cities knows the unproductive hours
they spend on roads. The poor roads and the burgeoning traffic make traveling a
daunting task – whether it is travel to work or to visit friends and family.
Excessive travel, huge housing loans and general inflation has made city living
a nightmare.
Is this the quality of life that we are providing for our hard-working city
population?
While the urban infrastructure is bursting at the seams, the FM decides to
give largesse of about Rs. 7 crore for each city in an urban renewal mission.
Does he think this paltry amount will solve the infrastructure problems of
cities?
Another critical area for future growth is the health care industry, which
the FM has chosen to ignore. Except for some nominal reduction of customs duty
for medical equipments, there doesn't seem much else to be elated about. Our
talented medical doctors can make our country proud, just the way our engineers
have done in IT.
India can attract more export-oriented industries in medical tourism. But the
FM is silent about it and the budget does not talk of attracting this industry
at all. It is sad that we produce only 18,000 doctors compared to 400,000
engineers. Due to the unhelpful attitude of regulators, many reputed corporate
groups in the country prefer to set up medical colleges in neighboring countries
or the Middle East instead of in India. But the FM has no plans to reverse this
investment drain.
Health insurance for the poor is one area that has been completely ignored by
all past FM's as well as the current one. I am sure that the Finance Ministry is
aware that 85 per cent of rural indebtedness is due to catastrophic medical
emergency for rural households. Poor families spend all their lives repaying the
debt they incurred due to medical emergencies.
Yet, offering health insurance to the poor has not been given its due
priority. However, due to pressures from Congress President Sonia Gandhi, it
seems that the FM tried to show his priority for the village population. He
quoted Jawaharlal Nehru, "Everything else can wait but not
agriculture". The FM went to the extent of announcing a scheme of Rs 3
crore in the central budget, a sum which is worthy of a Mayor of a small town.
He spent considerable time explaining his rural initiatives, but I saw no
freshness or uniqueness in these schemes. They are all old dull schemes run
ineffectively for over decades, with only part of the money really reaching the
poor villagers. We saw no response from the FM to the suggestion by the
Administrative Reforms Commission chairman Veerappa Moily, that the MPLAD scheme
be scrapped.
Overall, this has been a lack-luster budget, ignoring India's powerhouse of
talent and competitive strengths in knowledge-based industries. The budget does
not provide any roadmap for future growth.
The results could be disastrous with jobs from India being snapped up by
neighboring countries.
Vivek Kulkarni
(The author is chairman & CEO, Brickwork India, and former IT
Secretary, Karnataka Government. The views expressed here are personal). Page(s) 1
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