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Updated: January 1, 2010 23:21 IST

Technology industry priorities for 2010

D. Murali
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Milan Sheth, Partner-Technology, Ernst & Young.
Milan Sheth, Partner-Technology, Ernst & Young.

Over the last about a decade, the technology and BPO (business process outsourcing) industry has been an engine of growth for the Indian economy, but the global economic downturn has impacted the growth trajectory of the industry, begins Milan Sheth, Partner-Technology, Ernst & Young.

He, however, adds that the industry in this phase has demonstrated maturity by reducing costs, focusing on new markets, investing in sales and development, domain expertise, enhancing operational excellence and thrust on customer centricity.

“As new mega-trends continue to shape the global technology and outsourcing industry, continued support from the Government is critical for the industry to retain its competitiveness and build for the next wave of growth,” argues Sheth, in the course of a recent email interaction with Business Line.

Among his list of priorities as regards IT are: the establishing of India as a trusted global hub for professional services by managing risks effectively, global trade development and actively advocating free trade in services, a competitive tax regime such as through extending Section 10A/ 10B benefits and providing parity with SEZ (special economic zone) scheme, and ensuring incentives under Section 10A/ 10 B and SEZ continue after the Direct Taxes Code is introduced.

Excerpts from the brief interview, in which Sheth explores the needs of the electronics industry and the strategic sectors.

On the electronics industry.

The electronics industry in India is looking at a large and growing opportunity, but there still exist multiple challenges that can hamper the growth of the industry, such as inadequate infrastructure, tax structure, supply chain and logistics, inflexible labour laws, limited R&D (research and development) focus, funding, limited focus to value addition and exports.

Supply is not keeping pace with demand in India, resulting in ever-increasing imports into the country from China and Taiwan. The Government’s long-term vision should augment the growth of domestic manufacturing through special focus on this sector. A few suggestions are:

* Establish ‘National Electronics Mission’: This can be a nodal agency for the electronics industry within DIT (Department of Information Technology) and with a direct interface to the Prime Minister’s Office (PMO). The nodal agency will help in the synchronised functioning of the industry. It will enhance the ease of doing business.

* Clusters: Nurture established electronics manufacturing clusters and develop them into centres of excellence, while encouraging new ones.

On strategic technology sectors.

Given the size of the aerospace, defence, and nuclear market opportunity and current momentum among the private sector players and potential investors, the Government has an opportunity to develop a highly strategic and competitive domestic IT industry. To leverage some of the market trends and also exploit its core competencies, India should focus on:

* Areas with higher technology intensity.

* Focus on technology areas that need to be built domestically as it is unlikely to be transferred by global players.

* Areas where the private sector can collaborate and provide superior execution capabilities to Defence Public Sector Units (DPSUs) such as in fabrication.

* Parts and sub-systems manufacturing.

* Maintenance, repair and overhauling (MRO) business.

It is essential to consider IT and software capabilities as an enabling mechanism. Significant changes are required to reform current organisation and acquisition practices and fix issues such as the mismatch between technological planning and development.

Also, to accelerate the process by which the private sector and indigenous participation happens, it is imperative to initiate the implementing of key recommendations from the Kelkar Committee Report on the following areas:

* Provide private players with a level-playing field, as compared to the DPSUs.

* Tighten the offset clauses to enable more effective technology transfer to India, and enlist private sector participation in utilising investments/ business resulting from the offset clause.

***

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