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Home > Business > Business Headline > Budget 2005-06 > Report


Hardware firms gung ho

March 02, 2005 12:27 IST

"It is overall a very positive budget. I think it has opened the field for much growth in the IT hardware sector in India," says Ram Agarwal, CEO and MD of WeP Peripherals.

His words echo the feeling of much of the IT hardware manufacturers of the country, wherein a general mood of happiness prevails following the announcement of the recent Union Budget 2005-06.

As per WTO rules under the Information Technology Agreement (ITA), all 217 items specified under it will attract zero customs duty. A special countervailing duty of 4 per cent has been proposed in lieu of local taxes for imports.

"The IT manufacturing industry is glad that anomalies of inverted customs tariff structure arising out of the implementation of the IT agreement have been addressed. The introduction of additional 4 per cent CVD will provide a level playing field to the local IT manufacturers against direct imports," said Vinnie Mehta, executive director, MAIT.

With this simple move, the IT manufacturing industry feels, the finance minister has opened the market to much more growth.

The industry expects the hardware market, which has been growing at 25 per cent in value and around 40 per cent in units annually to grow much more in the coming years.

"Hardware and manufacturing investments will grow with this step. In the last few years, only around Rs 10,000 crore (Rs 100 billion) has been invested in local manufacturing setups. But with this move, I expect that the manufacturing capacity will double every year," says Agarwal.

"Local products' supply has around 15 per cent of the market share, which will also grow with the move. All this will help us compete with China better and also ensure more jobs are created in manufacturing," he added.

But not all are happy with the move. As Suresh Vaswani, president, Wipro [Get Quote] Infotech puts it, "The net effect of the changes will mean that while the cost of manufacturing will go up, the imported value of computer systems will fall, resulting in situation of domestic manufactured item being more expensive than direct imports."

In other words, imported PCs could work out to be as much as 5 per cent cheaper than locally manufactured ones.

Others in the IT industry, like Deepak Ghaisas, CEO, i-Flex solutions, feel that this will hamper the faster penetration of IT hardware among the masses which is essential to ensure smoother spread of technology downwards.

The small and fledgling local PC industry hopes that the 'inadvertent anomaly' will be rectified soon. But for the most part, the rest of the manufacturing industry, believe they will laugh all the way to the bank if the Budget delivers on all its promises.


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