Indian Budget Boosts Telecom, Computer Industries

Bangalore, India " India's telecommunications and computer hardware sectors got a boost from the government in its annual budget proposal announced here on Thursday (July 8).

The finance ministry announced higher ceilings for foreign direct investment in India's telecommunications companies and removed excise duties on computers. Hundreds of state-owned technical institutes will also be upgraded with new equipment and curricula.

Import duties totaling 15 percent on mobile switching centers have also been eliminated and specified items used in the manufacture of mobile handsets have also been exempted from import duties.

Maximum foreign investment levels were raised from 49 percent to 74 percent in the budget proposal unveiled in Parliament by Finance Minister P. Chidambaram. Most Indian telecom stocks surged in response to the announcement. "The initiatives to raise the foreign direct investment limit and exempt mobile switching centers from import duty are a welcome move and will help mobilize much needed investments and drive down the cost of telecom equipment," said Ashish Chowdhary, country head for India and South Asia with Nokia Networks.

Removal of the current 8 percent excise duty on PCs has been sought for years as a way to increase the market penetration and make computers more affordable."By abolishing the excise duty on computers, the finance minister has significantly reduced the cost of owning a PC. I expect this to act as a trigger for the large-scale proliferation of PCs," said Sanjeev Keskar, country manager, AMD Far East Ltd.

Still, India's PC industry still faces an uphill battle. While excise duty on PCs have been removed, manufacturers have other concerns. "We are anxious to know about the excise duty on the components for local manufacturing" of PCs, said K.U. Subbaiah, managing director of Tyco Electronics, India

Similar concerns abound over the future of telecom manufacturing here. "The government has not given any motivation to the local telecom manufacturing industry. In my view, the government has missed a chance to make use of this growth opportunity in telecom to establish India as a manufacturing hub for telecom equipment," said Ravi Sharma, managing director, Alcatel India.

The Consumer Electronics and TV Manufacturers Association (CETMA) was also unimpressed. CETMA said there is little in the budget proposal to promote investment in the sector, even though it contributes 40 percent of all electronic hardware manufacturing in India.