People Web International

By Ashis Dutta, PWI Reporter Karnataka

BANGALORE, INDIA - The world over, the city of Bangalore in India has become synonymous with Information Technology (IT). So much so that the term ‘Bangalored’ has been coined in the United States and also inspired a soap opera there.

But a question mark has been put on the city’s remarkable technology journey since the year 1991. The reason being the recent Union Budget where the fiscal incentive of tax rebate so far enjoyed by the IT industry has been withdrawn. The effect is a whooping 30 % plus cess and surcharge in tax.

Mr. Vivek Kulkarni, a former top bureaucrat responsible for the growth of IT in Bangalore, has been critical of the government’s policy of withdrawing the tax benefit of the IT industry terming it as killing the goose laying golden eggs.

Kulkarni puts forth the example of China, which, despite its phenomenal growth from a struggling economy in 1978 to the manufacturing hub of the entire world, continues to offer tax incentive to the manufacturing industry.

Due to this tax burden, the most affected among the IT fraternity in India is going to be the small and medium enterprise (SME) sector, as large IT companies have already relocated most of their operations to the tax free SEZ (Special Economic Zone). For an industry which provides high quality employment to more than two million people and supports secondary and tertiary employment of another ten million, the tax has certainly come as a dampener.

As for the city of Bangalore, once the fastest growing city of Asia, whose predominant economic activity hovers around IT – be it real estate or retail, transportation or recreation, it is to be seen as to how the city copes with this new fiscal burden.

-- by Ashis Dutta - PWI Reporter Karnataka - karnataka@peoplewebinternational.com