The Indian IT hardware industry can look forward to making a substantial impact by taking some of the steps such as bringing down the hardware cost by 43% with the help of the Government subsidies, reducing the total cost of ownership (TCO) of a PC and broadband solution (currently estimated to be ~Rs 15,650 per annum), providing Income tax exemption to individuals against PC purchase, and promote purchase of PCs amongst specific segments like students and less than INR 5 lakh income households, among other steps, suggests MAIT- KPMG Reporttitled –“Indian Market Place- IT the unrealized potential”, unveiled by Dr. Sam Pitroda, Adviser to Prime Minister, Public Information Infrastructure & Innovations, Government of India.
The report estimates that in FY 2014-18, there could be an increase in sales of desktop and notebook from 6 percent to 18 percent CAGR contributing additional GDP of INR 66,300 crore, taxes of INR 25,000 crore and generate new employment for 1,11,600 people. However, if the recommendations are implemented by FY 2018, the total number of persons employed would reach 4, 23,500 on average, contributing INR 2, 91,700 crore to Gross Domestic Product (GDP) and INR 1, 10,600 crore in taxes through direct, indirect and induced effects. This would in turn help boost the sales of desktops and notebooks to grow at 7%, resulting in the current installed base of ~48 million increasing to ~76 million by end of FY 2018
Economic Impact Of Demand Acceleration
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| Expected Growth by FY 2018 | Overall Contribution | |
| GDP | Rs 66,300 crore | Rs 2, 91,700 crore |
| Employment | 1,11,600 | 4, 23,500 |
| Taxes | Rs 25,000 crore | Rs 1, 10,600 crore |
| Increase in Sales | ~48 million | ~76 million |
Speaking at the launch of the report, Amar Babu, President, MAIT, said, “There is no denying that India has a huge potential for the growth of IT hardware industry, we need the right approach to enhance IT penetration and significantly contribute to the economic growth. This report has identified some of the bottlenecks which are hampering the PC penetration in the country and has proposed the most viable recommendations to overcome them”
According to the findings of the report, the current PC penetration in rural India is limited to ~9 million households whereas ~14 million can afford computers, as they fall above the estimated affordability level of INR 5 lakh annual family income. Hence, 36% households in rural areas that can afford a PC still do not own one. Low rural literacy, poor infrastructure and lack of local language product customization are some of the key impediments to rural PC penetration.
Further elaborating the report, Anwar Shirpurwala, Executive Director, MAIT, said, “Increasing the penetration of PCs would not only contribute to the economic drivers but it would carve a path towards a developed and computer- educated society. A better IT infrastructure would lead to life augmentation that would help consumers as well as the Government. Similar to the adoption in the private sector that has taken the lead with banking, online ticketing, services, online shopping, all of which ‘make life easier. On the whole, this would enhance India’s face in the race with the other developed nations of the world.”
Addressing the audience, Debjani Ghosh, Vice President, MAIT, said, “It’s high time we start extending the reach of PCs to masses who can experience the benefits of computing and connectivity. Coupled with customized modifications of PC, notebooks, and tablets depending on user needs and affordability apart from joint efforts of the government and the industry, this can make a hugely impact the penetration of IT in the country.”
The keynote speaker at the launch was J Satyanarayana, Secretary, DeitY, Ministry of Communications & IT, Government of India.
The launch was followed by a panel discussion moderated by Mr. Pradeep Udhas, Partner, KPMG. The eminent panelists were - Dr. Ajay Kumar, Joint Secretary, DeitY, Mr. Amar Babu, MD, Lenovo, Mr. Krishnakumar P, Executive Director, Dell, Ms. Debjani Ghosh, MD, Intel and Mr. Neeraj Gill, Group Director-OEM, Microsoft.
Issues & Recommendations
Issues
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Recommendation
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Households
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Limited perceived utility of
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Run targeted campaigns to spread awareness about the benefits of PCs
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Limited product customization in local
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Promotion of and training on usage of Unicode representation of Indian languages, INSCRIPT keyboard, in Tier 2/3 towns, rural areas
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High cost of ownership
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Reduction in Indirect Taxes on IT hardware
· Reduce Excise Duty rate on hardware from 12 to 6 percent and increase abatement from MRP from 20 to 35 percent to align the duty structure with mobile phones and entail reduction of duty on hardware (estimated impact of 4 to 6 percent)
· Align CVD rate on the components with other inputs such as microprocessors, hard disk drives, etc. where CVD rate is 6 percent. Exempt 4 percent ADC applicable on all imported components that are used for manufacturing desktops, laptops, etc.
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Income tax exemption to individuals against PC purchase
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Schemes to promote purchase of PCs amongst specific segments like students and less than INR 5 lakh income households
Introduce schemes to promote purchase amongst teachers
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MSME
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Low awareness of existing government schemes
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Run awareness campaign promoting the IT spend component in the existing Credit Linked Capital Subsidy Scheme (CLCSS)
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Develop Welcome Toolkit for MSMEs to be given to them on EM filing and be available to existing entities as well
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Limited perceived utility of IT in core business
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Develop brochures with case studies on performance improvement due to PCs and distribute to MSMEs
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High cost of ownership, specially software cost
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Widen the scope of the existing CLCSS
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Large Enterprise
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Lack of incentives to spend on new systems
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Modify depreciation policy for IT hardware to allow 175 percent deduction of expenditure on IT hardware from business income
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Government as a buyer
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Limited flexibility in ERV clause impacts procurement in case of adverse currency movement
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Government may consider revising the clause, adding more flexibility as per the prevailing market conditions
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Inadequate training limiting
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Inclusion of IT as a compulsory subject with both theory and practical
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All customer segments
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Lack of enabling infrastructure
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Provide last mile broadband connectivity under NOFN
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