Those software entrepreneurs who had listened to the Budget speech of Finance Minister on 29th February, 2008 with a bated breadth was in for a shock. I was also one among them. All of us had thought or were made to believe by the deluge of paper reports and some purported hints from the officialdom that the provisions of the Income Tax, which granted tax holiday for software companies under the STPI umbrella, would be rolled over at least for a few years. Every one thought that it was certain to happen.Â
But the Finance Minister decided otherwise. Nobody knows the tangible reasons that the Finance Minister had adduced to justify his stand. I still do not know whether he has any one reason that can satisfy thousands of small
software companies. If he has any, for the reasons of fair play and equity, he should tell the general public and, more importantly, the vast number of small, medium and big software entrepreneurs, without fear or prejudice. They are mostly the first-generation entrepreneurs and they themselves or their kith and still belong to the middle or lower middle-class set-ups. They are the people, who nestled castles in their dreams and gave flesh and blood to those edifices through hard work, brainpower and mostly through the dis-intermediation of Banks and Governmental support. They are incidentally the people who have put India on the world map and built the perception across the world that India is a happening place. Before that, the perceived view was that India was like an elephant, lurching and sloshing. Be that it may, let me assure you that tax holidays or otherwise, software industry and the related avocations like BPO will continue to click, since it had grown up without any help from any quarters. Banks and institutions had and still are turning a deaf ear to their financial requirements. The reason is that the software entrepreneurs do not have much to boast of as collaterals in case there is a loan default. And yet, the record of repayment of loans in time by those fortunate software companies who could avail loan facilities from the institutional sources, I am told, is best in the country. More so, the software sector has rewritten the financing norms in the country, moving away from the debt financing to equity culture bringing more venture into the country.
I was privy to a conversation the other day, when a few software entrepreneurs were initiating into the field sharing their initial teething problems. One thing that struck me was that all of them had, more or less, the same type of initiation. They had the fire in their belly, but could not match up with the size and depth of their pocket. Most of them pawned or sold their family’s gold or property without knowing from where their next meal would come. Not an isolated story. Even Narayanamurty did so to create the seed money for Infosys. So also almost all software entrepreneurs, maybe with some exceptions. Now, they have made money and created an aura in the country that wealth generated should be equitably distributed among the stakeholders. The peons, drivers, sweepers, etc. started owning ESOPs and shed their inhibitions and complexes. They invested in their children’s education, gained confidence and set roll models for other industries, where the employer and employee divide was and is still wide and conspicuous.
These trailblazing examples, I believe, are not properly codified or credited. I digressed a bit. Let us go back to the conversation of the software entrepreneurs. They demanded to know what the otherwise-liberal Budget – giving over Rs.60,000 crore or so to the farmer lobby – could not take a decision on the rollover of Income Tax provisions on the software industry. Why the Government failed to appreciate that the dictum that “small is beautiful” is not valid in the case of software industry. Here, small means more miseries, disadvantages, lost opportunities, etc. Of course, they wanted the Government to appreciate that the industry is upfront with higher rentals, incidence of periodic hike in salaries and, more importantly, the SEZ syndrome, which, according to them, is more a real estate proposition than an export driver. By 2009, the year on which sun sets on the IT provisions of governing tax holidays for STPI, the micro, small and medium enterprises may have to migrate to SEZs for their operations. Who would fend for them for getting the space, which has already skyrocketed now? When the demand for space goes up, prices for that will go for a six. The beneficiary in that eventuality, whether intended or otherwise, is the real estate people or the SEZs and you know at whose cost.
Yet, I appreciated the guts of those youngsters. The last word from them is that we will bounce back in the adversities since we were baptized by fire and the heat emitted from sunlight would not affect us. Yes, they belonged to a younger age group. But I thought differently. There is another Budget to go before the sun sets on the tax holidays. There is always a next time.
