The Hindu Business Line : `BPOs need cash subsidy on new hires to stay competitive'

HIGH on the wish-list of the IT industry are financial incentives to encourage BPO firms to set up units in Class B and C cities, and infrastructure incentives such as electricity and real estate to make India a manufacturing hub and policies that would enable stringent enforcement of the IPR (Intellectual Property Rights) laws.

With competition from Mexico and the Philippines emerging to pose threat to the Indian ITES sector, domestic firms need to sustain the labour arbitrage advantage.

For these firms could look at sourcing English-speaking human resources from class B and C cities, Mr Rakesh Kaul, CEO, TWS Holdings, told Business Line.

"For example, the Government could provide a cash subsidy to companies of Rs 30,000 per new hire for any ITES centre located in these cities. This would cover the cost of training and educating these employees and bringing them up to the standards that would be required," Mr Kaul said.

On the hardware front, efforts to make India a manufacturing hub has not taken off and the lack of requisite infrastructure has been the key obstacle.

According to Mr S. Rajendran, GM-Sales & Marketing, Consumer Products Group, Acer India, the Government should usher policies that would increase the domestic demand for hardware.

"Some measures like a rationalised duty structure, harmonised customs, excise, and uniform VAT would help. Moreover, the Government should stop duty-free import of laptops as personal baggage," he said.

According to Mr Kaul, the Government could encourage the manufacturing of PCs in India, thus reducing the local prices of PCs.

Additionally, a robust educational system would create a stronger base in basic sciences and a readily available pool of scientific human resource.

In terms of R&D, the intellectual property protection needs to become both law and practice "before meaningful R&D will shift to India. We have done well in the services sector but significantly lag behind China in the manufacturing sector," Mr Kaul said.

Technology investments along with more investment on front-end sales and marketing offices in North America and Europe will enable India to garner more business and encourage R&D.

The ambiguity on Withholding Tax has raised concerns as this "is creating a lot of problems in the software products business and we expect the Government to clarify a long pending issue.

Software products distribution business is a trading activity and there is no IPR transfer, hence, this is not a royalty payment and should not be subject to withholding tax," averred Mr Niraj Kaushik, Country Sales Manager, Trend Micro India.

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