We expect the government to take significant measures to maintain a good annual growth and continue to focus on inclusive growth. Growing inflation is a cause of concern for the nation. This could put an increased pressure on the cost competitiveness of the country subsequently affecting the growth.
India is a dominant player in the global software arena, but lot needs to be done to create a strong presence in the electronics hardware industry. The Indian semiconductor industry is investing more and more in Research & Development. According to a study by global consultancy firm Ernst & Young, the Indian market will clock the fastest compound annual growth rate by 2020, more than double that of China and the triad of North America, Europe and Japan.
However, if you compare India?s contribution to the global semiconductor industry, it is about 2 percent. We have lot of opportunity to grow the industry and the stimulus package for allied industries like IT, Telecom and Auto will definitely provide impetus to the semiconductor industry in India. The government needs to support and fund the Research & Development which will subsequently lead to building a strong Intellectual Property for the country. Innovative semiconductor applications can build the future of the nation as they contribute extensively to building smart infrastructure for the citizens. The latest innovations in embedded technologies in the field of Energy Management, Education, Medical etc. has only brought down the cost and bridged the perennial digital divide.
As the industry continues to invest more and more, the government needs to address the issue of Transfer Pricing (TP) which remains a concern to all Multinational, IT and Semiconductor Companies operating in India. A report on TP audit completed till Assessment Year 2007- 2008 indicates a trend of greater scrutiny, leading to increased adjustments and resultant litigations with an estimated addition of INR 42,500 crore (US$9.4 Billion). If the government targets a steady increase in tax/GDP ratio, the amount of cumulative transfer pricing adjustment over the next five years could be a staggering INR 122,000 crores (US$27.1 Billion). Advanced Pricing Arrangements (APA) would provide an opportunity to resolve potential transfer pricing issues in a spirit of mutual agreement and cooperation rather than the adversarial litigation environment.
Another important aspect of growth is India?s automobile industry that has emerged stronger with all segments registering record breaking numbers. Government needs to capatilize on this. There is a need to develop and modernize the infrastructure for SMEs involved in auto components manufacturing to improve the competitiveness of the industry. It is important that we look at auto not only for the indigenous market but also aim to become the largest export hub. We expect some measures from the government to provide stimulus to the automobile industry.
Government should also look at the investment in the education sector to make education accessible to all. Investment should be increased towards building an IT infrastructure that will subsequently take education to all strata?s of the society.
