TechnoparkToday.com (Jan, 2014): Dr. Manmohan Singh, Prime Minister of India, has said that there is significant merit in the demand for the revival of the Software Technology Parks of India (STPI) scheme in tier 2 and tier 3 cities. He was responding to the representation given by the the Group of Technology Companies (GTech), the industry body of software companies in Kerala, when they meet him at Raj Bhavan today.
The Prime Minister assured the GTech representatives that Government of India would seriously examine the issue. He further added that diversification of the IT industry to tier 2 and tier 3 cities of India would be crucial for inclusive growth. Chief Minister Shri. Oommen Chandy was also present during the discussion.
GTech apprised the Prime Minister of the critical need to have the scheme restored to rejuvenate the sagging fortunes of the Indian IT industry. The representation handed over to the Prime Minister described the revival of STPI scheme as most crucial to make growth and economic development driven by IT more inclusive.
It was pointed out that the growth of Indian IT industry has slowed down significantly, from a 25 % CAGR until FY 2011 to about 10.4 % in the last fiscal. While there are challenges relating to the Indian IT business model itself, which the industry should reform itself to address, the Government of India can effectively step in to provide policy support to accelerate the growth level. One such policy support is the restoration of the STPI and SEZ Scheme which provides tax exemption on export income, but was terminated in the year 2011.
“90% of the IT exports from India emanate from units located in the seven tier-1 cities of Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pane and Kolkata. The fifty plus tier-2/tier-3 cities of India accounts for only less than 10% of the IT output of India. There are tens of thousands of small IT companies based out of the tier-2 and tier-3 cities of India; Kerala itself has over 400 such companies. Since the next phase of growth of the IT industry in India, which is IP based and nonlinear, can be fuelled by units located in these smaller cities, policy support has to be extended to such units,” said Mr. VK Mathews, Chairman-GTech.
“Since the size of the IT industry in Tier-2/3 cities is minimal, the actual tax loss to the Government by giving this tax relief will be minimal. This will be a path-breaking policy initiative by the Government of India”, Mr. Mathews added.
“Restoration of STPI scheme will go a long way in decongesting large cities as growth and development will be distributed to rural areas. This way, rural employment opportunities are enhanced; digital divide reduced, paving the way for promoting inclusive growth across the country”, said Anoop P Ambika, Secretary-GTech.
GTech has been spearheading the campaign for restoration of the STPI, ever since the scheme was discontinued. Officials of GTech Bysakh Bhasi, Ranjith Balan and Renjith Ramanujam were also present during the meeting with Prime Minister.