The Indian IT sector lost out on 250,000 jobs in 2010 to China and Philippines disclosed TV Mohandas Pai, director, human resources and member of Infosys board. In a candid chat with CNBC-TV18’s Latha Venkatesh, Pai said, the pain factor in doing business in India is long. "The government has just taken the eye off the ball and doesn’t seem to care anymore," he pointed out.
Pai said the government needs to view IT industry differently with rising competition. The budget, he said, needs to focus on sops for employment generation. "The skill development commission and the government of India should give training grants to many small companies," he added.
Below is a verbatim transcript of the interview.
CNBC-TV18: What are you expecting from the budget? Do you think in the situation that the IT sector is now, and it is crucialness in terms of software exports and dollar needs of the country, some fillip is needed in term of taxes?
Mohandas Pai: I would look at the IT sector from a different point of view. For example, next year there is a possibility that IT sector could hire gross 400,000 to 450,000 people. So from the government point of view, I look at the IT sector as an employment generator. If I were in the government or the finance minister (FM), I would give them all that they want, so they can increase the employment.
I think because of bad policies for the last three years, India has lost between 250,000 and 300,000 jobs to other countries like Philippines and China. The Philippines has overtaken India in the customer contact centre business in the BPO and China is expanding rapidly because of good infrastructure. We are also in China.
So I would say that the government needs to look at the industry very differently. The tax issue is something that the government needs to focus on. The government looks at companies like Infosys, TCS and says, "You are making profits." but I think many other companies don’t make that kind of profits. So the STPI should be extended for the next five years. The SEZ should be made simpler because many income tax offices are denying the benefit of SEZ to companies. The refunds due to the IT industry of Rs 2,500 crore on service tax should be given. Money is being held up for very flimsy reasons.
The harassment to companies undergo in terms of transfer pricing and in terms of tax assessment should be done away with because all of us are going through a very bad time because the tax authorities are passing orders without any basis. Then the process of appease in the tax administration should be improved because these are some of the things we need from the budget in terms of tax area.
In terms of other areas, we do need inputs for training. The skill development commission and the government of India should give training grants to many small companies. So they could help retrain and train the people to face competitive pressures.
CNBC-TV18: You said that India lost a lot of jobs — about 250,000 to Philippines and China — but what was the specific reason for the job losses? Was there tax reasons at all?
Mohandas Pai: It was the lack of a policy on STPI because the STPI went on getting extended one-year at a time for about three years. All this talk about the government about the tax policy not being good etc — the government forgets, this industry has created 2.5 million jobs and these jobs have not come easy. It is difficult to operate in India. Infrastructure is very bad. We have to put up power plants. We have to transport our own people. We have to help build roads in this country. We have to train people. There is enormous amount of cost.
While companies like us have become large enough to bear the cost, there are many small companies, which are unable to bear the cost and the cost become high. About 35% of India’s IT is captive and MNCs want a lower cost. So they shut it down and go to some other country where they can do much better and that is how the Philippines has grown in the contact centre because the Indian government slept over it.
Looking at it from the tax point of view to say, “We are giving a tax benefit and estimate that benefit to be maybe USD 1.5 billion this year.” For USD 1.5 billion, if I go and get 400,000 high quality jobs, any government in the world will say, “Yes, take it and give me the jobs.” The government just doesn’t understand.
This is going to have an impact on the current account deficit because if exports don’t take place, growth doesn’t take place at same pace from India, it will be impacted.
We will grow. We will grow in China and Philippines. We will grow in Brazil. We will go out and we will grow all the places and create employment. Possibly maybe four years later, more employment outside India than India. But India will lose. India is a domain of the FM and the government. The government has just taken the eye off the ball and doesn’t seem to care anymore. They are not responsive when you talk to them. They just don’t want to listen. They think we are coming and asking for some crumbs — some kind of a subsidy and they’re saying, “We giving you so much of a subsidy.” But look at the extra cost that you bear in this country. The pain factor in doing business in India is long.
CNBC-TV18: To be fair all sectors face the same problem of poor infrastructure.
Mohandas Pai: I understand but we are creating 450,000 jobs. Other sectors are not creating 450,000 jobs.
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