What The India 2012-2013 Budget Means For ICT Vendors

The Indian government announced its 2012-2013 budget on March 16, 2012. While the announced budget does not contain direct incentives to promote the domestic ICT industry, there will be adequate indirect opportunities for vendors to explore. The excise duty will increase from 10% to 12%; this will have a marginal impact on the sale of PCs (desktops, laptops, and tablets), but the government’s focus on improving infrastructure, creating efficient delivery mechanisms, and improving e-governance will provide substantial indirect opportunities to IT vendors.

The latest budget aims to achieve long-term and inclusive growth for the economy and is in sync with my upcoming report, “India’s 12th National Five-Year Plan (2012-2017) Provides Massive ICT Opportunities.” The report answers questions such as why and how technology will act as a key enabler for the Indian government to achieve its growth target.

The 2012-2013 budget will provide adequate ICT opportunities for vendors, such as:

  • Packaged and industry-specific applications, e-governance, mobile apps, and analytics will support the strong need for sustainable revenue sources to fund investments. A common problem that India faces today is the significant imbalance between expenditures and revenues. The budget categorically highlights the need to deliver more with existing resources; we will witness increased demand for packaged and industry-specific applications, e-governance, and mobile apps to help generate sustainable revenue to fund investments. Also, the outlay for e-governance projects will increase by 210%, from the equivalent of US$62 million to US$192 million; applications from software vendors for e-governance initiatives will present some of the most exciting opportunities in India. And the government will use various analytical tools to improve revenue sources and take corrective actions by identifying gaps.
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Emerging Asia Will Be A Hotbed For ICT Sector M&A Throughout 2012

In their Asia Pacific Tech Market Outlook For 2012 report, Andrew Bartels and Frederic Giron show that government and business IT spending in the emerging markets of Asia (including China, India, and the ASEAN countries) will reach US$180 billion in 2012, growing by roughly 13% over 2011. While emerging Asia’s IT spending is surging this year, economic obligations in the developed markets of North America, Europe, and Japan will ensure continued austerity — and limited IT spending growth. In other words, emerging Asia is clearly a lucrative region of opportunities for US, European, Japanese, and South Korean vendors looking for new sources of growth to offset lower business prospects in their home markets.

Asia is a region of highly disparate countries, with regulatory complexity, cultural differences, and a limited pool of skilled resources. These barriers to entry and expansion will compel vendors to look beyond organic growth, which is simply too time-intensive. Instead, mergers and acquisitions (M&A) of local/regional incumbents with local know-how, skills, and client relationships will increasingly be a strategic imperative for vendors targeting emerging Asia. I’ve highlighted some examples from the Indian market below, but I foresee similar trends in the overall ICT sector throughout emerging Asia:

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