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.
  • Power capacity creation and efficient distribution will accelerate the adoption of smart grid technologies. The Indian government realizes that it will be difficult for the energy sector to continue to grow at a healthy rate without new power generation capacities and proper asset utilization and optimization. Power sector-friendly announcements will generate strong demand for smart grid technologies, including RFID, sensors, pattern recognition, BI, and customer data management, in 2012 and beyond.
  • Rural healthcare is a key investment sector that will attract holistic ICT spending. Realizing the increasing importance of healthcare, the sector has received a 25% year-on-year increase in fund allocation from the government in the 2012-2013 budget, with a 15% increase in allocation reserved for the National Rural Health Mission program. With the emergence of many new large and small hospitals and healthcare units in rural areas, IT hardware (like storage, services, security, and networking equipment) and software (like digitization, clinical information systems, and hospital information systems) will get maximum gain from rural healthcare spending.
  • The quality education objective will drive technology spending. The allocation for the education sector has been increased by 21.7% year-on-year in the latest budget. Also, the proposals to set up 6,000 schools through public/private partnerships (PPPs), and implement a service tax exemption for school education infrastructure will generate substantial opportunities around PCs (desktops, laptops, and tablets), classroom technologies like interactive engagement, and back-office technologies  like CRM, ERP, BI, and Smart Campus. Low-cost tablets (like those from Aakash) will be in much greater demand when backed by government initiatives.
  • The increased focus on the UID project will benefit information security software and systems. The Aadhaar unique ID (UID) scheme received a great boost, as the government reiterated its aim to make the project a success by allocating US$2.8 billion to enroll around 400 million Indians by June 2013. As the Aadhar platform becomes a centralized mechanism to provide service delivery and track subsidies, there will be concerns among government organizations about citizens’ data security, which will create demand for information security software and systems in addition to standard IT hardware-related opportunities.
  • Infrastructure consolidation and integration will be the key. System and data center integration will deliver potential business for government-focused systems integrators. Generally, government departments and bodies have developed their own enterprise architectures with individual or point-to-point integration solutions. The integration of the network and service delivery infrastructure, as well as the integration of Aadhaar platform with all of the government bodies, will gain attention.

The Indian government has realized that it cannot put the economy back on the high-growth track with a “business as usual” approach. A radical shift in the government’s approach is required to meet its growth targets. We believe that this shift will be supported by new and innovative delivery models for the deployment of effective technologies. The need of the hour for the Indian government is to adopt the CIO role at the federal and state levels and act more like an enterprise.