Budget 2023: IT sector cheers announcements on AI, 5G, and skilling

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India’s IT companies did not have major demands from the 2023 union budget, with asks primarily focused on the ease of doing business. Barring a few niggles, the National Association of Software and Service Companies (NASSCOM) — the industry body — was satisfied with what the budget delivered.

Companies in the sector cheered the budget, and termed it positive from a technology sector perspective.

As part of her speech for this sector, Finance Minister Nirmala Sitharaman focussed on skilling, 5G, as well as artificial intelligence (AI).

The FM said that 100 labs will be set up in engineering institutions to develop applications using 5G services to realise new opportunities, business models, as well as employment opportunities. “The labs will cover, among others, applications such as smart classrooms, precision farming, intelligent transport systems, and health care applications,” she said.

She added that three centres of excellence (CoE) for AI will be set up in top educational institutions. “Leading industry players will partner in conducting interdisciplinary research, and develop cutting-edge applications and scalable solutions in the areas of agriculture, health, and sustainable cities,” she added.

The government also plans to set up a scheme — the Pradhan Mantri Kaushal Vikas Yojana 4.0 — to skill youth in the next three years.

“On-job training, industry partnership, and alignment of courses with industry needs will be emphasised. The scheme will also cover new-age courses for Industry 4.0, like coding, AI, robotics, mechatronics, IOT (internet of things), 3D printing, drones, and soft skills. To skill youth for international opportunities, 30 Skill India International Centres will be set up across different states,” the Finance Minister stated.

In a statement, NASSCOM said that the budget focused on three key transformational trends that will help India build its competitive advantage — digital transformation, energy transformation, and supply chain resilience. “The budget outlines India’s plan to become an engine for global growth and deploy digital technology to lead India’s development,” it said.

It added that the budget called out the role of technology in almost all major announcements, and that the creation of 5G labs “will further help in opening newer avenues and opportunities, scaling up new business models and employment prospects.

“The government’s focus on not just building COEs to drive AI development in India, but also on making AI and data work for India will be critical in building the core design principles of AI innovation for a diverse nation like India,” NASSCOM said.

In a discussion with NASSCOM President Debjani Ghosh, the industry body’s Public Policy head, Ashish Aggarwal, pointed out one concern that could impact IT companies.

Since a lot of IT companies work out of Special Economic Zones (SEZ), a change proposed in the Finance Bill, 2023, is that foreign exchange earnings have to be brought back into the country within six months. This, Aggarwal said, is something that needs to be discussed and analysed from an industry point of view as it could be a challenge.

Among NASSCOM’s asks was a timeline for the conclusion of advance pricing agreements, which are used to resolve transfer pricing issues before a transaction takes place. Aggarwal said that on that front, the budget’s focus on addressing the backlog of appeals is going to be very useful.

“We had asked them to put a binding timeline, but they're putting their efforts into building capacity to handle these cases. I think that's very good,’’ he said.

Tata Consultancy Services CEO Rajesh Gopinathan said that the budget builds on the government’s focus on enhancing digital infrastructure.

“The provisions for research in AI and 5G implementation, and the government's vision of Make AI in India and Make AI Work for India are commendable. Bringing in the National Data Governance policy is also a welcome step. Overall, it's a forward-looking budget that will fortify the digital spine of the country,” he said.

Accenture India Chairperson Rekha Menon said that there was a strong focus on the knowledge economy with technology as the bedrock for boosting socio-economic growth and green development.

“While agriculture, healthcare, and sustainable cities are the current focus of the CoEs, India has multidimensional potential – AI can add an estimated $450-$500 billion to India’s GDP by 2025, more than 60 percent of which will be from four key sectors – financial services, consumer packaged goods & retail, healthcare, and industrials & automotive. India will need to continue to invest in these CoEs to keep pace with the evolving asks across all sectors,” she said.

Jagdish Mitra, Chief Strategy Officer, Tech Mahindra, called it a positive budget from a technology sector perspective, and added that it sends the right message about 5G labs, AI CoEs, and the focus around skilling. This, he said, “is absolutely the key need for the country as we live through the Prime Minister’s vision of technology being the core enabler.”

He also said it was commendable that steps were taken around the ease of doing business.

SAP Labs India SVP and MD Sindhu Gangadharan said that the budget underlines the imperative of job creation and youth upliftment through the PM Kaushal Vikas Yojana 4.

“In line with this, the establishment of 30 Skill India International Centres across states will be critical to developing and nurturing the digital talent pool in the country. Additionally, the launch of the National Data Governance Policy and three CoEs for AI are initiatives that will help further cement India’s position as the global innovation hub. In fact, the launch of 5G labs will create new avenues of opportunities through the network’s rapid and efficient expansion,” she said.

WNS Group CEO Keshav Murugesh also said that the establishment of three CoEs for AI, and the National Data Governance policy “will strengthen India’s position as a global innovation hub.” He added that the launch of 5G labs will act as a catalyst to drive faster and better expansion of the network, creating more avenues for innovation.

L&T Tech Services CEO Amit Chadha said that the budget has focussed on boosting digital infra and adoption, which he termed a positive sign for the tech industry.

“As a pure-play ER&D services provider, our belief is that such mass enablement of digital transformation and innovation will unlock the full potential of the Indian engineering and technology sector, helping the country maintain its position as a globally preferred destination for engineering services,” he said.

LTIMindtree CEO Debashis Chatterjee said that the budget underscores the growing significance of cloud, data, AI, and other new-age technologies in governance, “while also taking a big step forward in simplifying processes and improving the ease of doing business.”

“The budget’s emphasis on digitisation and trust-based governance will open new opportunities for the IT sector to leverage its globally-acknowledged technology strengths to make a difference here,” he said.

He added that industry players partnering with educational institutions for interdisciplinary research and AI and 5G applications will create “a win-win proposition for both.”

“Building upon the earlier vision with a more structured development of Tier 2 and 3 cities, the budget will further enhance our ability to capitalise on an expanded talent pool, which is vital to the long-term sustainability and scalability of the IT services industry in India. Overall, the budget underscores India’s potential of becoming a global benchmark in technology-led transformation,” he said.