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Remove IT tax exemptions immediately: Murthy
May, 19th 2009

Former Infosys chairman Narayan Murthy gives his views on a wide range of topics and opines that the IT industry should not be given any tax exemptions. Excerpts from the interview:

Q: How do you see this government coming back with such a clear majority?

Murthy: Indian voter has voted for stability and has recognised honesty, decency and courtesy. He has responded to the need for inclusive growth, so all in all a fantastic voting. I am very happy about it.

Q:How much of a challenge do you see for this government with the expectation level going to be very high? The bar has been raised significantly because India has seen a growth of 9% or so we have come down now so we are aligned to the global economics
. How much of a challenge do you see now for this government to perform?

Murthy: The fact that this government has been voted back in such a majority in the sense that there are not too many partners in the coalition and any impeding forces have been on the retreat is a clear indication that this government can actually perform better and the current government will indeed achieve better than what it did earlier.

Q: The government has already given some fiscal stimuli to kick start the economy again, or to take it to a level to which it desired, or on which it was earlier, so what more can be done in fiscal measures to improve situation and to bring growth back on track?

Murthy: We have to improve the liquidity for the poorer people, for businesses to borrow easily. We have to make sure there is less friction to entrepreneurs to start new businesses and they are encouraged to export more - all this not by way of tax exemptions but by making them easy by removing unnecessary friction to business.

Q: Do you think the fiscal deficit burgeoning to 10% of GDP a real challenge? How do you think the government should fund this gap? Do you think some scope of increasing the taxes or should the government control its own expenditure, or should some stakes in the government be considered?

Murthy: I always believe in spending less than what I earn in Infosys or in my personal capacity. So, the first step is to reduce unnecessary profligacy and to spend on activities that are most needed to make the poorer sections of the society better. Second, we have to increase taxes wherever necessary; we have to remove all these tax exemptions from exports and we have to make sure there is better compliance of tax payments. If we did both of this, I would say we would be able to handle this.

Q: In its previous tenure, this government had given a big loan waiver to the farmers. Also, by way of implementation of the Sixth Pay Commission, it had spent a lot last year. Most probably it was a populist measure. Do you see that as a mistake or a positive measure? Would you expect any such measure in this term as well?

Murthy: The government is right in writing off loans given to small farmers, but not the big farmers. These are the people who have suffered heavily there were no rains, they could not pay it back for years so they committed suicide so it makes sense that the government wrote it off. We cant say that every farmer will get such a waiver. That is the way to move forward if need be. But at the same time, we create a platform where small farmers can succeed better both through better planting of crops, through better facilities and through better forecast of climate.

Q: Education has always been a very high agenda with you. What do you think should be done in the field of education so as to (a) bring inclusive growth, and (b) to make the country prosper? Do you think the agenda of reservation in private sector should be pushed again?

Murthy: Primary education is a state subject so the state will have to learn to enhance the quality of primary education and to make sure the money allocated to this section indeed reaches the schools they are intended for. Higher education is in the hand of the Central, the state and the private sector. These three entities will have to work together to improve efficiency and delivery of services. Disadvantaged children should be given all the help so that they are at par with the privileged ones that requires good facilities. Reservation is fine only in the primary education sector; scholarships should be there in the middle, secondary and in the colleges. There should not be any reservation in colleges. When Nehru brought reservation into the system, he supposed it to be there for a few years not forever.

Q: Coming specifically to the IT sector, you said tax exemption should be done away with. IT has been enjoying favours from the government. Now that it has come at par with the normal pace, do you think IT sector should also not be given any tax exemptions?

Murthy: Exemptions should be stopped immediately. It has been 18 years now since IT industry has had exemptions. It should be given only to the very small companies, say where the profit is only five crore or so. Dont give it to companies where they earn beyond five crore profit before tax.

Q: What should be the approach on issue of disinvestment? Should government sell stakes to public, or should it include strategic partners by sale of stakes?

Murthy: I am not in favour of government being in any business. The government should be a strong, powerful, impartial regulator. It should see that no private sector takes advantage or monopolises.

Q: Contrary to your view, the governments all over the world are buying stakes in banks and financial institutions to bail them out

Murthy: All that happened because there was lapse in regulation. If the government is a good regulator, then you would not get that kind of a thing. Government shouldnt play in business it should only umpire.

Q: Though PM Manmohan Singh comes across as a sincere person, there has been no decrease in corruption cases in India in his tenure. What do you suggest the solution should be?

Murthy: There should be a separate court to handle corruption cases to facilitate quick decision making. The cases should not be allowed to go to higher courts once a decision has been reached in this court. This would ensure a significant reduction in corruption in India.

Q: Would you accept if offered a constitutional post, like presidentship?

Murthy: We have a wonderful president in Pratibha Ptil currently, who is going to be there till 2012. Why discuss a hypothetical topic which would not apply till three years from now?

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