The newly elected Modi government presented its first union budget in the backdrop of huge expectations, given the thumping mandate given by the people of India. The economic survey highlighted the challenges: Lower than five per cent GDP growth for two consecutive years; persistent uncertainty in global outlook, caused by the crisis in the euro-area; general slowdown in the economy impacting the demand for exports; domestic constraints such as low manufacturing base, delays in project approvals and persisting high inflation, particularly in food items had made the fiscal situation worse than it appeared.
On the indirect taxes front, besides the much awaited clarity on GST, there were high expectations which do not seem to have materialised. Some provisions appear retrograde and counterproductive to the promise of igniting growth or simplifying compliance requirements. Proposals like restricting the time limit to claim CENVAT credit, increasing interest rate up to 30 per cent, penalty for delayed payments in addition to interest and mandatory duty and penalty deposit to admit appeals are certainly not good tidings. However there are a few bright sparks such as neutralising the impact of FIAT judgement and rationalisation of the customs duty rates on import of coal will indeed benefit the industry.
In the past, Narendra Modi has spoken extensively about increasing technology penetration in India and increasing digital literacy. While these two areas gain thrust, we would also like the government to focus on promoting the use of technology in schools, enabling MSMEs with the necessary ICT tools and setting the agenda in e-government services. The new government should set the ball rolling by providing infrastructure and connectivity in areas which has low proliferation of technology while addressing initiatives to lead devices and connectivity by providing tax waivers, VAT reduction/exemption and USOF sponsored subsidies and easy bank loans. Ensuring last mile connectivity for the National Optical Fibre Network should take utmost priority. Today, the increase in the import bill for electronics stands at USD 16 billion, third highest after oil and gold and the BJP can help encourage manufacturing by focusing on market growth as well as driving enabling policies for sprucing up hardware manufacturing. We are optimistic that the new government would work towards facilitating investments in manufacturing bridging about an electronics hardware revolution. The government should ease inverted duty structures which make manufactured goods competitive and exempt SAD on all components.”
Another key highlight from the budget is the initiation towards digital India by promising funds to develop smart cities, increase broadband penetration. This is likely to boost IT penetration and e-governance. Budget has also announced allocation of Rs 10,000 crore for venture capital to encourage start-ups and entrepreneurs in the MSME sector and emphasis on investments in roads and ports. This would help in improving ease of doing business leading to the overall growth of IT hardware sector.
To understand the reforms and policies IT sector from the new government, NCN compiled the view of executives from leading IT companies. Excerpts:
Mr.Amar Babu, President, MAIT
“MAIT welcomes the long pending correction of inverted duty structure from the IT Hardware sector perspective. Also, some telecom products (non-ITA) have been made liable to 10% basic customs duty, whereas all goods required for manufacture telecom products would continue to enjoy exemption from BCD. These steps will definitely help boost domestic manufacturing”
Mr. Anwar Shirpurwala, Executive Director, MAIT
“There are several positive signs in the budget that would go a long way in making India as an investment destination. Increasing FDI limit in defense and insurance sectors are some steps in that direction. We also welcome the government’s commitment to address retrospective taxes. MAIT had made several other recommendations and hope that they would be addressed in the near future.”
Mr.Jaideep Mehta, VP and General Manager, IDC South Asia
IDC also welcomes the Union Budget as a positive step forward in the government’s efforts to revive the economy and promote economic growth. The emphasis on the infrastructure and manufacturing sectors is particularly welcome as these are foundational for a nation at India’s stage of economic growth.
From a technology sector perspective, the budget has several proposals which are positive. The outlay of Rs. 7060 Crores on Smart Cities will not just push the frontier of urbanisation in India but also create a new set of markets for tech players across the industry spectrum. We estimate a minimum of Rs. 2,000 Crores flowing into the technology sector on the back of this initiative. The e-governance program to inter-link all ministries and departments is welcomed. India urgently needs to improve the efficiency of government functioning. While the details are yet to be made available, this initiative is likely to yield several hundred crores of revenue to the IT industry. New employment and wealth creation opportunities will abound in the startup eco-system with the Rs. 10,000 Crore fund created to boost start ups and SMEs. Banking and Manufacturing are the two main sectors for the IT industry. The slew of measures announced to strengthen and expand both these sectors is welcome news and will encourage IT consumption, which together constitute 40% of the market, over the next 12-18 months. An addition of even 5% of IT spending growth here means a boost of Rs. 1000 Crores for industry. The duty reduction (from 4% to 0%) on imported PC components will give local electronics and computer manufacturing a boost; with the electronics import bill expected to exceed the oil import bill by 2025-2028, such measures are urgently needed. The net addition to the manufacturing base, job creation and cheaper PCs are all excellent outcomes of this budget proposal. However, the education cess on imported electronics, including PCs and Smartphones, will challenge consumption growth as it will increase street prices. The spread of the Internet to rural areas will greatly enhance the quality of life for the communities. In this context, we welcome the National Rural Internet and Technology Mission with the fund allocation of Rs. 500 Crores. Over time, this will boost both the IT and the ecommerce sectors.
Mr. Pradeep Nair, MD, India and SAARC Autodesk
“The budget was austere in character and as expected stressed on fiscal prudence. What should please us in corporate India is the fact that the FM has laid a lot of importance on two specific areas which are imperative to boost growth- namely infrastructure development and Medium and Small enterprises. In particular, the move to extend MSME benefits for a period of three years post moving to a higher category is welcome. The exemption of 15% in investments of more than 100cr to setup plant and machinery should also provide a huge leg up to the manufacturing sector. The commitment to increase the availability of low cost funds to infrastructure sector is noteworthy. I am also particularly pleased with the emphasis on national skill development as well as the separate amount of rupees 200cr to fund ‘technology for common man’, which is perfectly aligned to our corporate vision. Overall, not much that’s spectacular or game changing in the budget, but well balanced.”
Mr. Sunil Khanna, President and Managing Director, Emerson Network Power in India
“Emerson Network Power believes that this has been a pro-industry budget and the proposal to develop 15000kms of new gas pipelines through PPP will spur growth. Additionally, allocation of funds to create solar power projects across states will help in alleviating the power crisis in the country. Understandably, the focus on implementing the Green Energy Corridor Project will help boost power generation from renewable energy sources. The government’s commitment of providing electricity 24×7 for all households will provide an impetus on maximizing power utilization with increased efforts on harnessing alternate energy sources and bringing back focus on manufacturing. We are confident that the initiative to enhance broadband connectivity in villages should help in creating more digital infrastructure and this will also benefit small and medium businesses as well as restore confidence in the public with the shift towards e-governance models.”
Mr. Vishal Dhupar, Managing Director, South Asia – NVIDIA
“We welcome the proposed allocation of INR 7,060 crores by the government for the development of 100 smart cities. The government’s ambition for modernising mid-sized cities will undoubtedly require precision planning and effective disbursement of budgetary funds, and we believe that technology will play a crucial role in enabling this development. As a visionary in visual computing, NVIDIA believes that India has the chance to leapfrog the use of the right technical and supercomputing technology in planning and executing on the Smart Cities vision. Flawless execution of the Smart Cities vision will require massive computing power to achieve smarter real-time video surveillance, traffic management, emergency response, satellite imagery, seismic modelling, utilities, civic amenities, biometrics and image processing and anti-terror measures. GPU and supercomputing technology can help the Indian government to overcome challenges of cost-effectiveness and energy-efficiencies. And, NVIDIA looks forward to supporting the government in its vision of building 100 smart cities.”
Mr. Ravi Swaminathan – Managing Director, AMD India & VP (Sales & Marketing) AMD South Asia.
“We welcome the announcement for the IT sector, the budget looks very pragmatic and realistic. The government has pledged to support the growth of domestic information technology capabilities in both hardware and software, focused on enabling the timely delivery of citizen services and creating new jobs opportunities, especially in rural areas. The FM talked about Smart Cities and Digital India which clearly speaks about government’s intention to go aggressive in developing the nation by taking help of technology. It recognizes the role of technology in creating a citizen centric governance framework. Talking about the micro – Exemption on all inputs/components used in the manufacture of personal computers from 4 percent special additional duty (SAD) would help revive the subdued demand and promote domestic manufacturing in the country.”
Mr. Sanjay Rohatgi, President – Sales, India, Symantec
“The Finance Minister has presented a forward-looking budget. ‘Technology for Governance’ seems to be the new mantra here. This has instilled a great deal of excitement in the technology sector with an array of opportunities. We are particularly thrilled with the Government’s all-encompassing initiative themed ‘Digital India’ which clearly enunciates a clear action plan for last mile internet connectivity, better access to services, as well as IT skills development of local talent. This is being further reinforced with outstanding proposals for massive investments in greenfield infrastructure projects such as smart cities; youth-focused programs like establishing new IITs and developing a conducive environment for entrepreneurship. These are extremely positive and encouraging steps and we sense that a protected and secure information infrastructure will be the backbone for inclusive growth and development. It’s an environment Symantec will look forward to work and partner in. “
Mr. Subroto Das, Director – South Asia & India, WD
“As expected, the current government has acknowledged the importance of technology and has demonstrated vigour to promote it for socio-economic growth. Earmarking Rs 500 crore for broadband connectivity in villages, exempting all inputs/components used for manufacturing personal computers from 4 percent special additional duty (SAD), proposal to develop 100 smart cities, and more such pro-technology initiatives are likely to boost local manufacturing of technology hardware and software. This is important in bringing economic growth, connectivity, and reducing the existing digital divide.”
Mr. Pankaj Jain, Director, ESET India
“This time the Finance Minister has given a special attention to the software product industry. The announcement of Rs 10000 crore Funds for start-ups is also a very good move. These initiatives would improve competitiveness among the Indian small and medium enterprises. Software product industry can aide many other industries like defense, electronics and communications etc. Also we forecast a positive change, knowing that the government has recognized the existing tax related issues (Dual taxation).”
Ms. Sushmita Das, VP-Business, Kobian Pte Ltd
“Governments’ initiatives have given the Indian IT industry some reason to cheer the Budget 2014 by allocating Rs.7060 crore for smart cities, Rs.500 crore for bridging the digital divide, a 100 crore for technology development fund and several other e-governance. It is a good sign that there will be no additional duty on components that go into the manufacturing of PCs, as earlier; there was a 4 percent tax. This year, we can also expect support towards our product ion and research from GST law. Online and mobile advertisements, digital/ web/ social media agencies will have additional service tax now; this may face a negative impact.”
Mr. Puneet Dhandharia, Country Manager–India at Astrum Holdings Ltd
“We are happy with the government’s decision to encourage start-ups and entrepreneurs. Provision of 7060 crore for smart cities, creating venture capital fund of 10,000 crore for micro, small and medium enterprises and 100 crore for technology development fund will inspire many product based companies; also it increases the employment opportunity. This year, we can also expect support towards our production and research from GST law. The focus on education, infrastructure and agriculture sector is really appreciable. Overall it’s a balanced budget and we are hoping to see the best execution of it.”
Mr. Subhasish Gupta, Country Manager-India & SAARC, Allied Telesis
“Union 2014 budget is very encouraging as it focuses on infrastructure; IT sectors and hopes to see increase in FDI limit as it would strengthen the Indian rupee. Modi government has outlaid a clear roadmap by allotting Rs 7060 to develop smart cities across India. This would be challenging for the ministers because this is vast, as they have to leverage technology in every part of the cities from core operations to applications. Willing to see new job opportunities in the market and new business in rural areas and hope the government will support Indian economy.”
Mr. Govind Rammurthy, MD & CEO eScan
“Overall a practical budget, in the backdrop of a grim macro-economic scenario, a difficult fiscal situation and compulsion of ensuing general Elections in 2014. That way the Budget is on expected lines. Having said this however, there are no path-breaking measures to push the economic growth of the country and to take it out of its present stagnating trend. Lack of clarity on a timeline for introduction of the Goods and Service Tax and the Direct Tax Code yet, is a major disappointment. The IT sector, one of the major drivers of growth, employment and exchange earnings, has again been overlooked without any tangible steps to boost the sector. To conclude, not a bad budget, but definitely another missed opportunity to kick-start the Indian economy back on growth track.”
Mr. Sanjay Deshmukh, Area Vice President – India Subcontinent, Citrix
“The Union Budget 2013-2014 has been an affirmative, balanced and realistic one that will boost our economic growth, even though it hasn’t been particularly relevant from an IT hardware and software perspective. On a positive note, provisions for post offices deploying core banking tech and schemes for modernization and technology upgradation in the textile sector; would benefit the sectors immensely. The budget indicates that there is a pressing need for the public sector banks to be compliant with BASEL3 norms which underscores the need for better data management that can be realised through technologies such as virtualization and cloud services. Additionally, incentivising the semiconductor wafer fab manufacturing facilities along with provisioning zero customs duty for plant and machinery is a move in the right direction.”
Mr. Shibu Paul, Regional Sales Director–India, ME and SEA, Array Networks
“We welcome the union budget announcement from Modi government. We appreciate the current developments and congratulate the government’s decision to support and allocate funds for Internet connectivity in villages, for development of smart cities across India. The focus on tax rebates for low and middle income bracket and on infrastructure development will boost the growth. This is not sufficient as there is no specific allocation for promoting and implementing eGov projects on a timely manner. Government should concentrate on promoting local manufacturing of IT products and provide specific incentives for IT products and industry.”
Mr. Ravi Raj, Brand Head, Director Sales& Support at NetRack
“We welcome Modi government’s first budget, hoping for enhanced growth and connectivity. There is emphasis on entrepreneurship by funding start -up companies with Rs 10,000 cr. The government decision to come up with new accounting standards for Indian companies from FY 15-16 is appreciable. Additional emphasis on telecom, automation /ITES in the budget will open up opportunities in both IT hardware and software companies creating new jobs opportunities, especially in rural areas and simultaneously to see more expansion in infrastructure.”
Mr. Subir Mahapatra, Vice President at Savera Marketing
‘‘We warmly welcome the Jaitely Budget. It is recognized that middle class is the backbone of consumer economy. As we all know that boom in IT Industry with advanced technology decide the growth of country. For same Modi Sarkar is going to take good initiative in Technology space and announcement of 7060 crore for smart cities will help to create new job opportunities especially in rural areas. We can say that, this budget is very pragmatic and realistic which support the growth of country.’’
Owing to the fact in his pre election campaigns, Mr. Modi had stressed on inclusive growth and development in the country, the expectations were at peak. Though the budget did address some key demands of the IT hardware industry while leaving some unattended, MAIT is hopeful that those will be addressed in the current year. The most important decision of this budget has been the steps taken by the government towards boosting domestic production of electronic items and reducing dependence on imports. Rationalisation of Inverted duty structure by exempting 4% special additional duty on laptops and tablets is appreciated by the IT hardware Industry.