UNION BUDGET

Mixed reaction from IT sector

2013-04-info

The IT-driven industry sounds some muted cheers, but no one is excited about the budget

The core infotech industry has been virtually ignored in the Union Budget 2017, with little either to enthuse or enrage them. But the push towards a cashless digital economy has been welcomed by companies, mostly startups or e-commerce entities , which stand to benefit from the fallout.

Skill developers and educators find silver lining in online training platforms like Swayam. The e-cash tool BHIM, added to the support for BharatNet, is welcomed by mobile phone makers as an indirect fillip to selling more handsets, though there is precious little direct incentive for the sector. In fact, phones will be marginally costlier after the latest tax tweaks.

Here are tech industry and association voices on Budget 2017:

Thanks to the initiatives proposed in the budget, next-generation Knowledge Service Hubs such as Fintech Valley, Andhra Pradesh can emerge as growth magnets and growth drivers for the Indian economy, feels J. A. Chowdary, Advisor IT & Special Chief Secretary to Chief Minister, Government of Andhra Pradesh. The transformative potential of Union Budget 2017 is enormous, he adds.

Industry associations

M. N. Vidyashankar, President India Electronic and Semiconductor Association, said the benefits to startups will give a fillip in promoting the startup ecosystem in India. “We will have an immense role to play along with MSMEs in making the Startup India Scheme initiative successful as 96 per cent of Indian companies will benefit from this. The investments made by the government in Swayam will provide 350 online courses in IT and enable students to attend the courses virtually. This initiatives will give impetus to implementation of national programmes like Digital India, Make in India,

A NASSCOM statement says: For the IT sector, leading the startup journey, extending the time period for eligibility for the three year income tax exemption from five years to seven years will allow for startups to actually avail the benefit, as most startups do not make profits in the initial years of their operations.

The association finds the budget proposals a mixed bag. “TDS on payments to call centres have been reduced from 10 per cent to 2 per cent. This will improve working capital available with call centre companies and potentially support companies in their expansion to Tier 2/3 locations. However, this is possibly the only IT sector focused announcement in the budget. Several industry recommendations to help sustain and grow global competitiveness of the sector like support for research, development and innovation, rationalising safe harbour margins to more realistic levels and roadmap for corporate tax reduction have not found place in the budget.”

Analysts


Partha Iyengar, VP and Gartner Fellow, India says: The biggest positive is the continued focus on infrastructure (roads, railway, housing, tier-II airports et al) in general and rural infrastructure (affordable homes, rural electrification) in particular, including e-infrastructure with the increased allocation to BharatNet. This will allow commercial activity to expand to the rural segment in a much more efficient manner, if the aim of achieving the broadband connectivity targets by 2018 is actually met. Iyengar noted that there are no sops for the infotech industry and none were expected. “In another sign of the fact that the IT industry has become quite mature and does not need sops to continue its growth trend (other factors like Trump notwithstanding), there were no overt steps taken – and none expected – for the industry, and there is no hue and cry about it. In a sense it is a no-news is good-news story for the sector from a budget perspective.”

Education/skills

Shekar Sanyal, director and country head, IET: The Union Budget 2017-18 with its very specific focus on higher education is a welcome relief to this sector. The enhanced focus on skill development, with over 100 India International Skills Centres established across the nation and the Rs 2,200 crore allocated for vocational training will help bridge the skill gap among the youth.

This is a view shared by Partha DeSarkar, CEO, Hinduja Global Solutions, the IT-BPM arm of the Hinduja Group: The focus on quality education through a revised framework for educational institutions and employable skill development for the younger generation will encourage the IT/BPM sector to further deepen their presence in Tier II and Tier III cities. Also, increasing the MAT credit carry forward period from 10 to 15 years will help companies in SEZs to utilise the same when moved into normal tax regime.

Ajay chhangani, ceo and co-founder of Rise India: The setup of 100 international skill development centres and 350 online courses with top faculty would help energise the youth and accelerate the employment growth of the country. Allocation of 1.84 lacs crore for skill development for women is the biggest ever initiative on women empowerment taken by Government of India.

Mobile industry

Sanjeev Bhatia, CEO of Zopo Mobile India: Those portions of India that are deprived from the fruits of technology will now be able to enjoy it. Government's mission to connect 1,50,000 gram panchayats with hotspots and digitisation will increase the use of technology and will create a friendly environment for digital payment system. No doubt smartphone will play a crucial role in strengthening Indian economy.

Peter Chang, region head, South Asia and country manager for ASUS India: Government’s thrust on digitisation through its push on Aadhaar-enabled payments will provide impetus to the demand of mobile phones in the country. The BHIM app has already been adopted by 125 lakh people and government’s plans to introduce two new schemes to promote its use will make the concept of a cashless society and digital currency, a reality. In addition to this, proposed extension of the OFC network to 1,50,000 gram panchayats for high speed broadband connectivity and rollout of 4G in the country will create a more digitally inclusive society. The budget was also conducive to promoting domestic manufacturing of electronics. With a provision of Rs 745 crores in 2017-18 in incentive schemes like M-SIPS and EDF, manufacturing of smartphones in India should see a boost.

Like ASUS, Gionee is sanguine about make in India. Arvind R Vohra, country CEO and MD, Gionee India said: We are positive that the government’s increased allocation and incentives will provide the necessary push to the mobile and internet manufacturing economy. Also the allocation of Rs 10,000 crore in BharatNet provides the much needed boost for the penetration of Digital India into the rural segment, and for strengthening the consumptions of smartphones.

This is a view also shared by Indian phone makers. Rajesh Agarwal, co-founder, Micromax Informatics said, “It is heartening that the government has announced multiple measures which can improve local manufacturing and create a better component ecosystem for mobile handset makers. The allocation of Rs 745 crore is a welcome move which will provide impetus to local component manufacturing in the electronics sector

Jay Chen, CEO, Huawei India feels the allocation of Rs 10,000 crore towards BharatNet will give an overall boost to broadband connectivity in the country. The success of the BHIM app and announcements related to its promotion, Aadhar-based swipe machines, and tax exemption to those who use Aadhar-based POS machines, will all help accelerate acceptance of digital payments.

Startups

Girish Rowjee, co-founder and CEO, Greytip Software: The reduction in corporate taxes by 5 per cent will immensely benefit the MSMEs in India and spur growth in the domestic sector. Legislative reforms to streamline and amalgamate existing labour laws into four codes will significantly help in simplifying the effort required on statutory compliances and result in improved compliance across organisations.

Adhil Shetty, CEO and co-founder, BankBazaar: The budget has several provisions for startup that can help them conserve that amount. Taxes for startups and small businesses have seen a dip, with the profit-linked deduction available to startups for three out of five years extended to seven years now. The Income Tax for MSME up to Rs 50 crore turnover has been reduced to 25 per cent and the presumptive income tax for enterprises whose turnover is up to Rs 2 crore has been reduced to 6 per cent from 8 per cent. These measures bring down the operating expenses and give startups a little more breathing space and room to conserve resources and grow.

Nita Kapoor, Head, India New Ventures, News Corp which has invested in many Indian startups said the Union Budget 2017 has left the Indian startup community asking for more. A five year tax holiday or the profit linked-deductions for startups are benefits which are virtually redundant. This is because there is a long gestation period for them to even break even, forget achieving profitability. Had there been fiscal incentives for private sector to support the setting up of more incubators through industry academic partnerships, that would have been a positive for startups in India.

Prabhakar Jayakumar, country manager, DigitalOcean: The government's announcement to allow eligible startups to avail their three-year tax holiday in a block of seven years as against the earlier five years is a useful one and should give further impetus to the Startup India initiative.

Abhiraj Bhal, co-founder, UrbanClap: The new policy proposed in the budget, allowing startups a three year tax holiday in the first seven years of their existence is a welcome change. However, this policy could have been more impactful had it included startups incorporated prior to March 31, 2016, and extended the period when the tax holiday can be availed from seven to 10 years.

Rajiv Vij, CEO & MD, Carzonrent.com: The impact of the demonetisation drive is visible with progressive steps taken for an inclusive and cashless economic future of India.

Make in India

There is disappointment for global companies who hoped to find some encouragement to Make in India.

Kuldeep Malik, country head, corporate sales international, MediaTek India said: We were expecting Financial Budget 2017 to offer incentives to start inflow towards design-led manufacturing in place of assembly-led manufacturing ecosystem, but it seems government is not yet convinced towards adopting multiple layered incentives for localisation while increasing the duties on CBU (Completely Built Units). The budget and the impact of the policies seems to be neutral for mobile/tablet industry, at best.

Manish Sharma, president and CEO, Panasonic India & South Asia: The government’s move on imposing a 2 per cent special additional duty on populated printed circuit boards (PCB) used for mobile phones imported into the country, will provide adequate protection to the domestic industry and give the necessary impetus to Make in India under the GST regime.

Security

Altaf Halde, managing director, Kaspersky Lab, South Asia: Post demonetisation, the number of digital transactions have increased, and also the concerns about cyber security. The government has taken a step to address this by announcing to set up ‘Computer emergency response’ team for cyber security of financial sector. It will lead to collaboration between the technology companies and the banking system in the country.

Rostow Ravanan, CEO and MD, Mindtree points to special provisions to ensure greater financial growth, with emphasis on enhancing cybersecurity in finance, and bringing greater coordination and transparency between departments. “The Computer Emergency Response Scheme is a great initiative which will smoothen coordination between finance regulators.”

Sudhindra Holla, Country Manager, India & SAARC, Axis Communications: We see conducive growth for the security and surveillance industry. Axis Communications sees tremendous potential in India as a market for security solutions as the country is experiencing rapid economic growth and sectors like banking, IT, transportation, retail, healthcare including the government, city surveillance/safe city and critical infrastructure where security is a key concern.

digi-dhan2

Digital economy

This is a sector most pleased with the budget, thanks to the government's own post-demonetisation agenda of pushing people to go digital.

Rakesh Desmukh, CEO and co-founder, Indus OS: The budget is an extremely promising one, and extremely pro digital economy. Several of the initiatives rolled out seek to include the masses into the ‘Digital India’ fold, making it possible for them to not only have the right technology to transact online, but also the right broadband infrastructure to provide Internet to data dark areas. Specific announcements and provisions like the target of Rs 2,500 crore digital transactions across platforms like UPI, AadharPay, IMPS, launch of AadharPay for merchants, and Aadhar-based smart cards for senior citizens, all encourage more Indians to come online and gives them more reason to transact online. Incentives to promote the use of BHIM app will make citizens more comfortable with mobile wallets, and we see all of these as providing a major boost to India’s move to digital.

Thyagarajan Seshadri, president of Banking Relations at Electronic Payment and Services: Budget 2017 provides impetus and growth to digital payments, proposes change to the Payments and Settlements Systems Act, and envisages a Payment Regulatory Board in the Reserve Bank of India. It paves way for digital economy by focussing on speed, accountability and transparency.

Govind Rajan, CEO FreeCharge: FreeCharge welcomes the policy measures aimed at accelerating the adoption of a digital economy in India. The incentives for adoption of fintech equipment, expansion of digital infrastructure in under-served areas, Aadhar Pay for wider adoption by merchants and capping cash transactions at Rs 3 lakh, all together have kept the spotlight on building a less-cash India. In doing so, we will all help build a transparent and efficient future for our country.

Sashank Rishyasringa, co-founder and Managing Director, Capital Float: This budget is transformational at its core, aimed at propelling India towards becoming a digital economy while increasing employment opportunities and having a determined focus on rural development. The government’s push for digitising infrastructure is heartening. Incentivising cashless transactions at fuel stations, hospitals and railways, rolling out 1 million POS terminals by March and proposing a payment regulatory body to the RBI will help create a robust architecture for digital transactions.

MSME

The small and medium industry sector counted its blessings: reduced income tax and hopefully reduced lending rates:

Shilpa Mahna Bhatnagar, CEO and co-founder Evoxyz Technologies: On the positive side, there has been tax reduction on MSMEs, these concessions will also build a platform for MSMEs to embrace the company’s format, reduction of custom duties on hardware for Fintech innovation and increase in child and women healthcare fund, the only concern which advances is that whether we as startups will be able to use them.

Sudhir Singh, MD Marg Compusoft: The government did not disappoint corporates, especially SMEs and MSMEs on the much expected reduction of tax rates. For small and medium businesses with annual turnovers of less than 50 crore, the tax has been reduced from 30 per cent to 25 per cent.

Sunil Gupta, founder and director, ExportersIndia.com: MSMEs and startups have all the reasons to cheer with a dip in income tax to 25 per cent for companies with an annual turnover of Rs.50 crore. Their grin grows wider with the FM proposing dip in bank lending rates. Incentives such as cash backs, referral schemes on BHIM app is all set to push the use of digital transactions which is yet another reason for MSMEs to move to online business models.

Tourism

India is now the world's fastest growing travel market, yet there was little in the budget to accelerate the growth in this sector:

Aditya Loomba, joint managing director, ECO Rent A Car: I wished there could have been more focus on our Tourism and Hospitality industry as it has a much greater potential for growth and needs suitable investments. We are a large country with an amazing potential for tourism. If the tourism grows, it has cascading benefits on Employment, GDP and general image building of our nation.


Aloke Bajpai, CEO and co-founder, Ixigo:
Kicking off on a good note, this year’s budget brought happiness to many with the removal of service charges on bookings made through IRCTC, indicating the government’s focus to drive more digital transactions.

E-commerce

Vishwavijay Singh, Co-founder, SaleBhai.com: The hero of the Union Budget 2017 is definitely the rural sector, with finance minister Arun Jaitley allocating Rs 1,87,223 crore for rural agri development. As an e-commerce player, I see consumption in rural areas going up. With rural areas likely to witness greater digital penetration, the e-commerce sector is surely to benefit.

Neelesh Talathi, CFO, Pepperfry.com
The Indian furniture industry employs around 5mn people and over 85 per cent operate in the unorganised sector. We are heartened with the government’s investment in skill upgradation and tax relief for the MSME sector.


Kunal Bahl, co-founder and CEO, Snapdeal
: We commend the focus on growing the digital footprint in the country—enhancing digital infrastructure, capping cash transactions, reducing cash donations, using Aadhaar Pay to enable more digital payments are significant measures. Initiatives make an impact when there is continued attention and the announcement of today builds on the demonetization efforts of last few weeks.

Mixed reaction from IT sector

Healthcare

Startups in healthcare found little to cheer except for a general thrust to digital payments, which was at best an indirect fillip.


Ravi Virmani, MD and founder, CrediHealth: The Union Budget 2017 has taken a step towards making healthcare not just affordable but structurally robust as well. But, unfortunately the budget has completely overlooked the health-tech startups which are changing the landscape of healthcare industry in India. With a focus on transparency and reach, they have been deprived of an opportunity to make an dent in healthcare ecosystem.

Pradyumn Singh, co-founder and CEO, Pharmarack: The thrust on cashless transaction and move towards digital economy will help startups like ours which is all about bringing stakeholders of Indian pharma sector online and facilitate automated sales order processing. The encouragement to go digital will encourage more and more distributors to move important component of their business online.

Housing

The thrust on low cost housing is a mixed blessing.

Sangeeta Banerjee, co-founder and CEO, Apartment, ADDA: When it comes to Real Estate or Housing, the budget is solely oriented towards boosting affordable housing, as expected. Affordable housing defined as house cost up to Rs 50 lakh or carpet area of 300 sqft in metros and 600 sqft in other cities. This definition varies for different benefits in the budget.

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