Finance Minister Arun Jaitely is scheduled to bring his second budget since his government came into power. Come Saturday, he will outline all the key areas the government plans to invest in the next financial year. With the e-commerce boom, smartphone manufacturing and the rise in Internet users in India, big bets are being made on investment in improving technological infrastructure in the country.
With Modi’s massive push towards ‘Digital India’ and ‘Make in India’ initiatives, we expect big announcements from the budget this year to improve the country’s digital economy. Some of the biggest players in the Indian tech sector shared their wish list for the Union Budget 2015. Most of their recommendations include tax holidays, subsidies, simplification of policies and improvement in technological infrastructure.
Policy framework, subsidies and tax holidays
“Over the past nine months, the government has set the right context and articulated its vision for India’s economic development,” said Bhaskar Pramanik, Chairman of Microsoft India. “Programs such as Digital India, smart cities and Skill India require the creation of technological infrastructure that will need budgetary support. A policy framework for industry and SMEs in particular that encourages innovation and adoption of technology can boost the Make in India initiative. We hope this year’s Budget will create an enabling environment for Indian industry to realize its growth potential.”
Mobile handset makers like Micromax and Karbonn have sought tax holidays and subsidies in the upcoming budget to promote local manufacturing, a move they expect will create lakhs of jobs.
“It is imperative that the government provides a fillip to manufacturing in the country by making its policies directly competitive to present ‘monolith’ China. I hope the government will adopt a carrot rather than a stick approach for India’s burgeoning smart devices market through encouraging and supportive rules and regulations to expedite the eco-system creation in India which is quintessential for smart device manufacturing,” said Sanjay Kapoor, Chairman at Micromax.
Pradeep Jain, Managing Director at Karbonn Mobiles, said indigenous products will help the country realise the vision of its proposed initiatives. “In Budget 2015, the government should be introducing friendly policies including tax holidays and interest subsidies to give a push to domestic handset manufacturing and increase the mobile phone user base in India. With locally manufactured products, we expect to see billion hands using mobile phones for communicating and sharing data in coming years,” he said.
Encourage domestic manufacturing – ‘Make in India’
Ritesh Suneja, CEO of Lava Mobiles, feels that the budget will play a very critical role in shaping the future growth of mobile handset industry in India. “Smartphones today have a huge potential to boost education, healthcare in the country and the government should try to ensure that it reaches in the hands of every Indian. We expect that the government will take measures to promote domestic manufacturing and investments in technology. Industry players should get incentives and taxation reforms such as a ten year tax holiday, interest free loans, exemption of special CVD (SAD) on mobiles accessories and parts, components for post sales warranty repair, exemption of BCD/CVD on Capital goods and removal of retrospective amendments in tax laws amongst others. A level playing field should be created between e-commerce and physical retail segments by putting a uniform VAT rate structure for mobile phones, until GST gets implemented.”
“Additionally, companies should also get full support in the cost for skill development for enriching the existing talent pool in the country. Talking about investments, we expect the government to also take measures in providing 100 percent clarity, transparency and ease for foreign investments in the country. A lucrative return on capital is very important for the investors to invest and is most critical for India,” Suneja said.
Y Guru, Managing Director at Celkon Mobiles, says that the need of the moment is to showcase the fact that this government means what it says. “We are in a new era – hence business investments in current times should not be viewed plainly in terms of plant and machinery but investments in terms of technology and infrastructure should be given more weightage when formulating incentives. In order to boost the sector the government should refund 100 percent of import duties for all exports made by Indian companies. We believe reduction of import duties with an option to allow businesses to ‘Make in India’ will be a welcome move. This will give a huge boost to the ‘Make in India’ initiative and also enable Indian businesses to exponentially grow,” Guru added. He also stressed that Corporate Income Tax should be reduced to 20 percent.
Chip manufacturing giant AMD expects this year’s budget to be aggressive, focusing on making India emerge in the top three hardware countries in terms of demand. Ravi Swaminathan, Managing Director at AMD said, “With this budget, we look forward to India becoming a centre of excellence for product development and design and also being integrated into the global supply chain with manufacture of key components for both domestic and international markets.”
Widen ‘geographical reach’ by improving infrastructure
Partha Iyengar, Vice President and Head of Research at Gartner India, feels that Digital India and Make in India are positive initiatives. “It will (hopefully) bring better access to the vast areas of untapped rural India, which can drive unprecedented economic growth across industry, by allowing companies across all industries to tap the elusive ‘bottom of the pyramid’ economic opportunity. Country level infrastructure improvements needed to drive ‘Digital India’ will also help spur industries embrace of the digital business paradigm, which will increasingly be a competitive imperative in the coming decade, as digital business hastens the demise of ‘geographical reach’ as a competitive barrier,” Iyengar said.
E-governance
Sanjay Rohatgi, President at Symantec, thinks that accelerating the process of simplifying tax reforms and the adoption of e-government projects is the need of the hour. “Technology has the potential to empower the 1.3 billion Indians through visionary programs like ‘Digital India’, ‘Smart Cities’ and ’Skill India’. The budget is a perfect opportunity to charter a clear plan in this endeavour. The budget should pave the way for expeditious implementation of e-governance projects, incentivizing investments in world-class data centres and cloud computing infrastructure besides a chance to be a pioneer in the realm of Internet of Things. However, this should be done without causing disruptions in the free flow of data across borders – the lifeline of India’s IT exports. Such steps will ensure high availability of trusted and secure information ecosystem thereby providing much needed foundation for inclusive growth and development,” Rohatgi said.
Online startups and e-commerce wish list -Tax benefits
Even online startups have high hopes from the upcoming Budget. Tapan Kumar Das, CEO of iTiffin.in (an online and offline healthy meal providing company) says, “I have huge expectations from the budget of 2015. According to me, ‘Nutrition services and Health food’, can be brought under the gamut of Health services, thus qualifying those services for Service Tax. The cost of healthcare in the country should be reduced in order to regulate the increasing number of lifestyle disorder cases in India. Also, I wish Food technology is made free of import duty. Income tax benefits should be allocated to the Nutrition and Health Food sector and in order to recruit people from the skill development academy while Nutrition and Diet Plan services should be brought under Mediclaim policy of General Insurance.”
Swaminathan Vedaranyam, CEO of VIA.com, says, ”As far as the travel industry is concerned, I think there is an urgent need for well-defined policies and clear commitments to ensure that all cultural heritage points are given more attention with improved infrastructural facilities. There is a recent spurt in domestic travel as well as a higher influx of foreign tourists in India and with dedicated upkeep of the tourist hotspots, we can ensure higher growth for the travel industry. Additionally, I wish that there is an allocation towards revitalising all unused airports in tier II and III cities as these geographies hold immense potential today. There should also be a rationalisation of air travel taxes for competitive pricing to boost travel and tourism.”
“From the IT industry perspective the long elusive transfer pricing clarity is one serious expectation,” said Ramesh Loganathan, President of Hyderabad Software Enterprises Association. “For the Startup ecosystem, clarity in operationalizing the Rs 10,000 crore startup fund will be great. More specific policy support that incentivize and support incubators will be a major boost to early stage ecosystem.”
Adopting foreign policies
Industry body Nasscom has a number of recommendations that would help the technology industry to grow. For instance, the industry body is suggesting a lowering in royalties and fees on technical services, and the adoption of international practices on foreign tax credit policies to increase competitiveness.
“We need to make patents simpler, and offer schemes and incentives that encourage startups to take risks if we are to grow,” said Sangeeeta Gupta, Vice President at Nasscom.
Nasscom also wants information technology and software products to be eligible for research and development deductions in taxes, as should the re-education of employees, which is necessary to maintain competitiveness.