Economy

Update 1: Industry gives guarded reaction to Budget 2016-17

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Budget 2017As Union Finance Minister Arun Jaitley unveiled the Union Budget 2016-17 on Feb 29, reactions coming from the industry, industry bodies and experts have been rather guarded ones. While they don’t see much for them in the budget proposals, they do see an opportunity for incentives to promote the government’s programmes like #MakeInIndia and #DigitalIndia, and its initiatives to promote the #Startup campaign:

Mohan Reddy, Chairman, NASSCOM

Our wish list for Budget 2016 included three key priorities – policy bottlenecks including ease of business; nurturing startups, products and ecommerce sector; and clarifications on transfer pricing to enable inward investments in India. The Budget only partially covers these priorities. Extension of Section 10AA for SEZ units till 2020 is a positive outcome though the imposition of MAT on startups will not allow the full impact of the benefits to be realized.

R Chandrashekhar, President, NASSCOM

The Finance Minister’s speech had a strong emphasis on leveraging technology to transform India. The initiatives announced, combined with a swift implementation of Digital India, will help digitise India and provide effective citizen services. We would urge the government to move forward at a swift pace and build an effective PPP model.

Harshavardhan Neotia, President, FICCI

Overall, the budget proposals are in line with the development priorities of the nation. The Finance Minister has made a strong attempt to pump prime the rural economy and the infrastructure sector. This would yield dividends and we foresee a multiplier effect in the form of demand generation and employment creation over time. The state of the agriculture sector on account of two consecutive years of monsoon failure was precarious and it deserved the attention that was needed.

Additionally, we see a lot of emphasis on affordable housing segment which will also result in forward and backward linkages and thus propel growth. Sticking to the fiscal framework is another major plus and should offer comfort to the international community. Attempts towards tax simplification and improving the tax litigation framework are also noteworthy.

Sunil Kanoria, President, ASSOCHAM

The government has rightly realised that a sustainable and equitable growth model cannot be built as long as the rural economy is in distress.

With successive monsoon failure, the farm sector was in distress and the Finance Minister with a clear vision of the Prime Minister. Narendra Modi has tilted the balance in favour of the agriculture sector, which would certainly yield dividends for the entire economy and provide a solid foundation for a robust economy.

A huge commitment of Rs 2.18 lakh crore on the rail and road infrastructure will not only kick start the economic growth but would also result in having a multiplier effect on India’s economy.

Debjani Ghosh, MD-South Asia, Intel & President, MAIT

The Budget is strongly focused on bridging the divide between the ‘haves’ and ‘have-nots’, and good work by the Government in identifying the right priorities for focus under the nine pillars called out by the FM. This Budget, unlike any other, has not treated technology in isolation but integrated the effective use of technology across all the strategic imperatives in keeping with the intent of a Digital India. This budget has laid emphasis on governance reforms and ease of doing business, while highlighting the need for enhancing educational skills in order to make India a knowledge-based economy.

But, we are disappointed with announcement of the R&D incentives reducing because we believe that it is critical for India to be one of the most innovative countries in the world and this move could be detrimental in building India as an innovation hub. I strongly urge the government to re-consider this move, as any restrictions on the R&D ecosystem are likely to decelerate innovation in the country and restrain the ambitious Make in India and Digital India vision.

Nitin Kunkolienker, Vice President, MAIT

We hail the Union Budget announcements. IT hardware companies expect prices of devices like modems, routers, set-top-boxes to go down by 8 per cent within a year and about Rs 10,000crore investment in local production capacities.

The change in duty structure will encourage manufacturing of consumer premise equipment like modems, routers, digital video recorder, STB for internet, IP camera, etc. We expect investment of about Rs 10,000 crore for their local production. I expect their prices will go down by 8 per cent in first year and by 10 per cent in one-and-a-half year.

Anwar Shirpurwala, Executive Director, MAIT

The Union Budget has met our demands partially to help the Indian ICT industry move from assembly to next level of manufacturing. However, certain products have been missed out. We hope that preferential duty tariffs will be extended to include components and parts that go into the manufacture of laptops/notebooks in the near future. Having existing manufacturing facilities, this will help to unleash the full impact of ‘Make in India’ and realise the twin goals of higher domestic value addition and local employment generation.

For the first time the government has clearly put an effort of creating an integrated approach by building connectivity through road, rail, air and waterways. Measures taken to proliferate use of technology and increase overall penetration of IT in the country are commendable.

Pankaj Mohindroo, National President, ICA

The differential duty regime available for promoting domestic mobile handset manufacturing in India has now been enhanced and extended for mobile handset adapters/ chargers, batteries and headsets/ speakers of mobile handsets for supply to mobile manufacturers. The domestic manufacture will attract 2 per cent excise duty while imports will face 29.441 per cent duty, giving a 27.441 per cent protection to domestic manufacturing vis-a-vis importers. Further, a broad category of inputs including parts, components and sub-parts has been exempted from excise as well as CVD of customs when used for manufacture.

The actual date of implementation of this duty dispensation should be postponed to 01-06-2016 in case for mobile adapters / chargers and 01-09-2016 in case of batteries and wired headsets, considering the lead time required to set up manufacturing operations for these components / accessories.

ICA said the size of components industry pertaining to mobile phone chargers, batteries and wired headsets by 2018 will be Rs 7,000 – Rs 10,000 crore.

Rajiv Nath, Forum Coordinator, AIMED

Finance Minister Shir Arun Jaitley must be applauded for bringing budget’s focus on rural community as well as senior citizens. Budget’s proposal to set up 3,000 medicine shops in rural areas and insurance scheme for senior citizens is noteworthy and noble intent of low cost access to dialysis centres .

But then, given India’s humungous population with majority of people with modest income, the biggest challenge that our country focuses is to ensure low cost quality healthcare access to majority of Indians. Government needs to realise that medicines are just one component of healthcare cost and at times not the major component of healthcare cost also. Medical devices are, equally, if not more as critical a part of overall healthcare cost as medicines and diagnostics. If the government had focused on giving a major boost to medical device manufacturing in the country and also ensured a robust MRP regime, then it would have served two purpose with one shot – i.e. (a) Lower the overall healthcare cost and better price stability and (b) Lead to sharp reduction on import dependency.

M P Vijay Kumar, CFO, Sify Technologies Limited

In order to make the Government’s social and infra spend effective, a good monitoring and audit system through independent accounting firms across the country is critical. Even if one per cent of spend towards audit is actioned, the productivity of spend will increase by three times and we will see intent matching action. Intent has to grow beyond mere announcement in the newspapers. Equity of economic growth through social spend will also curtail inflation in the long run and help economic growth.

Taxing Dividend in hands of individual is retrograde. As profit is already after tax and there is dividend tax of 20 per cent, another tax in the hands of the individual is unwarranted. It will also impact HNIs investing in start-ups/encouraging enterprise. Capital market has lot more role to play for economic growth and this could have been avoided.

Altaf Halde, Managing Director – South Asia, Kaspersky Lab

The overall Union Budget 2016-17 is encouraging for the common man, especially the tax relief in HRA. The announcement of Digital Literacy scheme to be launched to cover 6 crore additional rural households is a welcome move. This will not only boost the fast adoption of digital technologies across the country but also encourage digital means to reach out to consumers and different markets. Startups getting 100 per cent tax exemption for 3 years except MAT is again a good call taken by the government, as this will entice budding entrepreneurs to start their own business. Since we are targeting this sector for our software business, it could prove beneficial for us as well. Besides, it will also help in creation of more jobs in the country. Overall, it’s a balanced and realistic budget in difficult times.

Vishal Malhotra, Tax Partner, Telecom Practice, EY

Proposals introduced in Finance Bill 2016 are a mixed bag for the telecom sector. Proposal to amortise spectrum fee rather than allowing tax depreciation would have a negative impact on the cash flows of the telecoms besides resulting in ambiguity and litigation risk for the prior years when the operators have largely taken the position that spectrum is an intangible liable for tax depreciation. Clarification that consideration for sharing and trading of spectrum would be liable for service tax, however, is a huge positive, though it still needs to be seen if the states adopt a consistent position as regards levy of VAT on such transactions.

Reduction in rate of withholding tax on commission from 10 per cent to 5 per cent is again a welcome step though the industry would have preferred if the rate had been reduced to 2 per cent which is more in line with the dynamics of distribution of pre-paid services which comprises approximately 90 per cent of the revenues of the operators.

Introduction of dispute resolution and settlement provisions would again be a positive and should help reduce litigation facing this sector.  Applicability of BCD will also result in increased financial burden for the telecoms though introduction of lower excise duty regime for routers, modems and other CPE equipment may promote local manufacturing of such telecom equipment, similar to mobile phones.

Prashant Singhal, Global Telecommunications Leader, EY

Telecom sector had high expectations from the Finance Minister, since several existing tax provisions were exerting additional burden on the industry and required urgent revamp. Proposals introduced in Finance Bill 2016 are a mixed bag for the telecom sector. While clarification introduced in taxation of spectrum fee and applicability of BCD may result in increased financial burden for the ailing telecoms, the same may reduce future litigation. Withdrawal of customs duty exemption on battery, chargers and headsets, and introduction of lower excise duty regime for routers, modems and other CPE equipment is in line with the government focus on local manufacturing and digital India.  Reduction in rate of withholding tax on commission to 5 percent is a welcome step for the telecom industry.

Keshav Bansal, Director, Intex Technologies

With a great emphasis on the nine pillars of economy in the FY16-17 Union Budget, the Finance Minister has made a commendable effort towards creating a robust path for the future. We are happy that the budget has walked the talk for ‘Make in India’ by proposing changes in the customs & excise duty structure in components and sub-components to give fillip to the creation of domestic mobile component ecosystem.

Kenny Ye, MD, UCWeb India

Finance Minister Arun Jaitley has presented a well-rounded and constructive budget, focusing on most critical aspects of the economy.

Thrust on farm sector, increased spending on rural development and infrastructure planning shows that this government means business. The record digitisation plan outlined is another major positive. The new digital literacy mission scheme will cover six crore additional households and bolster employability of rural youth. There is also the much-needed thrust on entrepreneurship training, higher education and skills development that will help make India a knowledge base. While the reduction in corporate tax is welcome, it is applicable only to select companies and is a minor negative. Measures to reduce tax hassles and address disputes, on the other hand, are a positive.

Tax exemption for Start-ups, amendments to Companies Act and allocation for Stand-up India scheme will further aid cost and ease of doing of business in India.

Nigel Eastwood, Group CEO, New Call Telecom

Overall, I would view this budget to have a positive push to industries across the board. This budget focuses clearly on growth, development and job creation with particular focus on start-ups by giving them support via exemptions for three out of five years. With government initiatives like National Digital Literacy Mission for Rural Households and Stand Up India Scheme in place, these will help boost the startup scenario for the SCs, STs women entrepreneurs as it will help reach out to these under-served sectors of the population by facilitating digital technologies for consumers and markets. This is a balanced growth-oriented budget with focus on accelerating on the fundamentals.

Arvind Vohra, Country CEO and MD, Gionee India

The ‘Make in India’ initiative by the Government has been in the limelight for a long time.  The Budget clearly depicts that the government is in full support of startups and Make In India initiatives. The Finance Minister has proposed changes in the customs and excise duty rates to boost Make in India drive. However, it is yet to be seen how it would affect the smartphone industry. In my opinion this will surely act as an impetus for the sector and will go on to make the industry more competitive. Government’s initiative towards the R&D sector to Accelerate Depreciation Limit to 150 per cent from FY2018 is also a welcome boost for the manufacturing sector.

Ajit Patel, CEO & Founder, n-gage

The devil lies in the detail, but overall the Union Budget 2016-17 sounds exciting and promising for the IT and IT-related industries. Government’s ambitious announcement to achieve 100 per cent village electrification by 1st May, 2018 and a new Digital Literacy Mission Scheme for rural India to cover around six crore additional household within the next three years is commendable.

The allocation of Rs 1,804 crore for skill development and the proposed 1500 Multi Skill Training Institutes to be set-up, will definitely boost the employable population and generate more jobs for rural youths and in turn would help release the pressure in urban cities for want of employment.

Pradeep Jain, Managing Director at Karbonn Mobiles

The withdrawal of BCD, CVD and SAD exemption on mobile phone chargers, adapter, battery, wired headsets and speakers for actual manufacturing is disheartening and is likely to stifle the growth of Indian Smartphone players and impact their price competitiveness. The parts and components ecosystem in the country is still in its nascent stage. While the incentives on local manufacturing announced in the previous budget were welcoming, government should have allowed for a gestation period for local handset players to strengthen their manufacturing capabilities before withdrawing tax exemptions on completely built units.

Rajesh Agarwal, Co-founder, Micromax Informatics

The government has emphasised on schemes for digital literacy for rural India to cover 6 crore households in the next three years which executed well will kick start a next revolution in the PC and smartphone adoption in the country.

FM’s concerted effort to focus on multi skill development is a laudable effort. Focusing on education and job creation through skill development, his measures to bring in quality education and commitment to empower higher educational institutions will reap benefits in the skill development of the government. Providing an impetus for startups, the 100 per cent tax deductions for new startups for first 3 years will truly boost the burgeoning start up ecosystem in the country.

The proposal on reduction in excise duty  on inputs, parts and components, subparts for manufacture of charger/adapter, battery and wired headsets/speakers of mobile phone, being exempted from 12.5 per cent  to nil is a welcome move and will eventually promote the manufacturing of these components domestically..

However, the exemption from basic customs duty, CV duty, SAD on charger/adapter, battery and wired headsets/speakers for mobile phone being withdrawn will increase the cost of the mobile phones till the time the companies manufacture these product domestically.

In terms of the electronic manufacturing industry we expected a lot to be announced but there was not much reference in the budget for the same. There are a lot of steps the government needs to take to bring in a next wave of growth in the electronic segment of the country. On behalf of the entire handset makers of India, we expected the government to introduce regulatory restrictions for ETA (Equipment Type Approval) and licensing requirements from DOT to import low powered wireless equipment which are very critical for success of the Digital India and Make in India vision; but there was no mention of the same in the budget. We wanted the government to also focus on having a quicker and predictable time frame to complete CRS (compulsory registration scheme) formalities to comply nation’s product safety standards. Additionally, as the electronics and mobile handset manufacturing is touted to be the next growth engine for India, there was a dire need for income tax holiday to make it viable and attractive for the industry and investors just the way it is in countries like Vietnam.

Aakash Chaudhry, Director, Aakash Educational Services Pvt. Ltd

The push in the higher education, opportunities for skill development and focus on quality education is a welcome move. It turns the spotlight on both sides of the potential growth story – job creation as well as skill up-gradation.

The budget is promising as it supports 10 public and 10 private educational institutions to be made world-class which will further add to the opportunities for aspiring students to get exposure to right kind of faculty, infrastructure, jobs and market ready curriculum.

Beas Dev Ralhan, CEO, Next Education India Pvt Ltd

To realise the full potential of the demographic dividend that India is set to enjoy, and to prevent from that becoming a demographic liability, we need to find suitable avenues for employment and self-employment, through the focus on skill-development. We strongly believe that skill and aptitude identification and development has to start in schools itself. Teachers also have to be trained accordingly, something that is missed out in this year’s budget.

The total allocation of Rs 68,968 crores will play a significant role in inclusion of entire education sector from secondary schools to higher education and research centers. However, we could have had a more active engagement with the private sector which currently contributes well over 40 per cent of K-12 education in India.

Lastly, the concern on quality education and learning outcomes will increase the focus on infrastructure development. Since the government has promised to increase the number of IITs, AIIMS and other professional institutes, maintaining the quality will be yet another challenge. However, we believe the allocation in the Budget for higher education will go a long way towards resolving this problem.

Ravinder P Singh, Director – Solutions Strategy & Business Development, IoT, Smart Cities & Digitization, Dell India

Anouncement on Digital Literacy Mission Scheme in rural areas is a key stepping stone to achieve next level of human capital transformation. India is going through a massive transformation with Smart Cities, Make in India and Digital India initiatives that will have far reaching impact in the growth of urban and rural India. Technology is not only the backbone for these initiatives but also a critical stakeholder for the success and sustainability of these programs.  We welcome the government’s initiative as this will help in building digital infrastructure from the ground up that will help India grow much faster and better to enable economic growth.

Dell being a global leader in ICT Technology and end-user computing, we consider this as a good opportunity to work with both the government and private sector and be an active player in this journey.  We are committed to support these initiatives by providing the next generation of technology solutions and being the digital architects for such programs.

P. Venkatesh, Director – Product Division, Maveric Systems

  • Fiscal consolidation: emphasis on fiscal consolidation and sticking to the fiscal deficit of 3.5 per cent of GDP are welcome; this should therefore encourage the markets.
  • Reform in taxation: the proposed reform in taxation to reduce litigation, certainty of tax and also an affirmation of no retrospective legislation should help foreign investment into India.
  • FDI in food sector: the emphasis on the rural economy, food sector and also the coordinated move to provide FDI at 100 per cent into the food sector clearly shows the wholesome integration of the policies.
  • Improving employment: continued investments in the social sector to improve employment through skill-building and greater emphasis on higher education reinforces a promising future
  • Addressing the trade gap: simplification of procedures and extension of duty drawback benefits to an extended list of sectors in order to promote export growth should aid in closing the current trade gap.

Sudhin Mathur, Director, Smartphones, Lenovo Mobiles Business Group

The rationalisation of custom duties and excise duties for raw materials, manufacturing for the IT and Hardware sector apart from various sectors to boost the Government’s Make In India sector are going to boost the manufacturing sector and lower costs for firms looking to do business in India.

Farrokh N. Cooper, Chairman & Managing Director, Cooper Corporation Pvt. Ltd

During the earlier BJP regime, there has been roll backs on many bold decision taken by then Finance Minister on political grounds. However, with Mr. Arun Jaitley presenting a positive budget, I am sure there will be no roll backs because it is the wish of the people and the need of the hour for India to move ahead and not roll back.

We acknowledge the concessions he has given for the export sector and simplification of tax administration and litigation. The Finance Minister has gone into great details in the agriculture sector when he has acknowledged the importance of honey in the economy and it is our wish that the sweetness and flavour of honey permeates throughout the economy.

Anand Agarwal, CEO of Sterlite Technologies

The Budget with a total outlay of Rs 2.2 lakh crore, for roads, highways and railways, shows heavy focus on infrastructure development to boost connectivity. The outlay on Digital National Rural Mission is very positive in-line with the BharatNet creation.

With the aim to achieve the targets of ‘Digital India’, two schemes enabling digital literacy for rural India, e-procurement for agricultural produce, and digital depository to store school & college certificates, come at a crucial time when the country is about to leapfrog through the deployment of BharatNet.  The Budget has missed the industry expectation for a clear roadmap for GST rollout. However, the clarity on lack of Dividend Distribution Tax on InvITs clears out the confusion on this matter and paves the way for listing of Infrastructure Investment Trusts.

Ashwani Rathore, CEO & Co-Founder, SpiderG

The Union Budget is balanced and perfectly linked with the vision of Prime Minister’s ‘Startup India, Standup India’ campaign with 100 per cent deduction on profit for startups for three out of five years. This exemption will reduce compliance burden and cash outflows. The decision of allotting Rs.500 crore for the startup segment is a welcome move which will encourage entrepreneurship in coming years.

Capital gains, tax exemption on investments and lowering the period from three years to two years for definition of long term capital gains in unlisted companies will pave way for new angel investors to invest in startups. With this initiative there will be growing funding support for startups in coming years.

Entrepreneurship learning through (Massive Open Online Course) MOOCS will provide access to educational resources across the country. The one day registration process for start-ups will also help the ecosystem to grow. These positive moves will spark a new energy in the startup sector which is expected to raise USD700 million and will generate around 5000 jobs in the next 12 months.

Hari Om Rai, CMD, Lava International

The industry is unhappy on the imposition of 2 percent SAD on populated PCBs used in manufacture of mobile phones and tablet computers. As much as half of production cost of a Mobile phone consists of populated PCBs and this imposition of 2 percent SAD will mean that the duty differential between complete mobile phones and its parts / components for manufacturing will be significantly diminished. India has not yet developed the eco-system for the complexity involved in populating a mobile phone bare PCB.

Nigel Eastwood, Group CEO, New Call Telecom

This budget focuses clearly on growth, development and job creation with particular focus on start-ups by giving them support via exemptions for 3 out of 5 years.  With government initiatives like National Digital Literacy Mission for Rural Households and Stand Up India Scheme in place, these will help boost the startup scenario for the SC, ST women entrepreneurs as it will help reach out to these under-served sectors of the population by facilitating digital technologies for consumers and markets.

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