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ICT industry calls budget balanced, gives 6 out of 10

A quick comparison of some of the widely discussed ICT industry expectation vis-a-vis the budget announcements made

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Soma Tah
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Thomas George

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BANGALORE, INDIA: The Union Budget 2015 may have failed to meet the towering expectations built in the last few weeks for a big bang reform announcements, but this budget, for sure, will lay the foundation for more stronger economic growth and a newer India in the coming days. Most of the announcement and proposals sounds positive from a long term perspective.

The historic mandate to this government, which was something not seen in over the last three decades and increasing power at the state levels will offer immense hope that a unified and rapid action on reforms will take shape in the coming budgets. It’s a beginning and more reforms are in offering.

Like other industries ICT industry also had too many expectations from this budget- some of them were certainly too high to be met with. A quick comparison of some of the widely discussed ICT industry expectation (listed below impact factor wise, in descending order) vis-a-vis the budget announcements made.

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(Click on the image to see the comparison) (Click on the image to see the comparison)

Wishlist 1#

Increased budgetary assistance for digital literacy, which would help in ensuring success for the country’s flagship “Digital India” program

Benefits Projected: A big positive for education, telecom service providers and e‐governance ICT players

Budget Announcements: Financial inclusion -JanDhan, Adhaar & Mobility(JAM) related initiative are expedited with NOFNP investments

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Wishlist 2#

Push for infrastructure and ecosystem build-up for “Make in India” initiatives with more conducive policies

Benefits Projected: To mitigate the over-dependency on services sector contribution to GDP and encourage manufacturing sector growth

Budget Announcements: Incentives for the local manufacturing of mobile phones and electronics with job creations.

- SAD exemption

- AIM and SETU

Wishlist 3#

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IT/ITES Sector to be included in the list of specified services for availing 150% deduction on expenditure incurred on skill development projects

Benefits Projected: Skill development of our large young population

Budget Announcements: Nothing concrete, but National Skill Mission will help the skill gap and its development

Wishlist 4#

Service tax clarity between domestic and overseas e‐ commerce vendors

Benefits Projected: Facilitate growth in e-commerce business which is likely to grow at 50%

Budget Announcements: Proposal to incentivize credit and debit card transactions over the cash transaction, which will reduce the risks of cash on delivery payments

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Wishlist 5#

Clarity with respect to the eligibility of IT/ITES companies for weighted deduction on R&D expenditure

Benefits Projected: IT/ITES companies to be benefited

Budget Announcements: IT/ITES companies to be benefited

Wishlist 6#

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Tax incentives for building data centers and cloud services infrastructure to ensure data security

Benefits Projected: More companies will invest in Data Center & Cloud infrastructure services for domestic market

Budget Announcements: Nothing was announced

Wishlist 7#

Resolving concerns relating to double taxation on software products

Benefits Projected: Impact on IT software product companies

Budget Announcements: Nothing was announced

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Wishlist 8#

Old demand for rationalization of variety of levies and duties which amount to 30% of telecom service revenues

Benefits Projected: It will influence all service providers in the telecom industry

Budget Announcements: Service tax increase to 14% level will have a negative impact

But there are some other reforms and larger initiatives which will pass the benefit to the ICT sector are:

  • Reduction in the rate of income tax on royalty and fees for technical services to 10 percent will increase technology adoption in the country
  • A proposed Trade Receivables discounting System (TReDS) which will be an electronic platform for facilitating financing of trade receivables of MSMEs
  • National Optical Fiber Network Programme(NOFNP) of 7.5 lakh kilometer connecting 2.5 lakh villages
  • Smart Cities along with Delhi Mumbai Industrial Corridor (DMIC) and Dedicated Freight Corridor
  • Modernization of India Post network with 1,54,000 points of presence spread across villages to be used for increasing access of the people to the formal financial system
  • Modernization of Railways
  • Announcement around Unified National Agriculture Market initiative, which will strengthen IT backbone for agriculture including SCM for agriculture warehouse and storage

These announcements will bring sizeable opportunities for ICT vendors to participate in creation of an ''Incredible India'' and be instrumental to the growth story of the ''New Rising India''.

Considering all these initiatives, we rate this budget as a balanced one, as the budget took significant steps aimed towards a sustained growth, but does not go overboard with the fiscal consolidation target.

The author is SVP & Head, CyberMedia Research(CMR)

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