Budget 2018: Digitisation, Boost in Local Manufacturing, and solid R&D among India’s IT Industry’s Top Wishes

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February 1, 2018, will change a lot of things for many people in the Indian subcontinent. The IT industry, which is one of the biggest in the world, is expecting Finance Minister Arun Jaitley to provide the industry with certain incentives to stay competitive in the global market. ELE Times contacted certain people from the IT industry, and their inputs made it clear that digitization, boost in local manufacturing, and developing a solid R&D wing in the country should be the government’s major priorities. Will Arun Jaitley listen?

Here is what the industry has to say:

“For the Budget 2018-19, we hope that the government will continue to push digitization of financial services and encourage consumers to use digital platforms for transactions. Initiatives such Aadhaar and UPI provide a good opportunity for banks, insurers, and fintech players to expand India’s efforts towards financial inclusion. Another area of focus should be reducing the cost of capital for the MSMEs by improving lenders access to low cost funding sources such as MUDRA & SIDBI and relaxing securitization norms” said Gaurav Hinduja, Cofounder of Capital Float.

“As hardware cost is one of the bigger inhibitors to rapid and sustained expansion of digital payment acceptance amongst smaller retail merchants, we hope the Budget takes a close look at options to reduce this friction. Conversely, if cash withdrawals from Banks were more actively dis-incentivised through surcharges, that would also help. An even wider ranging move to push digital payments habit would be to allow individual tax-payers an annual personal income tax deduction claim for a specified percentage of their annual digital purchase spends,” said Rajeev Agarwal, CEO, Innoviti Payment Solutions.

“The upcoming Union Budget 2018 will be a significant one as it will be the first budget after a bold economic measure like GST has been implemented.  We are likely to witness a whole lot of business and economy friendly measures being announced. Thanks to the government’s Make in India initiative which encouraged local manufacturing and augmented production, India has emerged as the second largest mobile phone market in 2018. As the country eyes the top position, the mobile phone industry expects the government to maintain and introduce more favorable policies for domestic manufacturers.  First, in order to prevent dumping of phones in the Indian market, the government should increase the duty on CBU’s to 20 % (recently govt. has increased duty on CBU’s from 10 % to 15%). This will provide domestic manufacturers a level playing field vis a vis importers and encourage them to expand capacity. Second, we expect the government to lower bank loan interest rate by 2%- 3 %. Mobile phone manufacturing is a capital intensive industry, with long credit cycles. Also, with the introduction of GST, a lot of working capital is tied up, making it tough for manufacturers. Furnishing a bank guarantee rather than blocking working capital would be a big relief. Therefore, to ease the pressure and make manufacturers more competitive, a lower interest rate coupled with bank guarantee would be crucial. Last but not the least; we hope the government extends the IGST benefits to manufacturers,” said Mr. Vivek Agarwal, Co-founder, M-tech Informatics Ltd

“The industry is still reeling under the APA (Adv Pricing Agreement) leading to confusion around the double taxation component of transfer pricing. We are looking for further clarity on this. Further, the development centres are looking for a more favourable deduction of Section 35 (2AB) to further India’s image as and R&D capital. On the startup fronts, local governments have set the precedent for bolstering innovation and entrepreneurship, and conditions like angel tax for domestic investors being higher than foreign investors must be relooked at. The government can also heed to IT association’s requests to set up a more central initiative around new tech reskilling, as there are initiatives being undertaken by organizations who find it feasible,” said Mr. Suman Reddy, MD, Pegasystems India.

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