India’s electronics industry expected a lot of things from the Union Budget. But, in return, they received no hope from the government. In an exclusive interview, ELCINA’s Rajoo Goel tells Soumyarendra Barik; Technology Correspondent, ELE Times about the disappointment that the industry is going through right now. But the question is: Is the government listening?
Soumyarendra Barik: Could you give me a brief overview of what you think this budget means for India’s electronics industry?
Rajoo Goel: This was not a budget for the industry. This was more for the social side, for the upliftment of the lower strata. One good thing is that they have given some support to the mobile industry. In case of LCD TVs, it looks like there has been some error. They have applied customs duty on inputs for LCD and LED panels. That seems to be an error, because those inputs are not made in India as of now. So, increasing the duty on panels is a good idea, so that the panels start getting assembled in the country. But we don’t have an LCD fab in India, so we don’t make the LCD glass, or the cells which are required to make the panel. And that seems to be an error. Other than that, there is no specific step for electronics. Apart from the reduction in the duty of glass for solar panels, there really is nothing. We are hoping that there will be a National Policy on Electronics (NPE) 2.0 where the problems of the industry will be addressed.
Soumyarendra Barik: So, the industry’s sentiments are not very uplifting…
Rajoo Goel: Yes. One sector got what it wanted, and the others are exactly where they were.
Soumyarendra Barik: Demonetisation and GST really drained a lot of Indian MSMEs. Do you think the government has done enough in this budget to help MSMEs stand up on their feet?
Rajoo Goel: There were some announcements in the budget geared towards the MSMEs. But the proposal of reducing the corporate tax from 30 per cent to 25 per cent for companies with an annual turnover of upto Rs 250 crore, will be a significant benefit. While many people from the industry are still saying that it is not enough, but I guess it is never enough. So, for now, 5 per cent is okay for now, and maybe it will be increased further in the future.
Soumyarendra Barik: The FM announced the setting up of R&D centres for AI, IoT, and 3D printing. How do you think will it be executed? Because let’s face it, the ground realities are different than assumed in the Lutyens.
Rajoo Goel: I think there are already some steps being taken under the Department of Science and Technology, Department of Industrial research. And they are taking up certain schemes to develop technologies for smart cities, for AI and for EVs. This is the next step. Industry 4.0 is almost upon us. SO, all these things are linked. AI is linked to IoT which is linked to Industry 4.0. So, this is the next age which is coming. I think it is a good step. But how it will be implemented is always a question. But I see it as a positive step and we need this investment.
Soumyarendra Barik: The electric vehicle industry was expecting a lot out of this budget. But they go home disheartened. Another example of the government’s political preferences?
Rajoo Goel: There was no mention of electric vehicles in the budget and we were looking forward to it. There was some good news for vehicles using the internal combustion engine, but the electric vehicle sphere got no mention at all. I think there should have been something for electric vehicles in the budget. I’m extremely disappointed that there wasn’t. But then, there are separate initiatives for electric vehicles going on. What they need to do is put more resources, more money into it. Because today I really feel that a Union Budget is not a micro document anymore. It used to be. When we used to look at very specific things, like for a particular segment, component or a particular raw material. I don’t think all that is happening anymore. So, it is more of a directional budget. More of an agenda setter. But yes, there should have been some focus on EVs, and we hope that it will happen in the future. Frankly, this is also the pre-election year budget, so there is some flavour of that.
Soumyarendra Barik: There is a proposal of setting up of 5 lakh wifi hotspots. Do you think that will directly or indirectly help the electronics sector?
Rajoo Goel: Well, if we are able to manufacture here, then yes. But, I don’t see that change in the policy. Because Wi-Fi technology, or Wi-Fi products have not been addressed. The policy is what it is. Hopefully the NPE 2.0 will do something more. For manufacturing to grow, you need demand to grow, which is fine. But you also need manufacturing itself to grow. And that will happen only if it is favourable. So I think that should happen separately, but unfortunately that has not happened in the budget.
Soumyarendra Barik: BCD on mobile phones and TVs was increased yet again. What are the positives and negatives of that?
Rajoo Goel: I feel increasing customs duty beyond a point is not a very sustainable thing to do. Because it can cause some anomalies in the market. And we need to avoid that. So, while they have again increased the BCD, I feel that should be a stop-gap measure, for maybe one or two years. I think they need to taper it down back to maybe 15 per cent or 10 per cent. Right now it’s a good thing. But in the case of TVs, there is a problem. The panel is the heart of TVs, it’s a very large part and I think there is some problem in that. So, hopefully this will be corrected before the budget is passed and accepted in the Parliament.
Soumyarendra Barik: You mentioned something about market anomalies. Could you please explain that in specific details?
Rajoo Goel: When you increase the BCD on any product, you are protecting it. And we have been asking for protection. We have been doing that is because most of these products either come under the ITA 1 or under the FTAs from different countries. And the biggest problem is with respect to the ASEAN countries. Luckily we don’t have an FTA with China yet. So, what we need is a level playing field. But when you go beyond that, it is not clear if it will be just used by the industry as a tool to increase their profits. Because it is obviously an attraction for anybody just to increase their prices because they have protection. So, the raw material inputs have to be manufactured here. And it should be clear that this is a stop-gap arrangement which is giving relief to the industry. They must gear up and go to the next level and not just take it as a short term profit thing for themselves. I would be happy with a maximum rate of 15 per cent.
Soumyarendra Barik: You must have sent a pre-budget expectation list to the FM. How many of those expectations were met and how many of them were not given a look?
Rajoo Goel: I don’t think any of our proposals have been addressed.
Soumyarendra Barik: What do you think Mr Jaitley missed out on in the budget for the electronics sector?
Rajoo Goel: What Mr Jaitley announced in the budget was extremely limited. I don’t think they have looked at anything submitted by any association. We were thinking that we should get some relief from the direct tax route. Which is possible whether it is an ITA 1 product or not. And that would have been good had they given it for ITA 1 products. They could have given some limited benefits because that attracts investments. If you want to big investments that is a step which could have been taken. It has helped the software industry in the past. We were also looking at some sort of benefit under GST. Neither have they taken the customs duty route for other electronic products. The problem is largely with the ITA 1 goods. There was also nothing for the value chain. Nothing for the components. I only hope that Mr Jaitley will take care of funds that the industry needs.
Soumyarendra Barik: What would the direction of Indian ESDM be following the budget? Are we going to see some radical changes?
Rajoo Goel: I don’t see any radical change. But all the mobile phones units that have come up under the SKD (Semi Knocked Down) will now move towards CKD (Completely Knocked Down). It should help the EMS industry.