Budget 2016 Fails To Bring Cheers To IT Industry

by Sohini Bagchi    Feb 29, 2016

union budget

The IT industry was pinning much hopes on the Union Budget 2016-17. From rollout of GST implementation to domestic manufacturing, the industry was looking for a futuristic Budget that understands and addresses their concerns. The end however was a little dissapointing, with many even stating that the Budget didn’t have much to offer to them.

Lack of clarity disappoints CXOs

“My first reaction is of a bit of disappointment from the budget proposals. There is hardly any thing announced for the healthcare sector. Though the coverage of rupees one lac per family and a top up of 30,000 for senior citizens is a good move towards getting India towards a universal healthcare system but there is no roadmap laid for any healthcare sector reforms that the country badly needs,” Vipul Jain, CEO, Advancells commented on the Budget.

According to him, there is no additional announcement or clarity towards the proposals already made in Start up India and Make in India initiatives of the government that are already announced nor there are any incentives for innovation and research. “Some tax exemptions are a welcome move but we had expected a lot more,” stated Jain.

Govind Bansal, Co- Founder, Aqua Mobiles, amobile manufacturing company said, “Apart from 30-35 percent relaxation in the corporate tax and a reduction in the import of IT and Hardware products, there is nothing to boost the mobile phone industry of India. We were expecting some good reforms in the structural changes, easy registrations and approvals, etc. The budget is not in the line of ‘Start-up India, Stand up India. Nothing has been offered to the manufacturing and trading businesses.”

Urvesh Goel, Founder and CEO, Syberplace.com echoed similar views. “We do not see Excise exemption for smartphones, to support Digital India and Make in India. Smartphone is the ‘first screen’ for many users accessing internet. This would have reduced pressure on civil infrastructure and propel growth from within. We also had foreseen a larger budget outlay for rolling out 4G and Wi-Fi in smart cities, to be subsidized, if not make them absolutely free. This could reduce the pressure on roads, in shopping malls and reduce gas pollution from vehicles. If homes can double up as home office and shopping, we could reduce investment requirement for commercial property. ” 

“The Finance Minister reiterated the Government’s focus on rolling out GST. We are hopeful that GST will be a reality soon, thereby ensuring uniformity in tax rates and regulations,” mentioned Kiran Murthi, CEO, AskmeBazaar

Of course there were some positives about the Union Budget that are worth praising. The thrust on agriculture, rural, social healthcare, infrastructure and education could have a big push on the economic growth of India. Moreover, as Geetha Kannan, Managing Director, The Anita Borg Institute (ABI) India noted, “The allocation of Rs 500 cr under the Stand-Up India scheme for SC/ST and women entrepreneurs is very positive. Now it’s up to all the women entrepreneurs out there to capitalize on this opportunity.” However, she expressed that the budget still seems to fall short on benefits and incentives offered to improve the financial well-being of women who make up close to half of our population. The budget also offers very little for the individual tax payer.”

M.P Vijay Kumar, CFO, Sify Technologies Limited believes while some of the steps taken towards tax administration and social welfare measures are positive highlights of this Budget, one is surprised to see no change in service tax rate. “We have managed fiscal deficit owing to the oil scenario. Capital asset formation is not happening and we are not seeing much measures in that direction. Exports are key. With present exchange rates and the “Make in India” campaign, exports should have been given some thrust. We cannot bank on present oil prices to support our forex needs in long run.” 

Nothing for the big ones

The major focus of the budget is infrastructure and rural economy. As Dr. Chandan Chowdhury, Managing Director-India, Dassault Systemes noted, “We believe that program such as Digital India, Start-Up India and Smart Cities need a strong technological infrastructure that must be supplemented with budgetary support from the government.  The Rs. 2.31 lakh crore earmarked for the infrastructure aligns well with the vision to build connected cities via highways and railways.”

The other positive was startups would get 100% tax exemption for 3 years except MAT which will apply from April 2016-2019 for creation of jobs. “It will be interesting to see how efficiently the Start Up India funds are utilized - this will definitely be something all startups and investors will be watching out for. Skill Development and Digital Literacy Mission are not only great social initiatives, but will also widen the addressable market for digital startups as making the internet accessible to the masses will also create more internet consumers,” stated Ankita Tandon, Chief Operating Officer, CouponDunia.

But again there’s not much for established start-ups. “We appreciate the EPFO benefits to startups and tax holiday provided to help the start-ups settle well. While some efforts by the government are really appreciated, its disheartening to see categorization of start-ups basis caste!. Additionally, there is not much that this budget has brought for already established / registered start-ups like us.” Anurav Rane, Founder & CEO of PlanMyMedicalTrip.com reacted on the budget.

Banking on digital literacy

The Government’s plans to launch digital literacy mission scheme for rural India. It aims to cover around 6 crore additional households in next 3 years. The FM announces Rs 500 crore for Prime Minister Modi’s StandUp India initiative. A Digital Depository to be established which will be a one-stop place for all education related e-certificates.

Schemes like the digital literacy mission to e-educate rural households will work towards bringing more and more Indians into the folds of the connected world, said Umang Bedi, Managing Director – Adobe South Asia. Initiatives like the creation of an online repository of qualification documents, an e-platform for an unified agriculture market and other such measures will ensure robust IT platforms are deployed towards furthering automation - advancing the government’s Digital India mission in earnest. We expect this to translate into more business opportunities in the IT sector locally, and also drive skills development as well as creation of new jobs across the industry. Additionally, some reductions announced in customs and excise duties are likely to bring in positive headwinds for the sector.

Pramod Saxena, Chaiman & MD, Oxigen Services, ”With digital literacy mission that has been announced which will target 6 crore households with financial literacy, the digital connect and payments connect will play an important role. Also, statutory status to Aadhaar will play a very big role in promoting digital payments, social benefit transfers and allowing several services beyond banking & insurance to be also be brought into its fold, whether it is government subsidies or government payments it will open a way for more government payments and subsidies to flow into the financial inclusion program.”  

The silver lining

Of the other positives, the Budget promises massive rollout of ATMs and micro-ATMs in post offices. The Department of Posts (DoP) announced plans to open 1,000 ATMs by March this year and also bring all 25,000 departmental post offices under core banking system. Presenting at the Union Budget today, the government announced it will undertake a massive rollout of ATMs in post offices over the next three years by providing better access to financial services in rural areas.

There’s also scope of e-assessment to be expanded to seven mega cities. However, Rajiv Vij, MD & CEO, Carzonrent said “Though the ‘Smart City’ development is running behind schedule, but the focus on infrastructure Development is a first step in that direction, and can be built on it further.  FM’s push to the ‘Skill Development’ initiative as an element of ‘Make In India’ is a positive step in creating skilled workforce important for overall nation building.”

Articulating some of the above-mentioned points, Partha Iyengar - VP & Gartner Fellow, Country Manager Research (India), Gartner mentioned, “The budget has a number of positives in it - though in some cases they are ‘baby steps’ but he summed up, “As always though, the devil is in the implementation of these schemes. It is good to see a mention of review of program effectiveness as one of the goals in the budget, but till we see that followed up religiously it is hard to give it credence.”