Union Budget 2014: Reactions from the IT Industry

IT News Online,

Sanjeev Ranjan, Managing Director, International Copper Association India (ICAI)
The budget presented by FM showed a sense of purpose, understanding of the issues and challenges which the current economic situation is facing. It provided a roadmap and direction for future budgets to come with a clear focus on infrastructure, manufacturing and agriculture. It aimed to address the issue of building a suitable economic climate for economic expansion though the challenge will continue to be on fiscal consolidation going from 4.1 percent in FY15 to 3 percent in FY16, which will be no mean achievement. The quality of asset creation, we believe is going to be the key focus area for the government by better direction of subsidies.

The things which we feel positive for our industry and shows the intent of the government to kick start the investment cycle for growth are the government’s own spending of Rs. 37,800 crores on building of roads through NHAI, Rs. 11,600 crores on development of harbours, development of airports in Tier 1 and 2 cities, Rs. 14,389 crores in rural housing development and declaration of housing for all with focus on affordable housing looking at the Lower Income Group, Implementation of REITS for investment in real estate by retailers, Banks support of infrastructure investment through long term loans which will be over and above the SLR and CRR limits, providing support to smart cities by announcement of 20 new industrial clusters, 6 textile clusters and pushing renewables through cuts on duties, announcement of ultra Solar PV projects for states of Rajasthan, Tamil Nadu, Laddhak and J&K, setting up of several 1MW Solar PV projects along the banks of rivers, and installation of solar pump sets and tax correction on personal income by providing benefits of Rs. 50,000 in 80C investment, Rs. 50,000 in housing loan interest and Rs. 50,000 on standard deductions will help improve disposable income and is expected to promote savings.

Manu Agarwal, Founder and CEO Naaptol.com
– Budget announces opening of ecommerce space for FDI: We were always in favour of FDI in E-com space. This will help the companies to gain an ‘Industry’ status. This will bring in more players and will eventually create a wider ecosystem and a healthy competition.

– Foreign companies manufacturing products in India can sell their merchandise through the ecommerce route: This will help the customers to have a wider assortment of the products to choose from. The customers now will have high quality products at their disposal.

– To set-up Rs 10,000 crore Start-Up fund for new businesses: Historically, start ups have brought a lot of technological innovation in the industry and most of the successful companies in the world have been small start up enterprises once. In India this kind of stimulus was missing. However, with this new reform, I believe that there will be a substantial growth in the number of such companies coming into existence, which in turn will contribute to the overall economic growth.

– Service taxes going up on online advertising: Online advertising industry is still in its nascent stage. The rates of the online advertisement space are very less as compared to outdoor or print, yet they have a massive reach. Thus this rise may not pinch as much.

Ravi Kumar, Founder FreeKaaMaal.com
This is by far the best budget for start-up ecosystem in India. Raising capital is the biggest challenge that every entrepreneur face but with this step of the Modi government, India will see more and more people starting their entrepreneur journey in coming years. Although the whole idea Rs. 10,000 crore VC Fund sounds good, but main question that needs to be answered here is how the Modi government will distribute this fund, whether it will give it directly to startups? or It will choose some other mechanism of fund distribution?

Apart from IT Start-ups, another sector which is going to get maximum benefit out of this Government Fund is Social Sector Startups. Raising fund in social sector startups is always difficult because private VCs don’t want to risk their money and that’s where Government VCs can fill the gap. The government has high risk appetite and therefore it can invest in business which are helpful for society even though they don’t generate too much of profits.

Arup Roy, Research Director, Gartner India
Overall I would view this budget to have a positive push to industries across the board and augurs well for IT industry as well. This budget focuses clearly on growth, development and job creation with particular focus on infusing growth in manufacturing and infrastructure sectors. From industry perspective, the policies that would have major positive impact on the domestic IT uptake are: ‘Digital India’ program; “Good Governance”; and “one hundred smart cities” program. Also, FDI cap increase in defence and insurance sector is a huge positive and has direct bearing on IT industry.

This budget has also set aside funding for adding new top-notch educational institutions such as the IITs and IIMs in various cities, which is likely to have a long term impact on generating technical and management talent. Lastly the focus on micro and small and medium sized businesses and their enablement/empowerment with various schemes is a huge positive and is likely to have positive impact on the IT industry as well as such companies get empowered to resort to technology.

The orientation towards growth across sectors augurs well for the domestic IT industry however things more or less remain ‘status quo’ from offshore or exports perspective as there is no change in the position there. One area where we would have expected some concrete decision taken would be retrospective taxes and the position thereof. But overall, this is a balanced growth oriented budget with focus on accelerating on the fundamentals.

Sanjay Gupta, Managing Director, India, Middle East and SAARC, Aspect Software
The new government’s first budget is an inclusive and constructive one for our economy. Many aspects highlighted in the budget ties back to the need for greater thrust on customer service engagement. The proposal for manufacturing units to sell products in retail through e-commerce platform is a progressive move and will usher a new wave of customer engagement in the e-commerce industry. The Indian Banking Industry is riding on finance transformation driven by IT, and bringing in singularity in KYC norms will mean that banks will have to bring about deeper IT integration in their bid to maintain customer records and share actionable intelligence among systems. In the rail budget, the government also proposed upgrading the IRCTC ticketing platform which will mean bringing about a more sophisticated customer relationship management approach to such flagship citizen facing government properties.

The most-awaited Union Budget has undoubtedly come as a delight for some sections of the economy. Talking about the start-up SMEs, the fund amount of Rs. 10,000 crores allocated to them is definitely a major highlight. Addressing their credit concerns in the country, the government has announced the formation of a Venture Capital fund to extend financial assistance in the form of equity, quasi-equity and risk-capital. Besides encouraging entrepreneurship in the country, the move is aimed at eliminating investment related issues for the SME sector.

Dinesh Agarwal, Founder and CEO, IndiaMART, said, “The Union Budget 2014 reflects optimism for the Indian SMEs in the coming year. With conducive financial schemes and budget allotments planned in their favour, SMEs are bound to make a substantial contribution to the country’s GDP. The efforts undertaken to promote entrepreneurship are truly a positive sign for the economy.”

Providing a boost further, the Finance Minister liberalized the much-talked about FDI in the e-commerce sector. This comes as a welcome step towards creating new opportunities for small and medium enterprises, resulting in greater employment for the economy.

Another significant announcement – the setting up of a ‘Technology Development Fund’ to focus on easy flow of finance for the SME space – would enable expansion, keeping away the financial constraints. Besides this, the amount of Rs. 100 crore allocated for Startup Village entrepreneurship is a nudge in the right direction for the prospective entrepreneurs located in rural India. The move will encourage the rural youth to participate in local entrepreneurship programs, and also learn relevant skills in their respective fields.

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