Effect of Union Budget 2014 on IT and Telecom Sectors

The longest budget speech ever?? Certainly a top contender in the race. Populist budget?May be…may be not. Micro? But none of the above is the point. The point is Team Modi has spoken. And spoken  in a way that aims to bring in the very required stability in the start-up segment of the country. Some of the points hurt while some are sheer pleasure. In this segment, we would narrate the effect of Union Budget 2014 on IT and Telecom Sectors.  index

Some of the pain points:

  • Radio taxis have been put under the purview of Service Tax making it more and more expensive for customers.
  • Online and mobile ads have been included in the ambit of Service Tax as well.This might prove to be a bit of hurdle for online businesses.
  • 10% of basic customs duty on telecom products is also likely to raise prices.

While few of the factors can prove to be a source of misery , many others can be the ointment to the injury. Few of such highlights pertaining to the technology sector as follows:

INTERNET CONNECTIVITY FOR VILLAGES:

Team Modi has always stressed on nation building visions in their election campaigns. Looks like the team is ready to walk the talk as well. In the Union Budget 2014, the Finance Minister has announced a special focus area on internet connectivity for villages. Under the National Rural Broadband Vision, the FM proposes to provide internet access in remote areas of the country and implement e-Governance as well.

Focus Area:

Supporting software products start-ups and bridging the Digital Gap in India. A hefty sum of 500 crore is provided for this purpose which would include IT Training as well. The PM has also set his targets for providing broadband services in these areas in the next 3 years.

So far so good. However, the taste of the food can be judged only when it is served in the plate. We can only hope that the “vikaas” actually takes place and we do not have to wait for eternity for a new Government to take up the charge.

EFFECT OF BUDGET 2014 ON START-UPs & SMEs:

Some real green pastures over here.The Government has set aside Rs. 10,000 crore as start-up fund for new businesses. A national level multi-skill programme, namely ” Skill India” has also been proposed. Basic customs duty for production of LCD and LED TVs (below 19 inches) have been proposed to be reduced to nil form the existing ten (10) %. Furthermore, Cathode ray TVs have been exempted from the customs duty.

Focus Area:

Focus ares here is mainly the youth, start-ups and small businesses. The incubators fund and Skill Development program is likely to instill the right spirit in the youth and present the country with more and more  budding entrepreneurs. The reduction in customs duty on TVs backed by the exemption is definitely a welcome move. This will help SMEs by reducing their cost of production and sales. It will also help the “aam  admi” to procure TV sets at a lower cost. This has also made this sector lucrative and more and more production (thereby employment) is expected to take place.

“Start-up are the life blood of any booming economy”. Theses provisions are likely to boost investments and pull in more and more of venture capitalists and angels.

E-GOVERNANCE:

The new Government knows the need of the hour. This is a country where paying bills to managing laundry is preferred to be done online. Team Modi has left this trend alive (no complaints here!!) An eBiz platform is proposed to be created, which will provide a synergistic environment for businesses and investors. This platform is aimed to provide all business and investment related clearances and compliances through an integrated platform and a payment gateway. This platform will be available 24*7.Furthermore , the Government has announced the facility of Electronic Travel Authorization (e-Visa) that will be used for 9 airports in India.

Focus Area:

Focus area is to curb out the operational backlogs and creating a smooth and secure business environment.

Our Government practices what it preaches.The Government targets to integrate all of its departments and Ministries services with eBiz platform as a pilot project by 31st December, 2014. The idea of integrating the VISA facility with online services is indeed an appreciable one.

E-COMMERCE:

In the manufacturing sector, the Finance Minister announced that the manufacturing units will be allowed to sell its products through retail including e-commerce platforms without any additional approval. The Budget announcement also talked about a unified bill payment system – a single website from where all bills can be accessed and paid. What this might do is pull the rug out from under payment gateways, as you could pay for products online directly through the RBI, instead of an intermediary.

Focus Area:

The focus area here has been the spread of digital marketing and boosting up the business sector.

Indeed a good move. E-commerce is a booming sector and has all the prospects of increasing employment and trade. FDI in this sector will definitely provide the much needed competitive energy in the e-commerce sectors. Also, it would benefit the foreign players and bring in the technical know how.

The platform will provide all business and investment related clearances and compliances through a single 24 x 7 portal with an integrated payment gateway. – See more at: http://www.digit.in/telecom/india-budget-2014-6-major-announcements-for-it-23238.html#sthash.i6JDLVC0.dpuf
The platform will provide all business and investment related clearances and compliances through a single 24 x 7 portal with an integrated payment gateway. – See more at: http://www.digit.in/telecom/india-budget-2014-6-major-announcements-for-it-23238.html#sthash.i6JDLVC0.dpuf

FUNDS FOR SC ENTREPRENEURS & NATIONAL INCUBATORS:

The budget also provides for allocation of Rs. 200 crore, to provide credit enhancement for young start-up entrepreneurs from Scheduled Castes.  This allocated amount will be sensationalized through a scheme by IFCI.The Government has also proposed to set up national accelerators and incubators for start-ups .

Hence, what we find from this budget is that there is a lot of focus on encouraging local entrepreneurship and start-ups backed by reduced dependency on imports. As the PM says, the future of the country lies in the hands of the youth. It certainly looks like what we got to hear was not just word but calculated reflections of a vision foreseen. Having said so, the devil lies in the details. Whether Team Modi can actually bring “achhe din” is yet to be seen.

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