A catalyst for digital India

The Union Budget 2014-15 undoubtedly has a lot to cheer about for the ICT sector. Allocations in various segments of the budget clearly signal the recognition given to technology in bringing about the vision of a Digital India.

By: R Chandrasekhar

Core priorities of that vision include broadband connectivity at village level, skilling, National Rural Internet and Technology Mission, e-Kranti, 100 smart cities, entrepreneurship and innovation.

The emphasis on start-ups and innovation has been the pivot with multiple announcements regarding funding, incubation network and skilling. The proposal to set up a R10,000 crore fund for start-ups and entrepreneurs signifies the recognition accorded to the role of start-ups and products in achieving this vision. Used wisely this Fund can greatly facilitate creation of a conducive ecosystem for them.

The administrative initiatives articulated and the various statements made bring out key problem areas that are sought to be addressed in order to restore investor confidence, improve the business operating environment and reduce litigation. A stable and investor friendly regime is obviously required to boost growth. This government is constituting a high level committee to interact with the industry in order to ascertain areas where greater clarity is required. Pending tax litigations to the tune of four lakh crores is a staggering number. This needs to be addressed immediately in order to garner investor confidence.

The vision of 100 smart cities and an allocation of Rs 7,060 crore in the current fiscal, is another step towards a Digital India. It is likely to create many opportunities for the industry. This, and the specific timeline set for integrating Central Government departments and Ministries into eBiz for one stop online services covering all regulatory requirements, the proposal to establish an Export promotion Mission, the initiative towards promoting good governance with an outlay of R100 crore are positives. Though there is a stated intention to promote effectiveness of SEZs, specifics are awaited and there is no mention of the long pending demand to remove or lower MAT.

For MSMEs, especially tech start-ups and product companies, this budget brings more hope than ever before. Removing structural & legal bottlenecks to setting up, running & exiting a venture, setting up of nationwide “District level Incubation and Accelerator Programme“ for incubation of new ideas, are all likely to enable many more entrepreneurs to put their ideas into commercial use. On the supply side, the Skill India Initiative will be a plus, and will help ensure adequate availability of quality manpower who can deliver.

Taxation—a rather contentious subject—has seen some positive movement as well. It is likely to witness more stability, predictability and clarity. The government recognises the complexity that has crept in and tied the system in a Gordian Knot and led to an adversarial positioning. There have been efforts to untangle some of these. Introduction of APA scheme, range concept in transfer pricing regulations, use of multiple years’ data for comparability analysis clearly marks a changed approach.

However there still are issues like Angel funds to be exempt from the Fair Market Valuation tax when they invest in start-ups, clarification on dual levies (VAT and Service Tax) on software products, exemption or lower rates of TDS for SMEs, abatement rate for packaged software to be increased from 15-30% and imposition of service tax on digital and mobile advertising. These could be impediments to fast growth.

The role of IT in catalysing growth and moving towards a digital India cannot be overstated. However, the devil lies in the detail. In the coming months we need to work with the government to become a catalyst, facilitator and partner in realising the vision laid out. The journey has begun and the first decisive step has been taken!

The writer is president, Nasscom

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