Are 'achche din' around the corner? IT sector expectations from Union Budget 2015

The Budget is an indication of the path the government visualises for an industry. We know that the government is focusing on promoting e-commerce, innovation and entrepreneurship. Finance Minister Arun Jaitley had invited CEOs of Indian software and hardware companies for a meeting along with various e-commerce companies and prominent startups for pre Budget consultations in January.

E-commerce expectations:

1)   FDI: A Large number of e-commerce firms are expecting that the new government will show the path for foreign direct investment (FDI) in retail, in India. This will pave the way for global retailers to offer their formidable knowledge and supply chain to India; moreover I believe smaller eTailers would see strategic investments by international brands looking to enter and expand in India. Allowing FDI would bring funds to more players thus more spending on educating customers to come online; which would potentially boost consumption and benefit small traders and manufacturers.

Most e-commerce companies would welcome clarity as a strategic input to their business.

2)   Tax Clarifications: E-commerce companies struggle with issues such as double taxation, multiple interpretations of taxes related to e-commerce. The industry is looking forward to implementation of GST. Furthermore, to boost the growth of e-commerce in India the industry believes the government should provide exemption from VAT and sales tax for online retailers. Clarification on service tax between domestic and overseas vendors for e-commerce and export proceed realisation (SEZ) is needed from the budget.

3)   Tax Incentives: e-commerce firms are also expecting implementation of crucial tax incentives in order to boost investments in logistics infrastructure and technologies. Logistics infrastructure would help boost the growth of the industry as products can be delivered faster and at a more efficient cost.

Companies are also expecting tax incentives for building data centers and cloud services within the country. These technology infrastructures will not only provide better data security but should also reduce costs. If built properly, the infrastructure should also reduce speed latency associated with international data centers.

4)   Digital India: Budgetary allocation for digital literacy program in order to make Digital India a success. Not only will this help the literacy program but also help groom future online shoppers as they feel more comfortable with technology.

Micro Small and Medium Enterprises (MSME) expectations:

MSME which contribute to about eight per cent of India’s GDP play a vital role in the country’s growth. In India there are more than 30 million MSMEs contributing 40 per cent of the country’s total export. MSMEs provide employment to more than 60 million people and are producing more than 8000 quality products for the international and Indian market. This sector expects some encouragement from the government in the terms of tax Standard Operating Procedures (SOPs) which motivates them to rise in the international arena. The sector also expects availability of cheaper credit, use of technology and a stringent policy framework.

Information Technology (IT) expectations:

In India, IT holds great relevance for almost every industrial sector. The sector has contributed exponentially towards GDP growth and has long been the backbone of the country’s export. The IT sector's expectation from the 2015 budget is that the government will promote investments on IT infrastructure and motivate entrepreneurs to adopt new technologies. Furthermore, the sector expects that the government should introduce special monetary incentives so that software companies can invest in research and development and can develop outstanding software products. Also expected are implementations of more stringent laws regarding IPR protection to safeguard innovations. In addition, the IT sector wants the government to focus on introducing various IT and software parks to promote growth along with providing a level playing field for all IT related projects or initiatives.

Conclusion:

Presently, there are no well defined and clear rules pertaining to e-commerce. There is an urgent need to create retail policies. It is expected that the budget will also provide a more efficient internal trade policy. This will help the players to get international funding without losing management control. The e-commerce and IT sectors are expecting big things in the 2015 budget and the new government has to make sure and balance the requirements of growth with policy and regulatory framework which will provide sustainable growth opportunities. Hopefully, this budget will truly prove the beginning of acche din for the Indian e-commerce and IT sectors.

About the guest author:

Ashish Jhalani is the Founder of eTailing India & SeB. He is on FICCI's retail as well as ASSOCHAM's FMCG Committee. Ashish set up a successful eCommerce venture in the US named mysolitaire.com for about 8 years.Ashish graduated from New York University - Stern School of Business and worked as a Consultant for Kurt Salmon in their Retail Practice (New York), where he helped clients such as Home Depot, Sara Lee Apparels, Tiffany & Co., Phillips, Van Heusen devise their market strategy & operations.

He is also the Founder of Indian School of eBusiness (ISeB), an educational venture that provides short and long term courses to graduates and young working professionals to make them employable in ecommerce companies.