The newly appointed Government in India has worked like a shot in the arm for country’s economy. A recent study by ASSOCHAM confirmed that this new wave of leadership for India is expected to double foreign investments to US$ 60 billion. While it’s hard to miss the air of optimism in the country, longevity of this sentiment is contingent on the announcements in the Union Budget.
To gauge the market sentiment, Greyhound Research connected with over 30 senior IT Decision Makers. The outcome of these conversations was unanimous – the budget will either open a pandora’s box or the government will take the courage to bite the silver bullet.
Problem #1 – Lack of clarity on multiple policies including the transition to GST and FDI in Retail.
Greyhound Standpoint – This lack of clarity has paralyzed IT investments and decision making in many instances has stretched to over 4 quarters. This continues to plague orgs in BFSI, Retail, Manufacturing and multiple other verticals that have a high degree of dependence on such policies.
Problem #2 – 12 per cent service tax on broadband and mobile internet.
Greyhound Standpoint – Growth plans to Tier-3 towns are contingent on broadband and mobile internet penetration. Key deterrent to higher penetration is the 12 per cent service tax which the government currently levies on internet, like other telecom services.
Problem #3 – Absence of sufficient incentives for SMEs to invest in technology.
Greyhound Standpoint – Despite the scale and the necessary volume (over 29mn orgs per latest MSME survey), orgs in this segment – particularly start-ups – do not have enough incentives from the government to invest in technology. The new government must provide support for budding entrepreneurs challenged by the lack of necessary support system, particularly IT systems.
Problem #4 – Double taxation on software significantly increases TCO.
Greyhound Standpoint – The government levies multiple levels of taxes – sales tax/VAT, CVD/Excise Duty and service tax – on procurement of new software. This is a major deterrent for orgs in India to buy original software. Government must implement a simplified tax regime which clears this confusion. This is increasingly critical given the higher number of organizations now turning to Software-as-a-Service and leveraging public cloud to deliver applications.
Problem #5 – Customers continue to feel scared to pay on both online and mobile platforms.
Greyhound Standpoint – While weak cyber security laws are largely to be blamed for this lack of confidence, RBI regulations haven’t been sufficient as well. RBI must go beyond 3D-Secure and multi-factor authentication and build stricter policies to establish trust in e-commerce. Government must also work towards promoting mWallet services in India to encourage financial inclusion.
It’s clear that the industry expects the new government to take measures that will act as stimulus and not adopt populist measures that will do little to change the status quo. Such decisions have traditionally suffered with lack of commitment from the previous government and the industry is now expecting this to change.
What are your expectations from the Union Budget this year? Do you think the Government will take a populist stand or introduce more effective policies?
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About The Author: Sanchit Vir Gogia is the Chief Analyst & CEO of Greyhound Research, an independent IT & Telecom Research & Advisory firm. He also serves as Founder & CEO of Greyhound Knowledge Group that operates under four brands – Greyhound Research, Greyhound Sculpt, Greyhound Technocrat and Greyhound Vivo. To read more about him, click here.