The newly elected government seems to have positively affected the investment sentiments in the country. Industry body ASSOCHAM, in a report, said that the new leadership is expected to double the foreign investments to US$ 60 billion.
While it is hard to miss the air of optimism in the country, longevity of this sentiment dependents on the announcements made in the Union Budget.
IT industry has high hopes with the Union Budget, as the government intent to ride the technology wave to take the development to the next level.
Greyhound Research conducted a small survey among the IT industry decision makers to find out the issues and concerns of the industry.
As per the survey the five key concern areas are:
Problem #1 – Lack of clarity on multiple policies including the transition to GST and FDI in Retail
Lack of clarity has paralysed IT investments and decision making in many instances has stretched to over 4 quarters. This continues to plague organisations in BFSI, Retail, Manufacturing and multiple other verticals that have a high degree of dependence on such policies.
Problem #2 – 12% service tax on broadband and mobile internet
Growth plans to Tier-3 towns are contingent on broadband and mobile internet penetration. Key deterrent to higher penetration is the 12% 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
Despite the scale and the necessary volume (over 29mn organisation per latest MSME survey), organisation 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
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 organisations 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
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.
-The author is the Chief Analyst & CEO of Greyhound Research.
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