It’s that time of the year again when Indians and all others with economic ties to this country eagerly await the announcements from the much celebrated annual financial event, the Union Budget. To gauge the market sentiment, I made a few calls to friends in the IT industry and the outcome was unanimous – IT decision makers are playing the wait and watch game before making decisions with their dollars. While most have charted big plans for FY14, a level of uncertainty in opinions is hard to miss.
So why does this Union Budget matter to IT decision makers in India?
- Lack of clarity and direction on multiple policies like transition to GST has paralyzed your orgs’ IT investments.
POV – Definitive announcement on matters of grave importance like rollout plan of GST, FDI in Retail and clarity on mandates on data centres (read data location) in sectors like BFSI among others will help IT decision makers define next steps.
- Your 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.
POV – Abolishing this service tax will help increase broadband penetration and allow orgs to offer services (hence more revenue opportunities) to consumers living in smaller cities of the country.
- If you are an SME, you have little bonus from the government to invest in IT. Despite the scale and the necessary volume (over 29 million orgs per latest MSME survey), orgs in this segment – particularly start-up ventures – do not have enough incentives from the government to invest in technology.
POV – Special packages and incentives for MSME will encourage investment in IT and also ensure sustainable growth. In particular, Government must promote and provide support for budding entrepreneurs challenged by the lack of necessary support system, particularly IT systems.
- Double taxation on software significantly increases TCO for your organization. The government levies multiple levels of taxes – sales tax/VAT, CVD/Excise Duty and service tax – when you procure new software. While multiple amendments have been made to the law, Government still does not have a clear stand and orgs continue to pay 15-25% higher for software products.
POV – Government must implement a simplified tax regime which clears this confusion and ultimately reduces the total cost of ownership for organizations. This is increasingly critical given the higher number of organizations now turning to Software-as-a-Service and leveraging public cloud to deliver applications.
- If your org engages in e-commerce, your customers feel scared to pay online. While weak cyber security laws are largely to be blamed for this lack of confidence, RBI regulations haven’t been sufficient as well.
POV – RBI must go beyond 3D-Secure and 2-factors authentication and build stricter policies to establish trust in e-commerce. New policies that mandate players across the entire e-commerce value chain to work more cohesively will help improve confidence in online commerce.
Overall, expectations from the Government to turn around the slack in sentiments are at an all time high. Leaders from across all industries are closely watching (read lobbying) the announcements and hoping the government will not repeat a dismal performance similar to last time around.
What are your expectations from the Union Budget this year? Do you think the Government will take a populist stand and introduce more effective policies?
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.
Very well written – sheds a lot of relevant information
Thanks Manit, I am glad you found the content valuable. Look out for the post announcement analysis – coming soon 😉