Interim budget 2014: what’s good for India telecom

Finance minister P Chidambaram today announced the last budget of UPA II. In the interim budget, he did not make any significant policy changes for the telecom sector. The government announced measures to improve local production of mobile phones.

The government today said the excise duty on mobile handset will be 6 percent on CENVAT credit to encourage domestic production.

This will prompt foreign handset makers to manufacture more phones in India. Also, companies such as Micromax, Karbonn, Lava, Xolo, etc. will be encourage to spend on local manufacturing.

“We must focus on manufacturing, specially manufacturing for exports,” said Chidambaram.

pranab chidambaram

The other announcements that will assist the telecom sector indirectly will be the following:

Rs 6000 crore will be allocated to rural housing fund, Rs 2000 crore for urban housing fund.

There will be no changes in tax laws in interim budget

Excise duty will be cut from 12 to 10 per cent in capital goods sector to stimulate growth.

Also read: Telecom budget 2014-15: Mixed response to excise duties on mobile handsets

The finance minister said three more industrial corridors — Chennai-Bangalore, Bangalore-Mumbai, Amritsar-Kolkata — under various stages of implementation.

He emphasized that average growth under UPA’s ten year rule was 6.2 percent against 5.9 during NDA period of 1999-2004. Average growth under UPA-I was 8.4 percent and UPA-II 6.6 percent, PTI reported today.

Government is committed to Aadhaar-based LPG transfer but scheme on hold temporarily. He said Aadhaar is tool for empowerment.

The government said plan expenditure will be Rs 5,55,322 crore in 2014-15, unchanged from last fiscal.

Also, Budgetary support to railways increased from Rs 26,000 crore to Rs 29,000 crore 2014-15.

INITIAL BUDGET REACTIONS

Ramesh Loganathan, vice president and centre head, Progress Software, said: “The budget looks positive. There is no specific impact on IT industry.  However, the MSME inclusive innovation fund looks very interesting, with the amount of corpus earmarked for the same.  Given its stated charter, this may help seed and grow more incubators with support for startups that solve the bottom-of-pyramid and/or social problems.”

Debasis Chatterji, CEO, Netxcell, said: “In my opinion, keeping a tight control on fiscal deficit to 4.6 percent of GDP is a good step from macroeconomic point of view. However, overshooting non-plan expenditure is a bad signal for the economy. Food inflation will hit the common man most and decelerating industrial growth is a major cause of worry. Overall the Finance Minister wants to keep middle class happy by reducing excise duty on small cars and SUVs.”

There is no significant mention about telecom.

But the Finance Minister has proposed a higher import duty on foreign made mobile handsets to encourage domestic production. All the major national handset manufacturers are sourcing the components from China, Taiwan, and Vietnam etc.

“I am not sure whether the higher import duty is applicable even on CKDs (Complete Knock downs) also or not. Finally, liberalized FDI is not going to give us expected results unless and until there is clarity on certain existing debates like Vodafone tax case etc. If the clarity is brought in then international investors shall have full confidence in our systems,” Chatterji added.

editor@telecomlead.com