Budget 2018 offers support for telecom and device manufacturing

Finance Minister Arun Jaitley offered some support for telecom and device manufacturing in India when he presented the general Budget 2018-19 in Parliament today.

The highlight of the budget was the allocation of Rs 10,000 crore for setting up 5 lakh WiFi hotspots to provide broadband access to 5 crore rural citizens. Broadband technology makers such as Ericsson, Huawei, ZTE, among others will benefit from such move.

The government said the Phase I of Bharatnet project has already enabled broadband access to over 20 crore rural Indians.

The second highlight was the decision of the India government to allocate Rs 2.04 lakh crore for 99 smart city projects across the country. India has completed smart city projects worth Rs 2,350 crore and works of Rs 20,852 crore are under progress.

The third highlight was NITI Aayog’s plan for a national program to direct efforts in the area of artificial intelligence.

The fifth highlight was the plan of Department of Telecom (DoT) to support establishment of an indigenous 5G Test Bed at IIT, Chennai.

The final highlight was the proposal to increase customs duty on mobile phones from 15 percent to 20 percent, on some of their parts and accessories to 15 percent and on certain parts of televisions to 15 percent – in order to boost local manufacturing.

“This decision will make the domestic items cheaper than imported ones and will generate more demand which will create more employment opportunities in device manufacturing for the people at large,” Arun Jaitley said.

Industry reactions

Subho Ray, president, IAMAI said Budget 2018 gives recognition to the emerging sectors like Edutech, Agritech, Healthtech in India and is an encouragement for Digital India.

Syed Tajuddin, CEO of Coolpad India, said the increase in custom duty from 15 percent to 20 percent will hamper the cost to customer, especially when it comes to getting repairs for the high-end devices. While increase in custom duty on handsets will compel brands to manufacture or assemble more in India, still there is not great support for local ecosystem for manufacturing spare parts.

“This lack of local spare part manufacturers will mean a tough situation for mobile handset brands. Hence a brand is compelled to import most of the spare parts and customers have to bear some burden of it,” Syed Tajuddin said.

Sanjay Kumar Kalirona, CEO and director of COMIO, said the Budget 2018 is a positive step towards India’s growing smartphone market. The increased custom duty on mobiles will further boost local manufacturing and will be the essential push to create a manufacturing eco-system in India.

Rakesh Kaul, partner, Government and Public Sector, PwC India, said the budget strengthens the opportunity for India to gain from digital economy through initiatives around Artificial Intelligence, Cyberspace, Fintech, etc.

Sanjeev Agarwal, chief manufacturing officer of LAVA International, said that custom duty increase in mobile phones will provide a big boost to the Make-in-India campaign by the government, and will be instrumental in achieving country’s vision of making India a global hub for mobile phone manufacturing.

Rajeev Jain, chief financial officer of Intex Technologies, said that the Budget will spur the demand side of the economy by proposing various rural income enhancement schemes and reducing various pain areas of farmers.

The budget has strengthened the Digital India initiative with the boost in increasing allocation for digital education through classrooms and continues with the broadband penetration in the country.

DD Mishra, research director at Gartner, said the budget does not generate excitement to the extent that was anticipated. Though the extension of rural WiFi hotspots along with investments in telecom can enable rural economy and drive much better financial inclusion and drive technology enabled growth for rural population, we need a better connect between strategy and execution especially in terms of digital India so that we are able to fully leverage the enhanced allocation.

Kunal Bahl, co-founder and CEO of Snapdeal, said the enhancement of digital infrastructure with more broadband access in rural parts, unique ID to companies, record allocation to building national highways and railways, and multi-fold increase in airports will go a long way in broad-basing growth in the economy.

Jay Chen, CEO of Huawei India, said India’s plans to connect additional 1.5 lakh gram panchayats with fibre optic networks under the BharatNet will create access and affordability and will help in bridging the digital divide even further.

Overseas device companies such as Samsung, Apple, Huawei and LG did not comment on the import duty increase.

Amit Gujral, chief marketing officer of LG Electronics India, said the focus on transforming India into a Digital power with its roots in promoting innovation ecosystems, smart technology, robotics, IoT and artificial intelligence is commendable.

Vikas Agarwal, general manager at OnePlus India, said over 85 percent of smartphones sold in country is now produced locally. This is an opportune time to introduce next set of regulations to attract investment in the manufacturing sector and establish India as a global hub for electronics.

Vishal Malhotra, tax leader, Technology, Media & Entertainment and Telecommunications (TMT), EY India, said the proposal to treat foreign exchange gains/losses other than purchase of capital assets from outside India, as a revenue item, should benefit the telecom operators since presently, any foreign exchange losses on domestic procurement including purchase of spectrum is not tax deductible.

Pranav Roach, president, Hughes Network Systems, said satellite broadband technology can greatly help connect the under-served and un-served regions. We request the government to use high throughput satellite connectivity.

Neeraj Sharma, country head – Spreadtrum India, said the increase in the customs duty on imported mobile phones is a great move which will boost the Make in India campaign by promoting local manufacturing.

Manish Sharma, president and CEO, Panasonic India & South-Asia, said the push for local manufacturing of mobile phones and consumer electronics by increasing customs duty on imported products and components will enhance local production.

Mahesh Lingareddy, founder and chairman of Smartron, said the announcement of increase in basic customs duty on mobile phones is a step towards fostering local manufacturing in India which would further fuel indigenous innovation.

Sachin Seth, partner, Financial Advisory Services, EY, said establishment of a programme to direct efforts in artificial intelligence, setting up 5 lakh Wi-Fi hot spots, establishment of ICT infrastructure, set-up of national programme for cyber space and doubling the budget for the Digital India program, all adds to the strengthening of the infrastructure.

Prakash Mallya, managing director, Sales & Marketing Group, Intel India, said the DoT’s establishment of an indigenous 5G center is an encouraging sign of the government’s view of collaboration with the broader technology ecosystem as the best strategy to accelerate the rollout of 5G infrastructure in India.

Ajey Mehta, vice president India, HMD Global, said the increase in import duties for mobile phones and additional duty on key components will have a minimum impact on its business, as all of our current portfolio of Nokia phones are manufactured in India.

Benoy CS, director, Digital Transformation (ICT) Practice, Frost & Sullivan, said some of the key initiatives by the Government like infusion of digital technologies to improve the quality of education will have a long standing impact on the overall growth of ICT in rural areas.

Kiran Deshpande, co-founder and president – Mojo Networks, said providing WiFi in trains, increasing broadband access through WiFi hotspots to 5 crore rural citizens and connecting 1.5 lakh more villages under BharatNet initiative is a step forward towards digitizing India.

Telecom misses

COAI director general Rajan Mathews said the telecom industry association is not happy after the Budget 2018.

“We had sought a reduction in levies and taxes, and an urgent intervention is critical for resuscitating the sector, which is currently experiencing its worst financial health and hyper competition,” Rajan Mathews said.

Reduction in levies & taxes, cut in BCD on 4G LTE equipment, clarity on Right of Way related taxation at the state level, and clarification on lowering the tax rate to 1 percent on discounts extended to small dealers were the main demands of COAI.

COAI represents telecom operators such as Bharti Airtel, Idea Cellular, Vodafone, among others.