Indian telecom industry responses to Union Budget 2012 policies

Telecom Lead India: Several ICT industry veterans have
responded to the Union Budget 2012-13. For many, the Budget created mixed
reactions. Hope Indian industries will boom and there will be more funds in the
pockets of people.

Telecom Lead is presenting few responses from diverse

Sunil Dutt, managing director, Research In Motion

It can be said that the Budget was well balanced and
focuses more on long-term growth aspects instead of short-term populous
measures, can be termed as positive and growth oriented. It indicates some
prudent steps towards fiscal consolidation and reflects that the government is
sincere about the fiscal situation going forward. The proposed full exemption
on mobile phone part may further make the smartphone affordable to larger
section of the masses and basis the direct taxes, the increase in disposal income
will further enhance the penetration of smartphones. The budget is expected to
stimulate growth for agriculture, banking & m-payments industry with
development of tier II, III markets. This will in turn enhance the adoption of
mobility contributing to the overall growth of the economy.  Introduction
of a constitutional amendment for GST is also a positive development.

Abhishek Chauhan, senior consultant, ICT Practice, Frost
& Sullivan, South Asia & Middle East

According to the Union Budget, telecom towers will
be made eligible for viability gap funding.  Public Private Partnership
would help infuse fresh funds in the struggling tower businesses and thereby,
boost the development of telecom infrastructure in the country.

Removal of customs duty would allow the OEMs to offer more affordable handsets
and thereby increase the mobile phone penetration in the country. This was
particularly required for proliferation of affordable smartphones as they would
be the key drivers of data consumption in the country, especially in the rural

Rajdeep Endow, managing director, Sapient India

On the whole it has been a very average budget. There was
an opportunity to make some clear moves to move the needle on growth and
investment. Instead, we have been given a safe budget. The increase in excise
duty and service tax will hurt growth and will likely cause inflationary
pressures. For the IT industry, I expected to see MAT exemption to SEZ units,
which did not happen. On the positive side, I welcome the increased investment
in education, health care and housing.” – Rajdeep Endow, Managing
Director, Sapient India.

Deepak Chandnani, CEO, Obopay

It is encouraging to see that the budget is focused
heavily on the rural development. Clearly, financial inclusion is high priority
for the government. Financial Minister’s proposal to complete Aadhar in 50
districts over the next 6 months will lead to availability of financial
services to more people.

Penetration of banks and financial services in rural
India, presents larger scope for mobile banking and payment service providers.
We believe that this is a positive sign for Obopay as the budget will only
encourage the adoption of mobile banking technologies.

The only road block that I see is the 2 percent increase
in service tax. It will lead to higher tax attached to  mobile phone
bills and mobile transactions thereby affecting the usage of mobile services.


Overall the budget is growth-oriented with a huge impetus
on rural areas and people residing therein.

R Chandrasekaran, group chief executive, Technology &
Operations, Cognizant

The IT services industry that was looking forward to
stability, consistency and simplicity in policymaking was served a mixed bag.
For the industry, which has been looking for greater clarity in transfer
pricing, the move by the Finance Minister to implement the advance pricing
agreement is a serious recognition of the importance of cross-border trade in a
globalized economy and would usher in greater tax certainty for foreign
investors in the coming years. This, along with the phased move towards the
direct taxes code, is a welcome development and a move towards stability in tax
structure. However, the retrospective amendments made are poised to introduce
significant uncertainty and increase the cost of doing business in India.


MP Vijaykumar, chief financial officer, Sify

Not a disappointment in its entirety. The FM had too many
compulsions and issues to address and they cannot be addressed in a fiscal
budget. At least, there is reaffirmation of GST, DTC becoming a reality. The
announcements towards fiscal discipline in terms of subsidy cap and focus
towards long term growth – R&D, venture capital funds scope enhancement,
Investment linked deduction are steps in the right direction. The key
differentiator now will be in how the government holds its nerve in delivering
on hitherto taboo subjects like subsidies and fiscal deficit”


PVG Menon, president, India Semiconductor Association


ISA broadly welcomes the budget with its thrust on
accelerating overall GDP growth from 6.9 percent to 7.6 percent. We welcome the
thrust given to areas like infrastructure development, skill development,
encouragement of R&D, and the focus on helping SME’s.


However, we view with concern the increase in Service Tax
and increase in excise duty on certain items which are traditional consumers of
the electronics and components industry in India.


We would have liked to see some initiatives being announced
for the promotion of the domestic Electronics Design and Manufacturing (ESDM)
industry, which has a potential to grow to $400 billion by year 2020. We are
also looking forward to the final policy as well as implementation details of
the new National Electronics Policy as well as the National Telecom Policy, as
related to ESDM sector.


Sridhar Sarathy, vice president – India operations,
Juniper Networks


With the proposal to extend the weighted deduction of 200
per cent for R&D expenditure in an in-house facility for five more years,
the Union Budget FY 2012-13 is a positive promotion of the long-term importance
of science, technology, research and innovation in India. This will be of
benefit to organizations conducting research and development in India and will
help to encourage them to deepen their connections with the ecosystem and the
talent available in the country. The Finance Minister’s recognition that the
driving force of a modern nation is research and the creation of new knowledge”
is to be applauded.


Jagdish Mahapatra, managing director – India and SAARC,


Last year, due to unfavorable global factors, India’s
economy was largely affected. This year, the Finance Minister has proposed a
fair bill which is for the most part populist in nature. It bodes well for new
investors and also creates a wonderful picture in the health, education, NREGA
etc. sectors. For the IT industry however, this is a moderately encouraging
bill and has made few strides in the development of the sector. Certain
benefits we see that will accrue to the industry at large would be:


* Scale and roll-out UID in 50 districts: As mentioned in
our pre-budget quote, we firmly believe that UID will be a catalyst for the
development of the country. Not only will it enable financial inclusion, it
will also help the rural populous in gaining identity and for the daily wage


* Introduction of mobile-based Fertilizer Management
System has been designed to provide end to-end information on movement of fertilisers
and subsidies. Nation-wide roll out during 2012: Pervasive technology so
that all sectors in the country can avail the benefits for the betterment of
their living. This will benefit more than 12 crore farmer families.


* A central Know Your Customer depository to be
developed in 2012-13 to avoid multiplicity of registration and data upkeep: A
brilliant reform movement, this will not only reduce duplicity in our system
but also help the banks in maintaining the correct financial requirements of
every individual. This will go a long way in the financial inclusion


* DTC and GST Bills: We welcome these proposals that
are aimed at bringing in uniformity in the taxation process.

Sanjay Deshmukh, area vice president – India
Subcontinent, Citrix Systems India


In the backdrop of challenges pervading the economy, we
see that the Union Budget 2012 has announced economic and tax reforms to set
the stage for sustained growth and development. As part of the 12th Five Year
Plan, we welcome the government’s move to outline policies that will generate
domestic demand recovery.


As a foreign corporation with an Indian subsidiary, the
government’s plan to introduce tax reforms for the enactment of Direct Tax Code
Bill is encouraging for us. The move to set up the GST network as a National
Information Utility and operationalize it by August 2012 is also favourable for
the industry. The budget has also recognised the role of technology in creating
a citizen centric governance framework, reflected in the subsidy provided for
Aadhaar tablet enabled payments for various government schemes in atleast 50
districts within next 6 months. This is particularly of interest to us as we at
Citrix are helping customers to enable on-demand access to desktops,
applications and data on tablets in their workplace which results in increased


There have been no mentions of clearing the ambiguity
around treating software as goods (subject to VAT) or as service (and subject
to service tax). We were also hopeful of revisions around the Minimum Alternate
Tax (MAT) on SEZ as last year it saw the investments in SEZs going down.
Amendments towards this end would have helped the industry create a conducive
environment to attract both local as well as foreign investments into the


Dippak Khurana, CEO and co-founder,


The Union Budget 2012 is a balanced one and has put forth
many provisions to  improve macroeconomic environment and strengthen
domestic growth drivers. Although the budget doesn’t majorly focus on telecom
and allied industries, there are a few provisions which are very crucial from a
populist perspective:


The exemption of duty on mobile phone parts is surely an
ecosystem enabler as it will lower the market prices of phones which are being
assembled in India. This will help us achieve not only last mile connectivity
but will fuel growth of ancillary sectors such as mobile content development,
mobile banking, mobile advertising etc


Over all, the government realizes the role that mobile
devices have to play in enhancing and streamlining IT oriented citizen centric
governance framework. This is reflected by two provisions in the government 1)
creation of a mobile-based fertilizer management system that will provide end
to-end information on movement of fertilizers and subsidies.  2) roll out
Aadhaar tablet enabled payments for various government schemes in at least 50
districts within next 6 months.


However, the increase in the service tax from 10 percent
to 12 percent will adversely affect the masses as mobile phone bills will
become higher. Barring this negative point, the rest of the provisions in the
budget are encouraging for the sector per se.

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