Digitization is among Key Focus Areas of Union Budget 2017-2018

Union Budget 2017-18 is quite satisfactory for the IT and Telecom sector as the government has kept technology as a prime focus for its development agenda

India: Arun Jaitley, Finance Minister of India, announced the Union Budget 2017-2018 on 1st February, 2017, with a major focus on Digital India as well as boosting infrastructure and improving connectivity. This is the first annual budget since the ban of high-value currency notes and is expected to bring an upsurge to government projects for Digital India.

Boosting cashless transactions has been the center point of Digital India initiative, and consequently, the government has banned cash transactions above INR 300,000 (approx. USD 4,400) in India. Basic Customs Duty, Special Additional Duty and Countervailing Duty have been waived off on miniaturized POS card reader for m-POS (not including mobile phones or tablet computer), micro ATM standards version 1.5.1, Finger Print Readers/Scanners and Iris Scanners, and has also exempt parts and components for manufacturing of such devices, for encouraging domestic manufacturing and cashless transactions. Moreover, Aadhar Pay, a merchant version of Aadhar Card has also been also put forward in the Union Budget to facilitate digital payments, which will further boost the mobile wallet market in India.

Leveraging the strength and reach of the country’s IT sector, the Finance Minister proposed the launch of SWAYAM, an online education platform incorporating at least 350 online courses. This would enable students to virtually gain knowledge from best faculty, access exceptional reading resources, become a part of discussion forums as well as take online tests and receive academic grades. For easy accessibility, SWAYAM would be linked with DTH channels dedicated to education.

Government has also reduced the tax deducted at source (TDS) in case of payments made to a person engaged only in the business of call center. This will serve as a major boost for the Business process outsourcing (BPO) industry, which is growing robustly in tier 2 and tier 3 cities in India. The Finance Minister also announced to launch a new initiative, DigiGaon, which would provide tele-medicine, education and skills to the people through digital technology. This is will encourage many start-ups to work in the rural area as well beyond the highly competitive Tier 1 cities.

Further, realizing the importance of cyber security and for safeguarding the integrity of the financial sector in the country, a Computer Emergency Response Team for Financial Sectors (CERT-Fin) would also be established. The government also mentioned its desire to bring reforms in tax administration in the form of RAPID approach, which stands for Revenue, Accountability, Probity, Information and Digitisation. The government is focusing on maximizing the use of Information Technology in the Revenue Department, to minimize tax avoidance cases and remove human contact with assesse, by increasing its effort for e-assessment during the coming years.

The government has allocated USD1.48 billion for the BharatNet Project, under which 155,000 kms of optical fiber cable has already been laid. It aims at providing high speed broadband connectivity via optical fibre in more than 1,50,000 Gram Panchayats along with the availability of Wi-Fi hotspots and access to digital services, in partnership with states and private sector. Through this project, the telecom sector will get a boost in rural India as the penetration of broadband connectivity will increase across various villages and gram panchayats of the country.

On the other hand, Special Additional Duty (SAD) of Customs on Populated Printed Circuit Boards (PCBs), which are used in manufacturing mobile phones, has been increased by 2%, which is expected to marginally increase the prices of mobile phones. However, it will not have an adverse effect on the country’s mobile phone industry as the government is promoting cashless transactions. which is expected to boost the sales of smartphones.

PROPOSALS INVOLVING CHANGE IN DUTY / TAX RATES:

1.	Changes in customs duty to provide adequate protection to domestic industry
		Electronics / Hardware
		Populated Printed Circuit Boards (PCBs) for use in the manufacture of mobile phones, subject to actual user condition	SAD – Nil	SAD – 2%
2.	Promotion of cashless transactions and promote domestic manufacturing of devices used therefor
	1.	a)   Miniaturized POS card reader for m-POS (not including mobile phones or tablet computer), b)   Micro ATM as per standards version 1.5.1, c)   Finger Print Reader / Scanner, and d)   Iris Scanner	Applicable BCD, CVD SAD	BCD – Nil CVD – Nil SAD – Nil
	2.	Parts and components for manufacture of: a)   miniaturized POS card reader for m-POS (not including mobile phones or tablet computer), b)   micro ATM as per standards version 1.5.1, c)   Finger Print Reader / Scanner, and d)   Iris Scanner	Applicable BCD, CVD SAD	BCD – Nil CVD – Nil SAD – Nil

 

TechSci Research believes that the growing government focus towards digitisation would strengthen the country’s economy and the IT sector, in particular. Start-ups have been given another boost by giving tax exemptions, which will encourage young entrepreneurs. Moreover, increasing focus and implementation of the government towards IT and Telecommunication across various government projects will further boost the country’s IT & Telecom industry in the coming years.

According to the recently published report by TechSci Research, “India Mobile Wallet Market By Application, By End User, Competition Forecast & Opportunities, 2012 - 2021”, the market for mobile wallets in India is projected to grow at a CAGR over 50% during 2016 – 2021. Evolving technologies, secure authentication process, rising adoption of online payments and growing e-commerce transactions are anticipated to significantly boost India mobile wallet market in the coming years. Banking sector accounted for the largest end use sector in the country’s mobile market in 2015, followed by retail, telecom and transportation sectors. Northern region accounted for the maximum number of mobile wallet users, owing to highest number of retail stores choosing payment through mobile wallets in the region’s Tier I, Tier II & Tier III cities. Few of the major companies in India mobile wallet market include One97 Communications, One Mobikwik, ItzCash, Oxigen, among others.    

According to another recently published report by TechSci Research, “India Optical Fiber Cables Market By Type, By Material Used, By End User, Competition Forecast & Opportunities, 2011 – 2021”, the optical fiber cables market in India is anticipated to grow at a CAGR of over 13% during 2016 – 2021, with Single-Mode segment dominating the country’s OFC market in 2015. In India, glass is the most preferred material type used for manufacturing OFCs. Few of the leading players operating in India optical fiber cables market include Sterlite Technologies Limited, Aksh Optifibre Limited, Birla Cable Limited, Vindhya Telelinks and Finolex, among others.