By Ajai Chowdhry
With a favourable economic environment like never before and backed by a majority government, the industry has high hopes from the Union Budget 2015-16 riding on the party's 'Ache din aane waale hain' campaigning. With the announcement of several key initiatives that seek to revive growth like Skill India and Make in India, the market confidence and investor sentiment both have got a major boost which in turn has created an optimistic business environment.
Before talking about the key reforms expected, I would like to say that implementation of GST and removing the retrospective tax from our vocabulary are two key aspects which should definitely see light of the day this budget. The GST implementation has been a primary demand of the industry and this has to be rolled out by bringing on board all State Governments and strengthening the tax regime.
A key sector which the Government should focus on in this budget is Electronics Manufacturing. The journey for domestic manufacturing in India has remained arduous coupled with the burden of rising electronics imports. Due to extremely low domestic production, the manufacturing industry did not keep pace with global counterparts and hence could not establish itself as a manufacturing hub. There are many challenges still present like high cost of finance, power, soaring transaction costs, tax structure, weak rupee and a poor supply chain which prevent large manufacturers from setting up base in India. In order to overcome these challenges, firstly, the inverted duty structure should be completely corrected as domestically-produced goods cost more than imported ones which is a major deterrent for manufacturing in India. This can be revised by rationalizing the special additional duty (SAD). Secondly, deemed export status should be given for ITA products manufactured in India.
Increase in domestic production can also be created by strictly implementing the policy of buying only products manufactured in India by all Central government bodies including PSU's and this can be extended to all State Governments to generate demand. Secondly, accelerated depreciation should be introduced on IT hardware products of 90 per cent. India has a large domestic market and hence it is essential that we draw investments into India by fully utilising the 'Make in India' initiative. Local electronics manufacturing will not just create newer avenues for jobs but also help narrow the current account deficit. Another factor that needs due attention in this budget is the entrepreneurial ecosystem. Entrepreneurship-led economic growth will act as a crucial catalyst to not just boost innovation but also create employment. While several plans and initiatives have been undertaken by States, it is time the Government puts its plans into action that can nurture the entrepreneurial culture. Also, the 10,000 crore start-up fund announced by the Government is a welcome step for entrepreneurs and SMEs but its real test lies now.
Globally, it has been recognised that innovative start ups are the real growth engine for creating employment and economic growth. Several countries like USA/UK/ISRAEL have transformed their economies by taking necessary steps to create a vibrant entrepreneurship ecosystem. Most recently, Singapore is attracting more and more Indian start-ups to move by offering very attractive policies. This needs to be corrected and focus needs to be diverted towards Angel investing. Section 56 (2) (viia) & (viib) is a serious roadblock in entrepreneurial growth for the way it treats the valuation and tax treatment for genuine Angel groups.
Another aspect that requires attention is the tax structure for Angel Investors. All countries like the US/UK/ Singapore offer serious incentives to Angel Groups. India as a start can introduce tax credits to Angels through recognised Angel Groups of 30 per cent with a sunset provision that this benefit can expire in 5 years. This is bound to boost the Angel community and increase the pool of investors.
It is expected that the new government will announce key policy reforms that will turn India into a lucrative destination for both the domestic market and foreign investors. The Budget in this case will play a crucial role in setting the roadmap for the future and move towards constructive growth.
Ajai Chowdhry is Founder, HCL
With a favourable economic environment like never before and backed by a majority government, the industry has high hopes from the Union Budget 2015-16 riding on the party's 'Ache din aane waale hain' campaigning. With the announcement of several key initiatives that seek to revive growth like Skill India and Make in India, the market confidence and investor sentiment both have got a major boost which in turn has created an optimistic business environment.
Before talking about the key reforms expected, I would like to say that implementation of GST and removing the retrospective tax from our vocabulary are two key aspects which should definitely see light of the day this budget. The GST implementation has been a primary demand of the industry and this has to be rolled out by bringing on board all State Governments and strengthening the tax regime.
A key sector which the Government should focus on in this budget is Electronics Manufacturing. The journey for domestic manufacturing in India has remained arduous coupled with the burden of rising electronics imports. Due to extremely low domestic production, the manufacturing industry did not keep pace with global counterparts and hence could not establish itself as a manufacturing hub. There are many challenges still present like high cost of finance, power, soaring transaction costs, tax structure, weak rupee and a poor supply chain which prevent large manufacturers from setting up base in India. In order to overcome these challenges, firstly, the inverted duty structure should be completely corrected as domestically-produced goods cost more than imported ones which is a major deterrent for manufacturing in India. This can be revised by rationalizing the special additional duty (SAD). Secondly, deemed export status should be given for ITA products manufactured in India.
Increase in domestic production can also be created by strictly implementing the policy of buying only products manufactured in India by all Central government bodies including PSU's and this can be extended to all State Governments to generate demand. Secondly, accelerated depreciation should be introduced on IT hardware products of 90 per cent. India has a large domestic market and hence it is essential that we draw investments into India by fully utilising the 'Make in India' initiative. Local electronics manufacturing will not just create newer avenues for jobs but also help narrow the current account deficit. Another factor that needs due attention in this budget is the entrepreneurial ecosystem. Entrepreneurship-led economic growth will act as a crucial catalyst to not just boost innovation but also create employment. While several plans and initiatives have been undertaken by States, it is time the Government puts its plans into action that can nurture the entrepreneurial culture. Also, the 10,000 crore start-up fund announced by the Government is a welcome step for entrepreneurs and SMEs but its real test lies now.
Globally, it has been recognised that innovative start ups are the real growth engine for creating employment and economic growth. Several countries like USA/UK/ISRAEL have transformed their economies by taking necessary steps to create a vibrant entrepreneurship ecosystem. Most recently, Singapore is attracting more and more Indian start-ups to move by offering very attractive policies. This needs to be corrected and focus needs to be diverted towards Angel investing. Section 56 (2) (viia) & (viib) is a serious roadblock in entrepreneurial growth for the way it treats the valuation and tax treatment for genuine Angel groups.
Another aspect that requires attention is the tax structure for Angel Investors. All countries like the US/UK/ Singapore offer serious incentives to Angel Groups. India as a start can introduce tax credits to Angels through recognised Angel Groups of 30 per cent with a sunset provision that this benefit can expire in 5 years. This is bound to boost the Angel community and increase the pool of investors.
It is expected that the new government will announce key policy reforms that will turn India into a lucrative destination for both the domestic market and foreign investors. The Budget in this case will play a crucial role in setting the roadmap for the future and move towards constructive growth.
Ajai Chowdhry is Founder, HCL
