Finance Minister’s ‘briefcase’ opens up growth prospects for ESDM industry

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March 18, 2015: The NDA government presented its much awaited first Union Budget on February 28, 2015. Those in the ESDM and allied industries were keen to know what Finance Minister Arun Jaitley had in ‘The Briefcase’ for them. It surely offered a lot to the ESDM industry, by promoting the ‘Make in India’, ‘100 Smart Cities’ and ‘Digital India’ drives. The government has also paid special attention to the solar energy sector by announcing the targeted solar energy capacities and ensuring a strong role for solar power in the Indian Railways. The most awaited announcement was that relating to the GST, which according to the government will be implemented by April 1, 2016.

All of these developments will be backed by better skills development programmes, initiatives to promote start-ups and also bring forward the under-developed regions of the country.

What the Associations say

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Rajoo Goel, joint secretary, ELCINA

At the macro level, the Union Budget has tried to address major challenges such as lowering the fiscal deficit, improving governance, increasing infrastructure outlays, enabling key initiatives such as ‘Make in India’ and improving the ease of doing business.

With respect to electronics manufacturing, a few steps have been taken to reduce tax anomalies. The problem of duty inversion and the reduction in the cost of raw materials has been addressed by reducing the custom duty on specific inputs. The steps to reduce the Special Additional Duty (SAD) on inputs that come under the ambit of the Information and Technology Agreement (ITA) are indeed welcome.

ELCINA’s recommendation to support electronics assembly by imposing an import duty on populated PCBs (those assembled with components) has been partially acted on through a different route because SAD has been continued at 4 per cent on this product. This will give a helping hand to electronics manufacturing services (EMS) companies in India as product manufacturers will have some incentive to source these assemblies locally.

While a detailed analysis of the steps taken is yet to be done, the government has shown its inclination to support electronics manufacturing. The steps are not comprehensive enough. Some tax anomalies have been addressed, but the problem of disability costs and competitive challenges need to be corrected by reducing the costs of energy, finance and logistics, which are not controlled by the manufacturer. This needs to be done now, if we have to break the vicious cycle of low levels of manufacturing, value addition, R&D investments and innovation, and a high dependence on imports.

ELCINA hopes that the finance minister realises the many disadvantages that India faces in electronics manufacturing, when compared to competing nations, and will take adequate actions to enable us to enter a virtuous cycle and achieve our potential.

Ashok Chandak, chairman, IESA

Members of the India Electronics and Semiconductor Association (IESA) appreciate the government’s intent of making India a manufacturing hub through various initiatives, including enhancing the ease of doing business. The Union Budget 2015-16 will accelerate growth, investments, manufacturing footprints and job creation, in general, and pass the benefits to the people.

Measures such as encouraging start-ups, addressing disabilities (at least partially), skills development, funds with states, ensuring duty benefits for some products, etc, will have an incremental positive impact on the ESDM sector. This budget will lay the foundation for the electronics and technology industry to drive manufacturing and innovation from India. However, it lacks any major stimulus for a quick impact to bring down the electronics import bill in the near term.

Centre-state cooperation: This has been a positive move. We commend that the Central government should focus on introducing GST, along with empowering states with 62 per cent transfers of the country’s total receivables, thus partnering the states in the nation’s growth and progress. IESA has been working with nine states across India to help them with the ESDM policy framework, delivering strategic roadmaps and setting up electronics manufacturing clusters and incubators. These additional funds at the disposal of states will help them to provide more benefits to attract electronics manufacturing into specific regions and to create jobs.

Addressing the disability factors: There have been some incremental measures to address the disability factors faced by the ESDM sector like the establishment of the National Investment and Infrastructure Fund (NIIF), which is aimed at pushing forward infrastructure projects; enhancing funds availability in the MSME sector, which will boost SME manufacturing; GST implementation from next year, etc. The proposals to rationalise SAD and to offer duty benefits on products like LED TVs, mobile handsets, tablets, LED lighting, etc, will help the local manufacturing of these products.

Improving the nation’s talent base: The National Skill Development Mission (NSDM) aims to speedily build up the skillsets required to drive innovations in ESDM across 31 sectors and thereby, enhance the employability of rural people. There have been several education sector announcements related to the IIMs, AIMS, IITs and some science institutes, and this will result in the creation of high quality human resources for the ESDM and medical sectors. There is a strong focus on skills development for the youth, which aims at making India the manufacturing hub of the world.

IESA has been working directly with the ‘Electronics Sector Skills Council of India’ on talent and skills development in the ESDM sector and the Union Budget 2015 will help to speed up this process, hence uplifting the entire sector in India.

Promoting start-ups: As mentioned by the finance minister, India is gradually emerging as a start-up hub with experimentation happening in cutting-edge technologies led by the entrepreneurs’ innovative thought processes. Based on this, the government has allocated Rs 10 billion to enable start-up incubation in the technology space and also created a mechanism called, ‘Self Employment and Talent Utilisation’ to support all aspects of start-ups and other self-employment capabilities, particularly in the technology driven areas.

IESA has been aggressively promoting the start-up ecosystem, striving to get the required infrastructure ready for ESDM in India and the intent shown by the government through the Union Budget 2015 is pretty encouraging. We also welcome the government’s decision to reduce income tax on royalty and fees for technical services to 10 per cent from 25 per cent, in order to encourage young entrepreneurs to get access to the latest technology. The announcement to promote innovation and R&D through a Rs 1.5 billion fund will be a good trigger to drive innovation in the electronics sector from India.

‘Make in India’ for defence manufacturing: The marginal increase in defence expenditure from Rs 222.370 billion last year to Rs 246.727 billion in 2015-16 and the focus on ‘Make in India’ will accelerate defence manufacturing in the country.

Promoting Digital India: Various measures like the National Optical Fibre Network Programme (NOFNP) and promoting cashless transactions will add momentum to technology and electronics innovation in India.

Overall, this has been a positive, growth-oriented and people-centric budget with the government trying to improve the business atmosphere in the country. However, we urge the government to look at the critical demands from the ESDM sector like deemed export status for ITA1 products, setting up of an Electronics Commission, extending MSIPS for five years, mandatory preferential market access to companies manufacturing products in India, removal of restrictions on used equipment imported for R&D purposes, financial and liquidity support, etc. All these factors are key in transforming the country into an ESDM power house.

What the INDUSTRY Says

We are excited about the emphasis laid on the renewable and solar energy space

We welcome the Union Budget 2015-16 as a pro-people and growth-oriented budget. On the corporate front, the focus on infrastructure, the desire to make taxation regimes simpler and deferring the General Anti-Avoidance Rule (GAAR) by another two years are welcome additions. We look forward to a long term and sustainable growth path as set by the honourable finance minister. Specifically, from the perspective of Emerson Network Power, the plans for investments in infrastructure and an enhanced rate of GDP growth at 8 per cent for the next two years, augurs well for the country, and will spur on business momentum. We are particularly excited about the emphasis laid on the renewable and solar energy space as this will bolster investments in the power generation space and will drive overall growth for the economy, since energy is key to 24×7 functioning of businesses.

Sunil Khanna, president and managing director, Emerson Network Power India

The move to launch a National Skills Mission to enhance employability of rural youth is great

The Union Budget for the year 2015-16 has been termed as a ‘make or break’ fiscal exercise primarily focused on pro-common man measures and goes one step further to strengthen the ‘Make in India’ campaign. The commitment to achieve 8-8.5 per cent GDP growth this year and to turn India into a fast-growing economy in the world heralds the optimism in the economy. To achieve higher growth, the government is riding on the core sectors – infrastructure, manufacturing and power — which is much needed to revive the sluggish economy. We, at the IET, are very positive about the fiscal prudence reflected in this budget. The government’s all-inclusive focus on MNREGA activities to provide a strong infrastructure with an additional investment of Rs 700 billion is a way towards attaining India’s next phase of growth.

The government’s move to establish more AIIMS centres and IIMs and to launch a National Skills Mission to enhance employability of rural youth is great. It will strengthen the quality of the technical talent pool, which will enable India’s journey to becoming a scientific power. The IET’s vision is also to build a strong engineering ecosystem in India that contributes to society by resolving critical societal challenges. We are happy to note that the budget is aligned with our vision and we see immediate opportunities from each section of the society – government, corporate and academia — to collaborate for economic development.

The Budget’s special emphasis on encouraging entrepreneurs and the SME sector, by providing funds, will foster the culture of innovation and provide a platform to build the next big global companies from India, many of which will leverage innovative ideas and technology for growth. Significant funds allocation to the solar and power sector is a positive step towards a results-oriented transition to a more sustainable energy-independent country.

A strong focus on building infrastructure, driving manufacturing through the ‘Make in India’ campaign, and support for R&D and innovation through various schemes will encourage start-ups and innovation in the technology sector.

To sum up, the Union Budget is certainly for the common man and a step towards the government’s vision to transform India. With a boost in investments in each sector, it will definitely bring about holistic growth. The IET, being a professional body set up to streamline engineering and technology, can partner with the government to play a critical role in bringing about the change.

Shekhar Sanyal, director and country head,
Institution of Engineering and Technology (IET), India

The step of reducing excise on PV ribbon… is oriented towards the ‘Make in India’ drive

The Union Budget is a far-sighted one with steps taken to build a firm platform for local manufacturers. The photovoltaics (PV) industry has been supported with full excise exemption on the ribbon material used in manufacturing PV modules. This may not contribute significantly to immediate price reductions of SPV modules, but will provide an elementary support to the manufacturing sector, which has been battling to sustain itself against the strong force of imported goods. The step of reducing excise on PV ribbon will not only reduce prices for local content, but is also oriented towards the ‘Make in India’ drive.

Raghunandan S, vice president, engineering, Kotak Urja Pvt Ltd

I would have liked to see more incentivising of companies to do more R&D and manufacturing from India

The Union Budget 2015-16 is well balanced and sustainable with a prudent mix of fiscal discipline and much needed investment across key sectors like infrastructure, along with a well thought out safety net for the poor, under a financial inclusive agenda.

The positive aspects that are immediately apparent are the reduction in corporate tax to 25 per cent in the coming years, the ‘Make in India’ initiative, the several corrections to the inverted duty structure and the National Skill Development Mission that will enable tens of millions of young Indians to join the workforce every year. Innovative schemes to monetise gold, prevent funds leakages and corruption with the direct transfer route, the Digital India initiative, the ultra-mega power projects (UMPP) to meet the commitment of 24×7 power, support of the start-up ecosystem, the schemes for alternative energy development and the move towards GST are all steps in the right direction. What I would have liked to see more of was incentivising companies to do more R&D and manufacturing from India.

Somshubhro Pal Choudhury, managing director, Analog Devices India

A great time for India to utilise its potential to emerge as the largest solar destination

I am pleased with the budget. For the first time, both the railway and national budgets mentioned solar energy prominently. The railways are committed to installing 1000MW of solar energy generating capacity while the finance minister reconfirmed the country’s 100GW solar energy target.

For the solar sector, the urgent need for skills development was put forth, which going forward, will serve the industry well. Moreover, the finance minister proposed a level playing field for Indian manufacturers of solar equipment and has taken action on the inverted duty structure.

I am also sure that the ministers for power, finance and commerce will work with banks and international funding agencies to fuel the growth of the solar sector. There cannot be a better time to be in India and contribute.

Additionally, the NTPC (under the power ministry) is also committed to implementing 15GW of solar power, covering various states in India.

The finance minister also confirmed the government’s resolve to provide 24×7 electricity to all households by 2022, when India completes 75 years of Independence, which will also provide impetus to the solar sector. Besides, the duty on coal has been increased to Rs 200/ton and thus the National Clean Energy Fund is increasing.

It is a great time for India to utilise its potential to emerge as the largest solar destination.

Krishnappa Subramanya, solar consultant and expert, and ex-CEO of Tata Solar BP

A progressive and investment-focused budget

The Union Budget by Finance Minister Arun Jaitley is bold and assertive. We are pleased to know that local businesses and budding entrepreneurs stand to make a mark globally through various schemes that will help them prosper. A number of steps have been announced to improve the ease of doing business — the creation of the Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs 200 billion, and a credit guarantee corpus of Rs 30 billion are positive steps to encourage young, educated, skilled workers who aspire to become first-generation entrepreneurs or expand their range of activities. With robust growth in the Digital India initiative announced last year, it is heartening to see that the government wants to further expand it and increase the network connectivity to more rural areas. Overall, this is a progressive and investment-focused budget from which we hope to see tremendous growth for the Indian economy.

Anil Valluri, president, NetApp India and SAARC

Emphasis on infrastructure will boost investments in technology

The Union Budget 2015-16 reiterates the government’s Digital India programme, with a balanced, strong focus on strengthening the infrastructure sector along with measures to promote entrepreneurship. The emphasis on infrastructure – roadways, railways, power and housing, will in turn boost investments in technology infrastructure and speed up IoT adoption. On the industry front, we are excited that the articulation of the Digital India vision will bring together diversified stakeholders of the Internet of Things (IoT) value chain and regulate the highly fragmented IoT ecosystem in India.

Prabhu Ramachandran, director, WebNMS

We are enthused by the reduction in corporate tax and MAT

“This is an excellent growth budget for raising internal financial resources without burdening citizens from the lower income group in the country. It can be termed as a visionary budget which lays the road map for achieving long-term goals of raising funds for infrastructure and industrial growth. The exemption from SAD and reduction in the excise duty of LED drivers and MCPCB for LED lights, fixtures and LED lamps is a clarion call to boost the domestic LED lighting and electronics industry. We are also enthused by the reduction in corporate tax and MAT as it will encourage corporate operations. Clarity and the assurance about the effective implementation of GST by the beginning of 2016 is indeed a very encouraging step.”

V. P. Mahendru, chairman, EON Electric

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