The budget has been presented. Setting an ambitious blueprint for steering the economy towards India@100, the growth-oriented tech-intensive budget has made a strong push to develop the country’s infrastructure through the PM Gati Shakti National Master Plan, which will be a game changer not just in triggering economic activity but also developing skilled human capital and generating employment.
Finance Minister Nirmala Sitharaman set the tone of the budget by carrying the budget in a made-in-India Tab in a slim red folder and presenting a paperless budget for the second consecutive year — a welcome break from the past when traditional briefcase budgets stuffed with stacks of paper used to characterize the union budgets presented by the previous FMs.
Rather than dallying with the broader announcements for various sectors of the national economy, we shall restrict our budget analysis here to the budgetary announcements vis-à-vis the IT sector.
At the first glance, it seems the uncontrolled economic ravages spun by the Pandemic, and the pivotal role played by the IT industry to keep critical sectors like education, health, even the running of the government as well as the private sector afloat, has propelled the Government to rise up to the occasion. A series of big-ticket announcements pertaining to the IT industry is a clear pointer towards that.
The IT industry, in general, has received the Union Budget with applause. Prabhakar Iyer, Executive Director and Chief Financial Officer, Ingram Micro India, says, “It is a forward-looking budget and will have an impact in the years to come. The government has embraced technology and digitization in all sectors of the economy viz. defense, agriculture, health, education.”
“It is very interesting to note the way Government is adapting the digitization – by increasing faceless engagement with government and also between the private sector through government platforms, creation of unified logistics platform, Delivery of digital and Hi-tech services to farmers, use of Kisan drones to aid farmers, establishing Digital university, e labs, e skilling are a very modern and contemporary governance process,” adds Iyer.
“The government recognizes that as it puts its thrust on digital transformation to usher in economic growth the human capital of the nation needs to be modernized, digitally empowered and rightly skilled, and this is a very welcome move. The DESH- Stack eportal and the formation of a digital university are all steps in the right direction and a major push towards upskilling & reskilling that should go a long way in addressing skill gaps and employability issues of the industry,”says Milind Borate, Co- founder and Chief Development Officer, Druva.
Echoing similar sentiments, Venkatraman Narayanan, Managing Director & CFO, Happiest Minds Technologies, says, “The theme of continued ease of doing business, consistency and stability in tax rates, rebates, push to further digitise the economy, issue of RBI backed digital currency, legitimising digital assets, etc. seem to aid and support the all and in specific the IT Industry which is expected by NASSCOM to grow to become $350 billion in size in 5 years. In all sounds like a ‘financial budget’ of the Country”.
Lets go through the budgetary provisions for the IT sector one by one.
Gaming Sector Gets a Shot in the Arm
The budget made provisions for the gaming industry. Animation, Visual Effects, Gaming, and Comics (AVGC) promotion task force will be set up to build domestic capacity to cater to our markets and global demand. The move will address one of the key challenges of
The gaming industry – availability of talent for nascent gaming industry.
Launch of Digital Rupee
Among the volley of announcements has been the FM’s announcement regarding the launch of a digital currency by 2023. Adding philip to India’s digital ambition, the FM announced that the Reserve Bank of India will launch a Digital Rupee based on blockchain technology by 2023. We feel the introduction of a central bank digital currency will definitely prove to be a major boost to the digital economy and would also pave the way towards a cheaper currency management system. Also, as it lays down a solid plan to have a public digital currency, it would bring into sharp focus and mainstream the application of next-gen technologies like BlockChain.
The Fin Tech Sector has welcomed the move.
“We believe the Budget provides for continued policy thrust on enhancing the digital payment ecosystem is a clear positive for the FinTech sector. Specifically, the introduction of the Digital Rupee based on blockchain by the RBI will be an interesting catalyst in powering Digital India 2.0,” says Ashish Nayyar, Co-Head of India, OakNorth.
“The proposal to start digital rupee by 2022/ 2023, only indicates that the government is abreast of the changes taking place around the world and will take lead in granting approvals and investments. This also gives assurance to individuals that digital currencies will not be outlawed.” Says Abhishek Malhotra, Managing Partner, TMT Law Practice.
Reflecting on the technical advantage of the blochain platform, Aniket Jindal, Co-founder, Biconomy , ‘The blockchain based digital rupee is a welcome step. While the critics rightly point out that it’s not decentralized & issued by the govt, we need to understand that the mainstream adoption of web3 & crypto won’t happen overnight. It will happen slowly with small steps toward our eventual goals. And such a blockchain based digital rupee has the potential for being a big step in onboarding 100s of millions of Indians into the blockchain economy. It will also help open one of the largest economies to new innovations in the web3 ecosystem.’
The launch of Digital Rupee has huge implications for the finance sector overall. This underscores India’s pre-eminence in in digitised finance sector.
Crypto, NFT Come Under Tax Net
There has been lot of buzzes surrounding the news that India is on its way to regulate the cryptos, the new age fad for investors. Industry has wanted a specialised regime for taxation of cryptocurrency, since crypto assets that covers a wide array of digital assets like non-fungible tokens (NFTs), wrapped asset tokens, etc, has gained tremendous traction in recent times..
The FM dropped a bombshell by announcing in her budget that henceforth crypto traders would be taxed 30% of their income. This is viewed by some as part of a bigger governmental move to disincentivize investments into cryptos.
Further, the government said the gift of virtual digital assets will be taxed in the hands of the recipient.
Finance Minister Nirmala Sitharaman said that it cannot be mentioned as a replacement of any other income and 1% TDS to be charged further on payments made using digital assets to keep a track on transactions.
The move is seen by many as by formally bringing the virtual assets such as cryptocurrencies and non-fungible tokens under the tax net, the government has given formal recognition to the private cryptos.
Toshendra Sharma, Founder and CEO, NFTically says, “Blockchain Innovations companies have exposure to Cryptocurrencies and this decision by the Government of India will help such core tech innovation to flourish without any fear. The Indian Government legitimatised crypto assets in India in an indirect way by coming out to tax the same. This is a strong step taken to boost a digital economy.”
Abhishek Malhotra, Managing Partner, TMT Law Practice, says, “Cryptocurrency has been brought into the tax net of 30% which is a welcome move, as the same does not seem to be subject to a complete ban anymore. Further, as gains from its trading will also be taxed now, this will bring in some faith in the investors.”
Aishwarya Shivakumar, CEO, Oddz Finance, says,‘The inclusion of the crypto and blockchain sector in the Union Budget 2022 is a welcome step taken by the Government of India. With the announcement of RBI launching its own digital currency using blockchain in 2023, the awareness of the technology and the economics surrounding it is only bound to increase. This announcement also implies a positive outlook of the government towards this technology.”
Roll out of ePassports
To improve convenience of International travel, the budget has announced for the launch of ePassports. The introduction of innovative initiatives like e-passports will boost security and enhance the convenience of international travelers. This will support a faster revival of international travel in a pandemic-driven environment.
Digital University: Major Boost to e-Learning
The budget makes provision for an innovative Digital University in a major boost to the online learning. Once set up in the hub and spoke model, this would lead to generation of employment and boosting vocational jobs.
“A clear emphasis on digital content development and delivery and overall efforts to digitize education is applauded as is the upgradation of Anganwadi. Coupled with 5G roll out – this budget should accelerate more accessible quality education in the country,” Pawas Tyagi, Co-Founder- edustoke.
Recharging the EV Ecosystem
The budget encourages the private sector to create sustainable and innovative business models for battery and energy as a service, improving the efficiency in the EV ecosystem.
“There’s a clear push for Electric Vehicles. A battery-swapping policy which is brought out with interoperability standards will definitely boost EV eco system,” says Rajat Singhania, Founder of HyLyt by SocioRAC .
Auction of 5G Spectrum: Boost to Tech Sector
India has been awaiting the rollout of the 5G for some years now. Not any longer. The budget makes provision for the 5G roll out sooner.
Vishwadeep Bajaj, CEO, ValueFirst, says, “Union Finance Minister Nirmala Sitharaman announced earlier about initiating the 5G spectrum in India next year. This development is incredible, especially for the banking sector. The spectrum will provide faster and simpler payment options, which will make mobile and digital payments even more appealing to the masses and merchants alike, further boosting usage. This is key to economic growth. Another major advantage of 5G will be its ability for banks to improve proactive fraud prevention and take informed decisions in real-time. Processing data, verifying the nature of transactions, confirming transaction amounts and funds availability, consulting multiple data instances in real-time, coupled with customer geolocation and merchant ID, will reduce fraud detection errors and false positives, thereby protecting consumers and the bank’s bottom line.”
Telemedicine Back in Focus
Dr. Harshit Jain, Founder and Global CEO, Doceree says, ”The high point of the budget is its focus on mental health. The proposed national tele-mental health programme will create a supportive environment for people to talk about emotional issues they counter on a day-to-day basis and help remove the stigma that we have around mental and emotional problems. Also, the decision to create an open platform for the National Digital Health Ecosystem is yet another move to digitize healthcare in the country which surely has a far-reaching impact on making quality healthcare accessible to all”.
Clean Energy Push
In a clear move towards cleaner energy and environment-friendly transportation, the budget puts efforts in the right direction. The FM announced battery swapping policy to address the charging issue with EVs, indicating that the charging station will be launched at scale and policy will be brought out with interoperability. Besides, Exclusive EV zones and focus on battery swapping will be good news for the EV sector. Standardizing battery swapping infrastructure will accelerate economies of scale and hasten EV adoption.
Data Centres Included In Harmonised List Of Infra
Data centres and energy storage systems will be included in harmonised list of infrastructure sectors. This will include dense charging infra and grid scale systems. This will facilitate credit availability for digital infrastructure and clean energy storage.
B.S.Rao, Vice President, Marketing, CtrlS Datacenters said, “The Infrastructure status allows datacenters to play a key role in enabling digital economy. Must thank the Government for granting infrastructure status to the Indian datacenters. It will help datacenters in the country gain easier access to institutional credit perhaps at lower rates, attract foreign investments and private capital, besides accelerating datacenter deployments in tier-2, tier-3 cities aligned with the roll-out digital banks, digital universities, digital payments, Bharatnet (OFC) across all villages thus paving the way for a vibrant Digital India.”
Nikhil Rathi, Founder and CEO, Web Werks, Says, “This budget further accelerates the Digital India push. Infra Status to data centers will provide further impetus to a fast-growing industry giving access to benefits like cheaper finance.”
Furthering the government’s committment towards Atma Nirbhar Bharat in armed forces, the budget earmarked 68% of capital procurement budget for domestic industry for 2022-23 up from 58% in 2021-22. Further, an amount of Rs 19,500 crore was marked for PLI for manufacturing of high efficiency module for polysilicon.
Big Boost for Startups
As the budget makes big moves towards recharging and strengthening digitization and entrepreneurship via tax incentives for another year, earmarking capital expenditure and promoting startups in various sectors, Indias Startup ecosystem responds with lot of excitement. Vikrant Khanna, Co-Founder and CEO, Mogi IO says, “Budget sets the tone for taking India one step forward as the Startup Capital of the World. There is an overarching theme of boosting digitization & entrepreneurship via tax incentives for another year and by earmarked capital expenditure & promoting startups in sector such as defense, agriculture, drone, digital currency, data centers, animation etc.”
“There is no doubt it will lead to an accelerated trend of global investments and growth for the Indian start ups,” Khanna further adds.
Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank, says, “The extension in timeline and increased outlay towards ECLGS and additional infusion of funds in the Credit Guarantee Trust for Micro and Small Enterprises will provide relief to MSMEs, especially those engaged in contact-intensive sectors, who have been adversely impacted due to the pandemic. The significant additional allocation towards PM Awas Yojana will boost demand for affordable housing, and in turn demand for housing finance.”
Similarly, Madhusudan Ekambaram, Co-Founder & CEO, KreditBee and Co-Founder, FACE (Fintech Association for Consumer Empowerment), opines, “Government’s recognition of startups as the drivers of economic growth is heartening. Measures like setting up an expert committee to suggest measures to help attract investment and extension of tax incentives period for startups incorporation by 1 year, will certainly aid in creating a healthy startup ecosystem.”
Boost to Electronics Manufacturing
The electronics industry too is happy with the announcements made in the budget. FM today stating that it has potential to create 60 Lakh new jobs and additional production of 30 lakh crores. This is also a clarion call to the industry to work much harder in the years to come to make it a reality. On a macro level, the scheme around design-led manufacturing as part of the PLI scheme would fasten the development of the ecosystem, and also changes in customs duty will drive greater domestic value addition in Electronics manufacturing in the country, which has grown rapidly in the last few years,” says A Gururaj, MD, Optiemus Electronics Ltd.
Data Exchange
The industry also welcomed the provision for Data Exchange proposed in the budget.
“Avaali welcomes the announcement of Data Exchange among all-mode operators to be brought on Unified Logistics Interface Platform. Digital solutions are the way forward in any kind of enterprise management. Furthermore, to make businesses more efficient & profitable, we require a workforce that is skilled in API. This will be one of the most sought after approach as we pivot ourselves to the needs of a post-pandemic workforce requirement. The finance minister’s digital push for skilling across the digital ecosystem is an impetus in the right direction,” says Srividya Kannan, Founder & Director, Avaali Solutions.
