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Budget Expectations: What India Inc wants

Posted on Feb 27, 06:37PM | IBNS

New Delhi, Feb 27 : Union Finance Minister P Chidambaram would present the Union Budget 2013-14 on Thursday. Ahead of the big day and amid great expectations, IBNS compiles the expectations of several corporates from the Finance Minister and the United Progressive Alliance (UPA).

Kailash Katkar, MD and Chief Executive Officer, Quick Heal Technologies: To my opinion, the Union Budget for 2012-13 should incorporate policies and measures to develop the domestic software industry and also focus on encouraging software products segment in the country by protecting it from foreign competition in the domestic market.

The Government should promote Indian software products to develop more Intellectual property for India. The current ecosystem is designed to take care only of service providers and we are losing out on benefits which can accrue from a vibrant product development industry in the software domain.

Right now the lack of a strong framework in protecting software intellectual property is damaging the overall reputation of the Indian IT industry across the globe. During the tenure of Late Rajiv Gandhi's prime minister ship. A lot of new initiatives were introduced in the software industry. This was done to encourage software services and it propelled the domestic productivity.

The situation is a lot worse today. India has now been ranked among the worst and awarded lowest scores for copyrights, patents and other intellectual property by the U.S. Chamber of Commerce. Currently, there is a lack of stringent policies and the government perhaps is overlooking the connection between software exports and Indian software products.

India is losing out on the competitive edge because of this situation. A lot can be done to develop an ecosystem in providing strong Indian software products and intellectual property protection. This will not only fortify the Indian software industry but will also create more patents, Trade Mark, Intellectual property and copyrights and increase tax revenues".

Nirupam Sahay, President, Philips Lighting India: As an industry leader, Philips has taken the lead in making a couple of representations to the Finance and Power Ministry, which will in turn help the government in reducing the gap between energy supply and energy demand. Firstly, we have proposed for a reduction in the excise duty payable on the energy efficient lamps - T5 and T8, which is currently 12.36%. On the lines of the reduction which the industry received last year on LED lamps, Philips has gone back to the government for extending the same benefit to T5 and T8 lamps, which are highly energy efficient lighting solutions. We have put forward a case on how this reduction will help drive the conversion from T12 to T5 and T8 lamps, which will save a lot of government spend that will have to be otherwise made on setting up thermal power plants to generate more electricity.

Secondly, in the case of LEDs, presently we have an inverted duty structure on some of the components, which basically means that the duty payable on the components procured for the finished product is higher than the duty which is paid on the finished products. We have pointed out these anomalies to the government, and we have requested for a reduction in the excise duty on the components so that it comes down to the same level as that of the duty on the finished product".

Ramana Akula CFO, Pearson India for the education industry: Education expenses which are allowed under section 80C may be carved out given specific exemption under some other Section 80 with a limit of at least Rs.2.5l per annum. For education companies like us who offer managed services for the educational institutions, some exemption (if not, 100%) may be provided to improve the quality of education in India. It can be similar to an investment deduction.

Any investment made by education companies for running the schools in terms of movable assets be given 100% tax depreciation. Definitely it should encourage vocational, self and extra education on job or after formal education with a limit of 50k.

Laurent Dhaeyer, Managing Director, Ogone Asia and EBS: Present demographics in e-commerce industry are definitely very positive as the number of online visitors in India grew 50 percent in 12 months to November 2012 outpacing the likes of China and Brazil, which grew just 2 to 3 percent each. It is not only the responsibility of the government and its policy initiatives but also the responsibility of every member in the process chain of the e-commerce business such as merchants, payment gateways and customers to work in harmony to shape up the industry's future. A more cohesive environment, bringing all the players in the payment ecosystem to work in unison will unlock the true potential of the e-commerce business in India.

The regulation put in place by Reserve Bank of India (RBI) for 3D-Secure or 2-factors authentication to create a safe environment for e-commerce, were necessary and a prerequisite for further growth. Regulation was necessary but perhaps not sufficient. Many online shoppers turn to cash on delivery for convenience, trust is not completely achieved and the number of new buyers could increase faster.

Following are the steps to be taken for further growth of the industry:

A. Convenience and user-friendliness need to be put back at the centre of the equation while balancing out with safety and security. Several millions mobile and tablet subscribers will gradually start transacting more online provided their check-out experience is optimised. Returning customers are looking for ways to simplify their buying process which would lead to higher conversion and impulsive buying behaviours (e.g. Amazon checkout process)

B. Better KYC: Merchants need to know their customers better and progressively adapt their processes for the level of trust they have.

C. Fraud mitigation systems: Payment gateways have a role to play with the use of advanced fraud management systems that give indications to the merchants about the potential risk level of each transaction

D. International cross-border e-commerce: Most of Indian e-commerce merchants are still extremely India-centric. While this is certainly greatly explained by the size of the internal market, that leads to huge untapped potential. Adapted fraud-mitigation tools and strategies become a 'must'.

E. Banking and networks performance: Today's typical failure rate on the transactions is way higher than in other countries. This can be partially attributed to unstable networks, internet connectivity and banking systems. The measures taken to create a huge fibre-optical network should help drastically.

Hemant Kanoria, CMD, Srei Infrastructure Finance: This Budget should emphasise on encouraging domestic demand, given the expected a modest 5.5% GDP growth in FY '13 especially when global economic recovery is still uncertain. I would like to see that the infrastructure creation be given adequate push and be the principal focus of this year's budget since creating infrastructure has its own multiplier impact in terms of creating new jobs, readying the economy for higher rates of growth, fuelling entrepreneurship and augmenting productive capacity. Most importantly, infrastructure connects the hinterlands with the mainstream economy and makes growth more inclusive.

I hope the budget takes necessary steps to encourage NBFCs, particularly especially those which are into financing infrastructure assets and projects (namely NBFC - AFCs and NBFC - IFCs respectively). The NBFC's have become systemically important and is a critical financial intermediary to the informal sector of India's economy. Presently a large portion of infrastructure financing in India is done by commercial banks. But that is not adequate. Thus NBFC-AFCs and NBFC-IFCs must supplement and complement the banks. These NBFCs are the principal conduit of credit delivery to the multitude of small and medium enterprises (SMEs) which are providing crucial services in the infrastructure sector but remain outside the purview of banks.

Micro, Small and Medium Enterprises (MSMEs), scattered all over the country, make up the backbone of the country's growth story. These MSMEs are actually carrying out major activities like construction, transportation, etc towards infrastructure creation. However, many of these MSMEs are located in remote areas beyond the reach of banking network and hence they essentially rely on NBFC-AFCs and NBFC-IFCs for their credit needs and hence these NBFCs bridge the gap and act as an extended arm of the banking system in India. However even when these NBFCs cater to the infrastructure sector and perform roles similar to banks, they do not enjoy a level playing field vis-a-vis banks in terms of tax-treatment and tax breaks, access to funds and asset recovery. These loopholes need to be addressed so that they can perform their task better.

Also the budget must attempt to address the bottlenecks in the power and road sectors. Keeping in mind the fiscal position of the Government and its limitations to undertake investments on its own, every possible attempt must be made to encourage private investment in infrastructure. Given this backdrop, the budget assumes immense importance.

The overall business sentiment has been down for some years now. However, the sentiment is gradually changing with few reform measures being taken by the Finance Minister ever since he took over. Therefore, we are expecting a reform-oriented budget and I am sure that it would provide a fillip to infrastructure creation and set the stage for India to return to the high growth trajectory in near future.

Pramoud Rao, Managing Director & Promoter of ZICOM Electronics Security Systems Ltd.: Budget 2013-14 must focus on ways to revive and stimulate the Indian economy, which is going through a tough time currently, and augment global investor confidence by creating a more favourable environment. Given the many instances of security lapses and increasing incidents of horrific crime, a higher expenditure on internal security and judicial reforms is the need of the hour. Security is one of the key concerns of the common man, and therefore the government must support this sector and offer it tax holiday. The existing taxes are very high, due to which companies like us are not able to percolate down the value to the institutions and public at large."

"Today, Electronic Security is one of the fastest growing industries with a growth rate of 25% per annum. By giving tax holiday to this sector, the government will encourage more of manufacturing units in India which will boost our economy too. Moreover, clear codification and transparency of transfer pricing regulation should be there to ease the complexity in taxes and procedures. We expect the budget to specifically focus on creating a robust framework and incentives to encourage setting up of modern security manufacturing units as 90% of the security products are imported nowadays. An 'entrepreneurship mission' can be adopted by the government, by way of which support and tax exemptions are given to small companies to ease business."

Kallol Datta, President, Bengal Chamber: We want that the Budget will be aligned with the 12th Plan, and the priority would address the multiple challenges of high fiscal, high current account deficit, low growth, and declining savings. However, there should be some relief for the common man. The Chamber expects a reduction in STT rates and relief to corporates on MAT, especially to boost investment in infrastructure. Reducing subsidies through direct cash transfers will be a focus area. The NBS may be extended to nitrogenous fertilizers like urea. Steps toward implementation of DTC and GST are also to be expected as also easing FDI norms and easing the raising of foreign debt by corporates.

Confederation of Indian Industry (CII) for MSME: The CII has submitted its Pre-Budget Memorandum for the MSMEs, with the Government and other stakeholders. Requesting for a comprehensive package for Micro, Small and Medium Enterprises to unshackle their growth potential, CII has outlined a 10-point agenda for the MSME sector.

In its statement, CII came out strongly in favor of streamlining the policies and procedures for listing on SME Exchanges, synergising relationship between the small, medium and the large industry and the implementation of the Public Procurement Policy, besides promoting FDI by NRIs in the MSMEs.

Recommending that Large Industry could be entitled to tax benefits subject to the transaction having been completed (including timely payment to the SME supplier, as per the payment terms & conditions, agreed upon between the buyer & the supplier), CII has also called for the extension of the applicability of the provisions of the Public Procurement Policy to the State Government Ministries, Departments and Public Sector Undertakings and its strict implementation by the Central Government Ministries, Departments and Public Sector Undertakings.

To mitigate the problem arising out of Delayed Payments to the MSMEs (and ineffectiveness of the current regulatory framework), CII is of the view that while data may be available, accessing it has been very difficult, considering they are embedded deep inside the PDF documents with the MCA. With the introduction of XBRL, this process can be streamlined. As a step towards effective implementation of this rule, there is a need to modify the reporting requirement of MSMEs by asking them to report receivables that they have from the large units. With XBRL data, the government can match the data and take immediate action signaling its concern towards MSMEs, as per CII.

According to the CII agenda for MSMEs, creation of different kinds of funds is needed to promote different aspects of MSME. These include the Branding and Export Marketing Fund for MSMEs and Environment Friendly Technology Fund could be instituted to enhance the self-reliance on energy and also be responsible towards the environment. There is a need to create to help MSMEs to adopt such branding and technology focused approach.

There is a need for policy guidelines to encourage FDI participation by NRIs in the SME sector - this would include automatic approval for 100% FDI from NRIs, and other promotional measures, including a single window clearance, across all subsectors within the MSMEs, said the CII statement.

Among other measures, CII has recommended availability of industrial infrastructure through a corporation that would rent out facilities to MSME; withdrawal of Import Duty exemptions available to foreign suppliers of security features such as security thread; and reinstate the benefits till the policy period 31.03.2014 for the Articles made out of Vulcanized Rubber.

According to Mr Deep Kapuria, Chairman, CII National MSME Council, the MSME segment, which employs more than 59 million persons and contributes approx 40% to manufacturing output and to the exports, can truly emerge as a growth driver for the economy if the above issues are addressed in a proactive manner.