Union Budget 2018 was announced earlier in the day with the government focusing on rural and agriculture sectors. Ahead of the budget, the tech sector was hoping for no tax sops to nullify the effect of GST and demonetization, which slowed down growth for many companies last year. However, the government did not pay heed to any of those demands, and instead announced customs duty hike.
As part of his budget announcement, Finance Minister Arun Jaitley hiked customs duty on imported mobile phones to 20 percent from the existing 15 percent. He also hiked the customs duty on mobile phone parts from the current 15 percent to 20 percent. The move is being projected as a way to boost job growth in these sectors.
The announcement might have direct implications on all the companies that locally assemble their products since parts are sourced from outside the country. At the outset, the budget seems to have been received well by the industry but the sector clearly hoped for more. Following are some of the reactions from the tech industry.
Intex, one of the few homegrown smartphone brand has welcomed the customs duty hike on imported mobile phones and mobile phone parts and accessories. The company sees today’s announcements as an effort to further boost the Make in India initiative of the government in electronic industry.
“I welcome government’s move to walk the talk on ‘Make in India’ by increasing customs duty (to 20 percent) on the imported mobile phones and in PCBAs of accessories like batteries & chargers (15 percent), which will prove to be the big boost for localisation and setting up of a domestic component ecosystem. This is a big thumbs up to domestic players like Intex, which have been developing domestic capacities since long in electronics manufacturing,” Rajeev Jain, Chief Financial Officer, Intex Technologies said.
Jain also added that increased duty on certain LED TV components such as LED panels will lead to more localization with domestic manufacturers benefitting with their local production facility. He also sees the announcement will lead to local manufacturing of components, which will be next major growth phase for Make In India effort.
Sudhin Mathur, Managing Director, Motorola Mobility also welcomed the announcement as a stimulus for government’s initiative, and believes will enhance the manufacturing sector along with job creation. “Our journey of Make in India began three years ago and we have been manufacturing and assembling at our manufacturing unit through our global contract manufacturing partner Flextronics. We have doubled up our production capacity this financial year and will continue to scale up our manufacturing capacities to meet the growing customer demand,” Mathur said.
While Chinese smartphone makers like Xiaomi, Oppo and Vivo, who assemble their smartphones in the country are yet to offer any statement, Indian OEMs are welcoming the customs duty hike overwhelmingly. Lava also sees the announcement as a major boost to local manufacturing efforts and turn India into a global manufacturing hub for mobile phones.
“We welcome the announcement on custom duty increase in mobile phones from 15 percent to 20 percent in the Union Budget 2018-19. This will provide a big boost to the Make-in-India campaign by the government. Local manufacturing will create more job opportunities, benefiting the youth and contributing towards the overall growth of the economy,” said Sanjeev Agarwal, Chief Manufacturing Officer, LAVA International.
Ahead of the budget announcement, Mahesh Lingareddy, Founder & Chairman of Smartron said he hoped the government will introduce new investment mechanism helping venture capitalists to nurture the Indian startup ecosystem. While Jaitley did briefly touch upon the VC ecosystem, he did not elaborate how government plans to incentivize the VC ecosystem.
“Union Budget 2018 has taken the needs of the ecosystem into consideration by taking policy decisions to build a robust alternative investment regime in the country along-with a taxation model designed for the special nature of VC funds and angel investors. These policies and new taxation model would definitely help the start-ups to ensure survival and profitability over the years,” Lingareddy said in a statement.
While the industry is appreciating the move to hike customs duty on import of mobile phone and parts, the government seems to be neglecting the local ecosystem. Syed Tajuddin, CEO, Coolpad India says the increase in customs duty will compel brands to locally manufacture their products but “there is not great support for local ecosystem for manufacturing spare parts.”
Tajuddin also made an important observation that the cost of repairing high-end devices could go up due to increase in customs duty. “The lack of local spare part manufacturers will mean a tough situation for mobile handset brands. Hence a brand is compelled to import most of the spare parts and customers have to bear some burden of it.”
The Finance Minister also announced reduction in corporate tax from 30 percent to 25 percent and Panasonic India has welcomed the announcement saying it will support the electronics industry. “The MSME sector, which forms the backbone of the electronics industry will benefit from reduction in corporate tax from 30 percent to 25 percent and the allocation of around Rs 3,800 crore for the development of the sector will translate to strengthening the electronics eco-system at large,” said Manish Sharma, President and CEO, Panasonic India.
Comio, which was among the many smartphone brands that entered the country last year, also sees the budget as a positive step forward for local manufacturing. Sanjay Kumar Kalirona, CEO & Director, Comio said, “The Union Budget-2018 is a positive step towards India’s growing smartphone market. The increased custom duty on mobiles will further boost local manufacturing and will be the essential push to create a manufacturing eco-system as well as boost local manufacturing of components & accessories in India.”
A spokesperson for OnePlus said that the timing is right for the government to introduce new regulations that will lead to investment in the manufacturing sector and establish India as a global hub for electronics. “At OnePlus, we are fully committed to the Indian market and welcome the proposed regulations. Currently, all OnePlus smartphones are produced locally and we are already exploring ways to further increase the share of local manufacturing to ensure there is minimal cost impact of any new regulations to the end customer.”
“HMD Global continues its strong emphasis on PM Modi’s Make in India campaign. While the import duties for mobile phones increased to 20 percent, along with a 15 percent duty on key components, this will have a minimum impact on our business, as all of our current portfolio of Nokia phones are manufactured in India,” said Ajey Mehta, Vice President India, HMD Global.
“Huawei Honor is with the law of the land and in line with the government’s vision of furthering local manufacturing. With our India first strategy, our aim is to build local capacity for indigenous production in India to meet the growing demand for the our smartphones in the market in the long run. Earlier this week, we have begun production of our latest bestseller the Honor 7x and will continue to add to our production portfolio,” P Sanjeev, Vice President Sales Huawei India, Consumer Business Group said in a statement.
While presenting the budget for financial year 2018-19, Jaitley also looked at the future trends where Artificial Intelligence and Machine learning are expected to replace several mid-level jobs and creating for demand for reskilling. “The focus on AI is a welcome move towards technological advancements in India and an allocation of INR 3073 crore for the Digital India scheme will certainly propel digital adoption and smartphone adoption in the country,” said Rajesh Aggarwal, co-Founder, Micromax.
Aggarwal welcomes the move to hike customs duty on imported mobile phones and mobile phone parts but he sees hike in certain parts of TV affecting the manufacturing sector. “We need the government to help in creating an improved local manufacturing and a better component ecosystem for the consumer electronics manufacturers as well. With focus on growth, it is the budget to look forward that would add an impetus to the India’s growth story,” he added.
“Coming to our industry, that of consumer electronics and manufacturing, the Government is very determined to ensure the success of the Make in India initiative. Therefore we welcome our Finance Minister’s decision to increase custom duty on CBU of television, which is a good sign for boosting the domestic industry. We hope the Finance Minister will also reduce GST on television to 18 percent subsequently,” said Avneet Singh Marwah, Director and CEO of Super Plastronics Pvt. Ltd., a Kodak brand license partner.
Ola, the Indian unicorn with a valuation of over $7 billion sees the budget as a strong support for Digital India. “Allocation of INR 3,073 crore towards Digital India is a significant leg-up. The thrust provided to tourism with the commitment of creating iconic tourist spots, investment earmarked for transport infrastructure, progress made on Smart Cities and creation of more than 5 lakh Wi-Fi hotspots in India is truly welcome. Overall, it is a balanced budget which will further strengthen India’s position as a leading world economy with good livability index and business environment,” said Bhavish Aggarwal, Co-founder & CEO, Ola.
Like Bhavish, Kunal Bahl, Co-founder & CEO of Snapdeal also welcomed the announcement as a positive measure towards the Digital India initiative. “The enhancement of digital infrastructure with more broadband access in rural parts, unique ID to companies, record allocation to building national highways and railways, and multifold increase in airports will go a long way in broad-basing growth in the economy,” Bahl said in a statement. He also welcomed government’s efforts to upgrading teaching methods and training teachers which will enable in creation of young entrepreneurs.
With bitcoin, cryptocurrency and blockchain becoming familiar among common people, Jaitley made it clear that the government will take right steps to curb the use of cryptocurrency for illegal activity. Bipin Preet Singh, Co-founder, MobiKwik believes the government should look at regulating cryptocurrency rather than curbing its use entirely. “I commend the government’s decision to reduce corporate tax to 25 percent and improve the ease of doing business by providing a unique ID for every company on lines of Aadhaar. These initiatives will benefit startups and MSMEs immensely and lay a strong foundation for a progressive India,” Singh said.
“It is a progressive and good budget. The decision to train 50 lakhs youth is widespread acceptance of technology like Artificial Intelligence is the best way forward for the country,” Manohar Bidaye, Chairman & Co-Founder of Zicom Electronic Security Systems Ltd. said in a shared statement.
IAMAI has also recognized the budget playing a positive role in digital transformation of the nation. “Digital technologies can bring in efficiency and economic scaling up in the critical social sectors. Budget 2018 gives recognition to the emerging sectors like Edutech, Agritech, Healthtech in India and is an encouragement for Digital India,” said Dr. Subho Ray, President, IAMAI.
“First, the NITI Aayog effort to institutionalize research and development in artificial intelligence reinforces the value that machine learning can bring to issues of national importance. If synergized with the work being done by the academia and industry, we can expect fast emerging use cases that can democratize AI in India,” said Prakash Mallya, Managing Director, Sales & Marketing Group, Intel India.
“The announcement on setting up of Centers of excellence for Artificial Intelligence is welcomed as this provides a consolidation of knowledge and a strong knowledge base that can be leveraged by the country,” said Arvind Chandrasekhar, WW Government Affairs Lead, AMD.
“The ambitious plan that the government has announced in this sector is a welcome move. Initiatives like the National Health Policy of 2017 which commits Rs 12000 crore for development of health centres and the National Health Protection Scheme which will help 10 crore poor families by providing them with upto Rs 5 Lakh cover per family per year for secondary and tertiary care will be gamechangers in the healthcare industry,” said ishal Gondal, CEO and Founder, GOQii.
NASSCOM, the association of IT industry in the country, has also welcomed the announcement and says increased investment for AI and creation of Aysuhman Bharat program will benefit the growing nation. The association is particularly upbeat about the announcements catering to startups like extension of Startup India scheme to March 2021 and right environment for Fintech companies to grow in the country.
It is clear that the technology industry is looking at the budget as a positive measure to fuel Make in India and Digital India initiatives. However, it needs to be seen how these companies streamline their business to reflect some of the budget changes and whether they pass the burden caused by customs duty hike to consumers.