Budget 2016: Tech startups happy, but mobile phone vendors want more

Budget 2016: Tech startups happy, but mobile phone vendors want more

Finance Minister Arun Jaitley on Monday tabled the Union Budget 2016-17. This comes as the third Union Budget by the NDA-led government, which launched programmes like “Make in India”, “Digital India” and “Startup India” in the past to revolutionalise the Indian economy. The government is focusing on uplifting startups in the country. And thus, it pleased the community with some new initiatives. But at the same time mobile vendors, who often walk hand in hand with startups, are unsatisfied with the new announcements. They want something more. Something more to grow. Something more to bring affordable offerings. And something more to garner more profits.

India is the third-largest startup generator in the world — comes just after the US and England — with more than 18,000 small and large startups. This brought the need for kick-starting ‘Startup India Action Plan’ that aimed to help enterprises receive necessary payments from Fund of Funds.

Budget 2016 tech startups and mobile phone vendors reactions

Finance Minister Arun Jaitley announces new developments for tech startups in his Budget 2016 speech

Jaitley in his budget speech also mentioned developments such as three-year tax holiday as well as capital gain tax to support the ongoing growth of startups. All this influenced startups to give their positive response.

“We appreciate the Finance Minister’s move on Tax holiday for startups as every startup takes minimum three of five years to setting up the company,” says Soumitra Gupta, CEO, Togofogo. “We welcome the effort by the Indian government for startup industry. It will give a strategic boost to the current ratio of Indian entrepreneurs and will support the Startup India campaign by Modi Government.”

Apart from the developments for all startups, the government has announced an allocation of Rs. 500 crore for scheduled caste, scheduled tribes and women entrepreneurs under its Stand Up India scheme. Ambika Sharma of Instappy considers that the new effort will take the startup ecosystem in the country to a whole new level.

“Government has recently been focusing a lot on the growth of woman entrepreneurs in the country, cheering them to establish themselves,” says Sharma. “Allotting funds of Rs. 500 crores especially for them will encourage the startup ecosystem to reach another level.”

Shashank ND of Practo states that the Modi government is creating a “conducive environment” for enterprises in the country and “facilitate growth” of the startup culture. “Taking a lead from Start-up India, Stand up India initiative, Mr. Modi’s government is constantly working towards creating a conducive environment to promote entrepreneurship and facilitate growth of the startup ecosystem in India,” he said.

“The ease of registration process and the hope to complete the task in 1 day is a welcome measure along with the three-year Tax holiday for startups. At least, this will allow a speedy way to setting up a venture and help startups to focus on the building disruptive products and services without worrying about profits or losses.”

Nasscom president R Chandrashekhar considers that the Jaitley speech in the Parliament “had a strong emphasis on leveraging technology” to bring transformation in India.

“The initiatives announced today combined with the swift implementation of Digital India will help to digitize India and provide effective citizen services,” Chandrashekhar said. “We would urge the government to move forward at a swift pace and build an effective PPP model.”

Something left for mobile phone market

Although the Budget speech was certainly pleasing for startups, it left something for the mobile market.

Jaitley in his speech suggested withdrawing of Basic Customs Duty (BCD) and Countervailing Duty (CD) exemptions on the import of mobile phone accessories such as chargers, adapters, battery and headsets to bolster participation in “Make in India” initiative.

Pradeep Jain, managing director of Karbonn Mobiles, says that the withdrawal suggestion “is disheartening” and its implementation will impact the price competitiveness in the market.

“The parts and components ecosystem in the country is still in its nascent stage,” Jain says. “While the incentives on local manufacturing announced in the previous budget were welcoming, the government should have allowed for a gestation period for local handset players to strengthen their manufacturing capabilities before withdrawing tax exemptions on completely built units.”

Rajesh Agarwal, co-founder of Micromax Informatics, considers that the government needs to take “a lot of steps” to grow the current electronic segment in the country. “In terms of the electronic manufacturing industry we expected a lot to be announced but there was not much reference in the budget for the same,” he said.

“On behalf of the entire handset makers of India, we expected the government to introduce regulatory restrictions for ETA (Equipment Type Approval) and licensing requirements from DOT to import low powered wireless equipment which are very critical for success of the Digital India and Make in India vision; but there was no mention of the same in the budget. We wanted the government to also focus on having a quicker and predictable time frame to complete CRS (compulsory registration scheme) formalities to comply nation’s product safety standards.”

Sudhin Mathur of Lenovo mentions that the duty differential benefits would bring a “marginal increase” in the mobile phone prices in the short term.

“Passing on duty differential benefits to components and accessories that go into the manufacturing of phones is clearly an extension of promoting Make-in-India,” says Mathur, who is the director of the smartphone business division at Lenovo Mobile Business Group. “It should also help built the domestic component ecosystem in the long term. But till a competitive supplier base is established in India, there may be a marginal increase in the cost of the box due to higher cost of accessories.”

That said, these were just some early reactions on the Budget 2016. Actual results are yet to emerge.

Categories: Analysis