IT channels laud digital drive; tax sops for minions

By Soumik Ghosh Feb 1st 2017
IT channels laud digital drive; tax sops for minions

The announcement of the union budget was an ambitious one. What’s got channel partners cheering is the drive towards digitization and tax rebates.

With the International Monetary Fund announcing its estimate for global GDP to grow by 3.4 percent, the stage was already set for the nation to look optimistically at the Union Budget ’17.

And Finance Minister, Arun Jaitley just fueled this enthusiasm with the announcement of the budget.

Jaitley reiterated that the pace of re-monetization has picked up and will soon reach comfortable levels; and that the effects of demonetization are not expected to spill over to the next year.

According to Nasscom reports, during the Financial Year (FY) 2016, the Indian IT-BPO sector contributed nearly 9.3 percent of India’s GDP with revenues of USD 143 billion. During FY2016, the industry’s exports were valued at USD 108 billion, which was nearly 76 percent of the total revenue, and contributed more than 45 percent share in India services exports.

Driving full throttle towards a digital economy

Jaitley said that the government will allocate Rs 10,000 crore for the expansion of the Bharat Net project in FY18. Bharat Net now aims to cover a total of 2.5 lakh gram panchayats.

“India on the cusp of a massive digital revolution. Promotion of digital economy is integral to weed out corruption and black money,” said Jaitley.

Channel partners in India largely believe that the increased drive towards digitization will trickle down to partners, owing to an increased demand for hardware and software.

"With the government stressing on digitization and a digital economy, the IT business is going to boom. With increased infrastructure, there will be a greater demand for all IT products," says Harbhajan Singh, founder and CEO, Infotech Computers and Communications.

Vishal Bindra, CEO, ACPL Systems, also sounds upbeat about the digital drive. ”This is a positive move. As digital payments become main stream, there will be a lot of investment in the payment devices, security, and enablement space. This is a good news for partners who operate in this domain,” he says.

Harish Kumar Shetty, chairman, Binary Systems believes that channel partners will now have to make their own plans on how to include new plans around digitization.

"We'll now have to frame our strategies in trying to understand what are the challenges and opportunities available. I feel there's an opportunity for the IT industry, but the government should be impressed upon utilizing the resources of the IT industry in rolling out these plans," says Shetty.

Getting serious about cybersecurity

Jaitley, in his speech, stated that cybersecurity is an important part of the financial sector. “A computer emergency response team will be set up to work closely with the financial sectors,” he announced.

In addition to this, a special agency to curb cyber-attacks in banks and exchanges has been proposed. “There's already a special cell in PMO and a division in RBI. Banks, particularly PSU banks, need to upgrade and sense the urgency,” said Jaitley.

Singh says that channel partners could see a steady stream of business headed their way.

"We expect more business in security, because when the network expands, there's added need for focus on cybersecurity. We are very optimistic about the increased focus the finance minister is laying on the security infrastructure," he explains.

Kavita Singhal, director, Kamtron Systems reiterates the much-needed focus on security. "The focus on cybersecurity is imperative for the drive towards digitization. We've already witnessed numerous instances of hacks in the financial segment. People could lose a lot of money here," she says.

“I think our banking sector will be under a lot of threat with the digital payments drive. People will try to use the vulnerabilities to commit fraud. This will also push lots of banks to invest further in cybersecurity, and that’s good business for us,” says Bindra.

However, one needs to question if the impact would really trickle down to smaller players in the cybersecurity space.

"With respect to the increased focus on cybersecurity, I believe the major chunk of the business would go to the top five MNCs. Small time partners might not be entertained by the large financial organizations," says Jitesh Chauhan, MD, Rubik Infotech.

Leveling the playing field: Tax sops for smaller fish

What’s really got channel partners cheering unanimously is the fact that the Finance Minister announced in Budget 2017 that the tax rate for companies will be reduced to 25 percent, for those with an annual turnover of up to Rs 50 crore.

"The tax rebate announced by Arun Jaitley for companies with an annual turnover less than Rs 50 crore will boost smaller companies like ours," says Singh.

Chauhan seconds this opinion by stating, “The tax rebate is a very good initiative. It would help more entities like SMEs and startups, and also create a startup ecosystem in our country.”

"By and large, bigger corporates are able to leverage with banking relationship and getting better interest rates, whereas smaller organizations are the ones that really need tax rebates and funds available at lower interest rates and lesser collaterals," says Shetty.

"Small timers are finding it very difficult to survive in the business, whereas larger organizations with better resources and talent will be able to manage more efficiently. So, it's an important move to help smaller companies stay competitive," he adds.

Locking horns with China, Taiwan

Jaitley, in his budget proposal announced plans and investments to make India the global hub of electronic manufacturing.

“Making India a hub for electronics manufacturing is a fantastic idea. The government now needs to ensure that it builds in the right policies to boost manufacturing,” says Singhal.

Singh shares Singhal’s optimism. "With the increased focus on making India the hub of electronic manufacturing, the opportunity for OEMs to expand business will show an effect on channel partners as well. This will have a trickle down effect on employment and reduction of costs," he says.

"The drive to make India the hub of electronics manufacturing is a very good initiative, but what we need to bear in mind is how we are going to compete with countries like China and Taiwan with respect to cost minimization," says Chauhan.

Bindra winds up on a positive saying that this move will create a lot of employment opportunities for our youth who may not be contributing to the services industry today.

So, with the stage set and the world watching, all that remains to be seen is how the government lives up to the expectations, now that the winds are in our favor. 

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