Budget 2019 and what is means for Digital India, Connectivity, Space Exploration, Electric Vehicles, Technology Retail and more

Finance Minister, Nirmala Sitharaman presented the Union Budget 2019 today, the maiden budget for the second Government led by Prime Minister Narendra Modi. The Budget, in its entirety, presented a strong focus on last mile connectivity, adoption of electric vehicles, digital growth, technology skill building, ease of investments for tech companies, enhanced efforts India’s space exploration programme, expanding the scope of scientific research in India, promoting digital payments, tax benefits on semiconductor, laptop and battery manufacturing in India, and duty exemptions for certain electronic components as well as raw materials. 

"From a technology sector perspective, focus on emerging new technologies in the form of artificial intelligence, data science, big data, internet of things, would revitalise technology companies. Connectivity, infrastructure, media, digital technology coupled with ease of living, ease of doing business and digital literacy is focus of the government," said Tapati Ghose, Partner, Deloitte India.

Some of the most important announcements in Budget 2019 emerged in the space of renewable energy, water conservation, energy efficient transportation and power management, making it evident that the government is thinking seriously on the lines of sustainable management of natural resources. 

All of these announcements are aimed at promoting the country’s digital economy and have been receiving extremely positive reactions from stakeholders in India’s technology and technology-assisted industries. The aim of the government for this fiscal year is to build a $5 trillion economy, with ever increasing focus on the use and development of technological means in various industries across the country. Here’s how the Union Budget of 2019 will impact the growth of the technology sector in India and what experts in the field have to say.   

Speeding up Electric Vehicle adoption

Just last month, we heard the Niti Ayog propose the sale of only electric vehicles (EVs) in India by 2030. With increasing levels of pollution and depleting resources, looks like the government has taken good note of the importance EV adoption in India. To encourage the same the FM has proposed incentives for buying electric vehicles in the form of Income tax deduction of Rs 1.5 Lakhs on interest paid for loans taken to purchase EVs, amounting to benefits of Rs 2.5 Lakhs over the loan period for anyone who takes a load to purchase an electric vehicle.

The Budget also proposes reduction of GST on EVs from current 12 percent to 5 percent. Further, it has also been proposed that certain components and parts used in EV manufacturing be exempted from custom duty. 

Speaking on the announcements, Bhavish Aggarwal, Co-founder & CEO of Ola, told Digit.in, “The Government’s focus on Electric Mobility and EVs in the Budget 2019 is inspiring. Lower GST rate, interest subvention for EV loans and the commitment of Rs 10,000 cr towards FAME 2 are encouraging. This further reinforces Ola’s mission to build Electric Mobility for India and the world and contribute toward making our nation, the global hub for innovation in this space."

“Income tax deduction on loans for EV purchase is an extremely welcome move by the new Finance Ministry. EVs are pricier than usual vehicles as initial cost, hence this will boost adoption,” commented Akshay Singhal, Founder, Log 9 materials, at Nanotechnology company.

Further, the government will fund the Inclusion of solar storage batteries and EV charging infrastructure in the country.

"I think the budget has clearly indicated the positive intent of the government in pushing the e-mobility revolution in India. The question of when is not that important as the how . The ‘how’ is now getting addressed. Consumer adoption of this technology not only requires education and mindshift but also an attractive and feasible overall proposition. I think with the govt proposing lowering of gst and providing deduction of tax on interest on loans, outlay for infrastructure for battery charging stations, push towards make in India initiative is just the kick start measures required," said Nishchal Chaudhary, Founder & CEO, BattRE electric mobility.

Easing the way for single brand retail by technology companies

Apple, amongst most other tech companies, must be rejoicing as the 2019 Budget has proposed easing of local sourcing norms in FDI for single brand retail sector. Apple has been lobbying for ease of restrictions and duties in order to set up its retail stores in India and this seems to have come at the right time for the company. “I think this is a good move which will help these companies to scale their retail operations quickly. This will bring more investments in the country. Yes, it is a big boost for Apple which is looking to expand in India and retail expansion is a strategic move which has already been delayed by a couple of years. If local sourcing is competitive it will happen automatically. Xiaomi, Apple, OnePlus, Samsung, OPPO and Vivo can now expedite their retail operations,” said Tarun Pathak, Associate Director, Counterpoint Technology Market Research.

“While It would depend on the exact details of the relaxation of sourcing norms the announcement is clearly laying out the carpet once again for the global single brand retail companies in India . Many of these companies were sitting on the border in a dilemma to invest or not in the Indian market on account of difficulty in meeting these sourcing conditions,” commented Anil Talreja, Partner, Deloitte India.

The FM also said that while India’s FDI inflows remained strong at $54.37 billion, a 6 percent YoY growth, there is more room to increase investments in the media, aviation and animation industries. 

Boosting scientific education and skill building 

During her budget speech, the FM said that Indian educational institutions have come a long way in the past five years. From no single Indian institute in the top 200 universities worldwide 5 years ago, we now have 3 institutions in the top 200 rankings globally. The Budget has stressed on greater focus in higher education and scientific research in the country. A National Research Foundation will be created to assimilate research grants given by various Ministries. The govt hopes to strengthen India’s scientific research ecosystem. 

Further, it has been proposed that 10 million individuals will be trained in industry relevant skilss such as artificial intelligence (AI), robotics, big data, VR and others to address the severe skill shortage felt by IT companies. "We are hopeful that the government will also roll out specific measures to harness
these technologies of the future so that digital India reaches every segment of the economy," said Rajan Mathews, Director General, Cellular Operators Association of India (COAI).

Meanwhile, Counterpoint Research notes, “These are the building blocks and a very integral part of the overall 5G ecosystem when it happens. We need to invest in these technologies to leverage their full potential when the time comes. AI can help to overcome a lot of disabilities attached to different business segment and other areas. With strong software talent pool, India can build strong research in these areas.”

Industry stakeholder, Tarun Bhalla, Founder & CEO, Avishkaar, a Maker space and DIY Robotics company, also voiced his reaction saying,”I’m delighted to hear the Government will be working towards improving our youth skill levels in AI, Big Data, IoT along with Robotics. These skills of the future will ensure that our youth are prepared and able to secure jobs both in the country and abroad. It’s a commendable step helping align education with industry requirements.” 

New highs for Space exploration

Commending India’s space programmes like Chandrayaan-2 and Gaganyaan, the Finance Minister said, “Time has come to harness this ability commercially.” Called, ‘New Space India Limited’, the government has incorporated a public sector enterprise with an aim to commercialise and market ISRO’s space products as well as assist in the transfer of technologies. “India has emerged a major space power,” said the FM, and the new company will help take India’s space programmes to new heights. 

“It is encouraging to see Budget 2019 taking cognizance of the growing opportunities in the space domain and also talking about increasing India’s global footprint in this sector. This is important because the Indian satellite communications sector is perhaps the only industry still stuck in the 2G era and suffers chronic capacity shortage resulting in users continuing to pay much higher than global rates. There is a surge of investment and innovation in the space sector globally driven by the private sector but in India the private sector is locked out and a huge investment and employment opportunity is being lost,” said Pranav Roach, President, Hughes Network Systems India.

Realisation of Bharat Net 

The Government’s Bharat Net initiative to provide high-speed broadband connectivity to all Panchayats and local bodies by the end of 2019 will be sped up under the Universal Service Obligation Fund. The FM said that under the Pradhan Mantri Grameen Digital programme, 2 crore Indians have been made digitally literate. 

Tax benefits for Electronic Manufacturing

The 2019 Budget proposes tax benefits for electronic manufacturing in India. The government envisions mega manufacturing plants for Semiconductors, Lithium-ion batteries, Laptops, Electric Vehicles and more. Tax incentives will be provided to these manufacturers. “Considering the large consumer base, we envision india as a global hub of manufacturing electric vehicles, said Sitharaman. 

Encouraging digital payments

To promote digital payments, and discourage business payments in cash, the FM has proposed to levy TDS of 2% on cash withdrawals exceeding 1 crore in a year from a bank account. The FM says that variaous digital payment instruments such as BHIM UPI, UPI QR Codes, NEFT, RTGS can be used to promote a cashless economy. Businesses with an annual turnover of Rs 50 Crore will have to use these modes of payments, and no charges will be levied on the merchants or customers. RBI and banks will absorb these costs, the FM said.

Duty increase/decrease

The FM has proposed in the Union Budget 2019 that customs duty on Auto parts, optical fibre cables, CCTV cameras, IP cameras and digital video recorders be increased. The exemption for the import of certain electronic components is now being withdrawn in light of them being manufactured in India. In the same breath, the FM said that custom duties are being reduced on CRGO sheets, amorphous alloy ribbon, ethylene di-chloride, propylene oxide, cobalt matte, naphtha, wool fibres, inputs for manufacture of artificial kidney and disposable sterilised dialyser, and fuels for nuclear power plants. Duty has also been reduced on capital goods required for manufacturing electronic goods. 

As mentioned before, the Finance Minister said that exemption on certain parts of electric vehicles will be provided to boost EV manufacturing in India.

Calling upon the need for Defence modernisation, the FM proposed that import of defence equipment is being exempted from basic customs duty

Defence sector needs modernization. Basic the import of defence equipment is being exempted from basic customs duty: FM

Focus on Renewable Energy and sustainability

The FM said that the government will be establishing necessary infrastructure for environment friendly public transport. The government envisions the use of rivers for cargo transportation, which will also help decongest roads and railways. In addition to the multimodal terminal at Varanasi, which became functional in 2018, two more terminals at Sahibganj and Haldia, will be completed to create a network on inland waterways.

The FM also proposed “One nation, one grid” for providing affordable power to states. The government will also make available a blueprint for gas grids and water grids in this year.

“Water for all Indians is a priority’” said the FM. In lieu of achieving this goal, the Jal Jeevan Mission was announced to provide water to every household by 2024. To promote sustainability,  wasted water will be reused for agriculture. The FM proposed sustainable water supply management across the country. She said that the govt has identified 1592 blocks across the country which are critical critical and over exploited, spread across 256 districts, for the Jal Shakti Abhiyan. The govt will explore possibility for allocating sufficient budget for the same.

Further, the FM announced that 1.25 Lakh Kilometers of roads will be upgraded and that green technology will be used to achieve this goal. Waste plastic will be used to build roads, reducing the carbon footprint.

To help scale the rural agriculture industry, the government will come up with 20 technology business incubators to help develop 75000 skilled worked in agro industry.

The Swachh Bharat Mission will expand to now deal with solid waste management.

More scavenging machines and robots will be deployed to save manual scavengers their dignity. 

Connectivity all the way

The govt is massively pushing to all forms of physical & other connectivity. 

New metro rail projects have been approved during 2018-19. These will be sped up. Also, during 2019, 210km of metro lines have been operationalised.

The PM had announced a National Mobility Card in March this year. This cared will soon be introduced and will enable multi transport payments across the country. The card will run on RuPay and allow commuters to pay bus charges, parking charges, and more.

Ease of living assisted by technology

The FM stressed upon the philosophy of “Minimum government, maximum governance”.

She announced a number of developments aimed at greater ease of living for citizens. She said that the mass scaling up of LED bulbs was taken up by the govt, resulting in massive replacement of incandescent bulbs and CFLs. 35 crore LED bulbs have been distributed under government's Ujala Yojna, resulting in annual cost saving Rs 18,341 crore. “India is going to be free of incandescent bulbs and CFL,” she added. 

The government will now ook to promote solar stoves and battery chargers. 

Railway station modernisation will be launched this year.

A digital repository of folk songs, lifestyle, art, dances and other anthropological details of Indian tribes will be built and added to over time.

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