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With considerable focus on employment and skilling, inclusive growth in rural areas, and impetus for the MSME sector it is expected go a long way in the development of the country.
In the age of roti, kapda and smartphones, can reduction in handset BCD, make things more affordable?
India’s mobile handset export has witnessed robust growth over the years. In FY24, India’s smartphone exports increased by 42 per cent y-o-y to ₹1,28,982 crore. This has been primarily driven by the success of the PLI scheme. If we compare with FY15, there was 83X increase in smartphone exports. In the Union Budget 2024, the Basics Customs Duty (BCD) of mobile phones, mobile phone Printed Circuit Board Assembly (PCBA) and charger/adapter have been brought down from 20 per cent to 15 per cent. This is expected to give a fillip to smartphone exports and make the market more competitive. In addition, it would make smartphones more affordable (especially high-end ones), boosting 5G adoption.
Kabhi khushi kabhi gham – increase in BCD of telecom equipment is a mixed bag
At the same time, the telecom equipment manufacturing segment has grown by leaps and bound. Total sales have surpassed the ₹50,000 crore in FY24, which is 4.7X that of the base year FY20. This has been largely possible owing to the Make in India initiative and PLI scheme. Now, in the Union Budget 2024, BCD on PCBA of specified telecom equipment has been increased from 10 per cent to 15 per cent. This would encourage more local manufacturing of PCBA and incentivise domestic manufacturing.
On the other hand, increase in BCD is likely to increase the cost of network rollout for telcos in the short term. Building the PCBA manufacturing ecosystem would take time. Given elevated capex cycle owing to 5G rollout, the move may increase financial burden of telcos.
Desh ko har kone se jodne ke liye satellite ki istemal – need innovative ideas for the space economy
The space economy in India is poised to witness significant growth with the impending launch of Low Earth Orbit (LEO) satellite services in India. The Indian space economy has opened-up for private participation. As a result, the number of space start-ups have gone up from 1 in 2014 to 189 in 2023. Investments in space start-ups in India reached $124 billion in 2023, a 5.4X increase over 2020. Given the positive momentum in the space sector, the launch of a venture capital (VC) fund of ₹1,000 crore is likely to be a big boost. It would promote innovation and encourage start-ups to disrupt the market.
From a telecom standpoint, budget aachan hai phir bhi …
As always, the telecoms sector had several expectations from the Union Budget. Regulatory levies of the Indian telecom sector are one of the highest in the world. The current licence fee of 8 per cent (including contribution to USOF) should be rationalised to ease operators’ financial burden. Moreover, the sector would have benefitted from suspension of USOF contribution till the unutilised corpus is utilised.
Taxation has been another area of concern. The sector was expecting a special regime request, allowing them to carry forward and set-off business losses for up to 16 assessment years. Additionally, telcos were seeking an exemption from the service tax on the assignment of right to use natural resources. Moreover, post-GST, telcos faced additional costs due to the AGR ruling, as no credit is available for the service tax paid on AGR payments.
Sector outlook – strong growth momentum, but policy intervention required
Several policy measures undertaken by the government has played a pivotal role in enhancing the sector outlook. The introduction of the New Telecom Act 2023 paves the way for superlative growth of the sector in the next decade. Tariff hikes, 5G monetisation, 2G to 4G conversation, and higher data usage are some of the key factors that would contribute to this growth. However, a phased plan of action needs to be formulated to attract more capital, continuously improve ease of doing business and ensure the long-term sustainability of the sector.
(The author is TMT Leader - Emerging Markets, Partner in a member firm of EY Global )
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