Budget 2015: Reducing the tax on R&D to 10% is a very positive move

Overall, the budget is a ‘feel good’ budget. It has a pragmatic and good balance of social programs, industry (large and SME) friendly programs and tax reforms, without going overboard to be populist or ‘politics driven’.

In terms of the IT industry, specifically there is a nod for the needs of the IT industry in terms of making a statement that the needs of the IT industry will be addressed in terms of ease of doing business, capital access etc. However, without reviewing the details of exactly how this is to be done, we will need to adopt a wait and watch approach to see how effective it will be.

Reducing the tax on R&D and innovation investments to 10% is a very positive move, both from the point of view of facilitating technology transfer as well as incenting companies to invest more in driving innovation. Along the same lines, the nod to the ‘start-up ecosystem’ in the country is a major positive. This is the first time such language has made its way into the budget and a good reflection of the fact that job growth has to be broad based by facilitating the SME segment and even the start-up culture in the country.

The increase in infrastructure investments across the board is another positive measure. Here however, the devil, as always is not in the budget pronouncements but the actual implementation of those announcements, which is where the challenges have always been. The fact that there wasn’t a strong acknowledgment of that fact and plans to ensure implementation oversight of these massive programs remains a concern.

As an example the NOFNP program has been dragging on for many years now, and other than reaffirming the desire to accelerate implementation, the fact that a hard (new) deadline was not established and committed to is a concern.

On education and skills development again, there are some strong announcements like creating a skills development fund, an innovation platform, and basic education availability within 5 kms of every village.

The traditional classroom based approach to expanding education access will be a major challenge and instead a strong technology / remote education process would be more effective.

All in all, this is a pragmatic and growth oriented budget which incorporates the ‘rising tide lifts all boats’ philosophy while also specifically addressing some burning rural and social issues.

--- Partha Iyengar, Country Manager (Research) - India, Gartner