Talking Direct with S Rajendran, CMO, Acer India on Union Budget 2016
The expedite initiatives like ‘Make in India’ and ‘Digital India’ has evidently gained well traction across the business attics of the country and with this, it can be well calculated that the core emphasis of this Indian government is all around ‘Electronics’. With a pool of dreams inclining to the Union budget 2016-17, the electronic industry is right up front with expectations.
The prime electronics maker, Acer India has an extensive footprint in India and is avidly expanding innovations across the indigenous market. To get a perspective of budget expectations, BiSInfotech had a candid chat with S Rajendran, CMO of Acer India. Below we put down the excerpts from the viz.
All eyes on Feb 29th, where will your eyes specifically stick to?
The expectations ride high from all segments – consumers to corporates – for the Union Budget 2016 as this is the second full-fledged budget of the government. The government needs to demonstrate concrete actions to revive investment, increase growth and generate employment which will favorably impact the industry. We are hoping that the Government will unveil the Union Budget 2016-17 with a pragmatic recognition of the global macro-economic woes and the relative advantage that India enjoys in having its economic foundation and fundamentals right. The crying need is to accelerate policy initiatives with a thrust towards structural reforms.
The key expectation from the Union Budget and how it can impact the IT industry?
One of the primary things the government should do is to adopt IT for citizen facing services and delivery centres in both central and state government. The government must also roll out the much delayed Goods & Services Tax (GST) as it will boost economic growth and will benefit manufacturing and exports. This is very important given that India has one of the lowest IT penetration rates i.e. 10%. Once rolled out, the IT sector has to be kept under the lowest percentage slab which will enable companies to take greater advantage of the benefits and invest more in manufacturing. Introduction of accelerated depreciation for government buying will lead to faster refresh cycles, which in turn will give a boost to the industry. For SMEs, accelerated depreciation will also serve as a tool for competitiveness amongst the category as latest technology and IT systems serve as distinguishers for SME’s. The Government should also consider providing tax benefits to consumers purchasing IT products, at regular intervals to boost buying of IT products a good practice adopted in some neighbouring SE Asian countries.
India’s consumer and appliance market is witnessing a double-digit annual growth, what is the key expectation from the Make in India initiative after one year, how promising has the initiative been for Acer India?
In this budget, the government should improve the Ease-of-Doing-Business quotient manifold by introducing friendly policies that are transparent and unambiguous so that its implementation is not fraught with confusing interpretations. Clearly there is need to build self-reliance in the import-heavy IT hardware sector which begs the need for a coherent push to encourage domestic manufacturing of IT hardware. Providing differential duty benefits to IT manufacturing will help ‘Make in India’ a reality for the IT sector, similar to how it has been correctly enabled for mobile phones and tablets. Taking advantage of differential taxation from smartphones Acer India is also working on its quick implementation.
In order to boost the manufacturing sector the government should bring in policies that will enable India to be a hub of IT manufacturing, given the strategic geographical locational advantage that India has with Middle East and South-east Asian countries. This will give a huge boost to the ‘Make in India’ initiative supporting it with a well thought-out, rational and phased manufacturing program, and give the much needed boost for the entire ecosystem to grow exponentially. We hope this year’s budget will create an enabling environment for Indian industry to realize its true growth potential.
Do you think consumer-friendly public financial schemes are the need to bring more consumers to buy products as today India’s major consumers deny paying at once? Your comments.
Rise in income levels, growing consumer aspirations and easy availability of credit has triggered strong growth in the sales of high-value consumer durables in recent years. Financing schemes enable customers, especially those with lower income levels, to use future income streams to buy consumer products upfront and pay in installments over a period.
Consumer durables finance schemes are generally available at the dealer location (point of sale) or the showroom. The beneficiaries are not just customers – lenders, manufacturers, and retailers too benefit. Manufacturers gain from the resultant boost to sales and increased consumer preference towards high-margin products. For retailers, footfalls go up, whereas an increase in the customer base helps lenders to cross-sell loan (personal loans, insurance, etc) products to consumers availing of loans for consumer durables.
Buying technology devices is a big decision for Indian consumers and most of our customers are keen to recognize and experience the value behind their purchase. That is why we have designed our offers for PCs to empower our customers and address what we believe they most desire. We think more consumer-friendly public financial schemes will bring more consumers to buy products rather than paying at once.
What announcements should be made to make a positive impact in consumer electronic industry?
On the sidelines of an extremely vibrant atmosphere created by various projects initiated by the government, the consumer electronics and appliances industry is growing at a healthy pace. Call it Make in India, Digital India or Swachh Bharat, the industry has started to align itself with the broad agenda of the government. As per a recent industry report, country’s consumer electronics and appliances market is projected to be worth $20.6 billion by 2020 on account of factors such as high disposable income. India is also expected to rank fifth in the consumer durables market in the world by 2025.
Last year, a below-normal monsoon and a consequent dip in sentiment in rural markets hit sales of consumer durables during the festive season. Festive season is the time when consumers are the most excited as the purchasing is planned in advance and it comes once in a year. The industry saw a sales growth of 10% during the season. Earlier last year, the budget announced many changes to put together a positive and progressive financial plan. While the Make in India initiative is leading to growth and investment opportunities leading to job creation, the steps outlined in the budget did definitely put India on the journey towards becoming a global manufacturing hub by 2022.
Also, simplification in the tax regime helped in creating an investor-friendly environment. Implementation of the uniform goods and services tax (GST) from April 01 is an encouraging step and will create a conducive economic environment. It will also bring down the total incidence of taxes by eliminating cascading effect of taxes on goods and services. In line with the Make in India vision, the reduction of customs duty on certain inputs, raw materials, intermediates and components compliments the road map of realizing the need of improving the business environment leading to a transparent tax system.
In Budget 2016, the government should be introducing friendly policies that will give a push to domestic manufacturing of IT. We have high expectations in terms of attention and budget allocation for the IT sector. We hope the government is able to provide adequate thrust to investments in IT and its infrastructure. The IT penetration in the country is yet to reach satisfactory levels and providing tax benefits to consumers purchasing IT products, at regular intervals, will help to increase the penetration levels. India has potential to up the IT penetration levels to a reasonable 25%+ given the demographic profile, English speaking population, urbanization and improved connectivity through the telecom revolution. One shining example is of this practice is Malaysia where tax relief is provided on purchase of PC’s every three years. Increased IT penetration will bring in an increase in productivity among a large section of population and this in turn will contribute to the country’s economy.
PM Modi has pledged to wipe out tax terrorism from India – GST to be the prime focus. What’s your take on the GST framework?
The government must roll out Goods & Services Tax (GST) from April 2016 as it is likely to boost economic growth and will benefit manufacturing and exports. This will enable companies to take greater advantage of the benefits of the incentives and invest more in manufacturing. This will in turn increase growth in GDP. This is a very good time to increase incentives to the electronic sector which will aid growth. This will encourage investments from Indian and foreign companies. Future disinvestments and lower subsidies in the next year will help control the fiscal deficit to a large extent. If GST is implemented in the true spirit of doing away with complexities and facilitating ease of transactions (with a robust tracking infrastructure) it will mean a lot to the industry and to the economy.
It is recommended that Central Government should come out with the draft GST legislation at the earliest for the purpose of understanding, discussions and eliciting the views of the business and trade communities. Business community should be provided sufficient time to understand and study the legislation and its implications on the business and trade and to contribute with the views and suggestions. The views and suggestions made by the business and trade community can thus be suitably accommodated, clarified, taken into account at the time of introduction of formal GST legislation.
Previous budget extended SAD (Special Additional Duty) exemption on import of certain products for use in manufacture of IT hardware. However, Appliance and Consumer Electronics (ACE) manufacturers still face hurdles. Do you think, the FM should purview on the Inverted Duty structure for the consumer segment?
The manufacturing ecosystem for Appliances and Consumer Electronics is more developed and probably the issue has to be examined for its merits. India has the potential to develop and manufacture electronic hardware for the global markets and gain higher global share besides meeting the country’s future requirements in the converging areas of information, communication and entertainment.
Firstly, there is a need to address the inverted duty structure. Budget 2015 extended SAD (Special Additional Duty) exemption on import of certain products for use in manufacture of IT hardware. However, Appliance and Consumer Electronics (ACE) manufacturers still face the same issue as the value addition in this sector, for several products, is quite low and results in an inverted duty structure. Also, the GST rate should be reasonable and in line with rates prevalent in other Asian countries. The issue of inadequate abatement persists despite numerous representations to the Govt. While abatement based customs duty payment was introduced with the promise of revenue neutrality in reality the level at 20% is woefully low. Like its brethren in White goods where the rate is 35%, the same should be adopted here. In reality the low figure of 20% has resulted in the price going up to consumers and vitiating the promise of ‘revenue neutrality’ when the change was brought about.
In order to boost the Indian economy what kind of announcements can be made on Smart city or to make the digital India a success story for Indian economy and business corridors?
Over the past one year, the Government has set the right context and articulated its vision for India’s economic development. Programs such as Smart Cities require the creation of technological infrastructure that will need budgetary support. The availability of Wi-Fi services should be pervasive across all services, esp. in citizen facing government services. The multiplier benefit that entails will be a strong boost for economic growth.
Lastly, what are the products can be expected from Acer India to hit the market in 2016 and what kind of gross market share do you think to vanquish in this fiscal year?
Recently, Acer has made a number of announcements at CES, Las Vegas with wide ranging updates which includes budget-friendly Chrome OS and Android based products. It announced a brand new Chrome desktop with Intel Core processors, a small, durable Chromebook and an affordable tablet. These products will be launched in India soon.
In India, Acer unveiled two internationally acclaimed smartphone models under the Acer Liquid Z Series and new range of products and upgrades across categories namely Notebooks, Convertibles, Projectors, Desktops, Monitors and Tablets. Acer has also introduced its gaming strategy across multiple form factors, including the industry’s first curved gaming monitor with Adaptive Sync that can support both G-SYNC and FreeSync technology.
Acer’s global mission statement is ‘fresh technology enjoyed by everyone, everywhere’ and the firm was widely regarded as a worldwide pioneer in delivering high performance PCs at accessible prices. Acer continues to lead the industry in innovation by enhancing the user experience and providing wide range of benefits. We are going to continue investing more in user-centric and aesthetically designed products which is our key strength. We will be expanding our product portfolio into strategic and key segments with a slew of new announcement during this year’s Consumer Electronics Show in Las Vegas. Some of them being Aspire Switch 12 S, an all-new Chromebook 11, World’s First Chrome base with Intel Core Processors, , world’s thinnest monitors with under 7mm thickness Acer R1 series, New Acer TravelMate P648 Commercial Notebook and a Pocket-Friendly 8-inch Android Tablet Iconia One 8.
