'Clarity On Transfer Pricing Norms Needed'

The government should carry forward its recent policy statements aimed at simplifying and clarifying transfer pricing norms in the Union Budget 2013-14. Currently, over 850 high-tech MNCs operate R&D centers in India, creating direct employment for over 250,000 highly qualified talent and thereby retaining knowledge workers in country. Further, the indirect employment multiplier is 1:4. Clarity in transfer pricing will encourage existing MNC R&D centers to expand, and act as an accelerator for those planning to set up India R&D operations.

Build Collaborative Framework For Modern IT: Indian companies will invest at least $10-15 billion in modern IT in the next 5 years. With the growing importance and relevance of modern IT, including cloud computing, big data analytics, mobility etc, we expect Budget 2013-14 to specifically focus on creating a robust framework and incentives to encourage modern IT adoption. While initiatives on cloud computing are being taken at multiple levels, a collaborative framework including government, academia, associations and industry is much required. Similar initiatives are being taken in the United States, Australia, Korea and other key markets.

Encourage Small & Medium Businesses: Over 45 Million SMBs are currently doing business in India and the sector contributes 40 per cent of the manufacturing output and about 17 per cent of the total economy. It will be important for government to collaborate with the industry ecosystem towards encouraging usage of technology to help the SMB sector enhance global competitiveness. We expect the government to significantly increase its focus on building robust ICT infrastructure including access to telephony, broadband, public data centers etc. to provide further boost to the sector.

Institutional Mechanisms To Create A World-class Startup Ecosystem By 2020: Startup ecosystem in India holds strategic importance in accelerating innovation, and Zinnov expects Budget 2013-14 to focus on supporting its growth in the country.

Setting up industry-ready incubators, expansion of incentives for private incubators, funding support and incentives for entrepreneurs to set up a venture would provide the necessary thrust to the ecosystem. To foster collaboration, the government should also provide specific incentives to MNCs and large companies that are partnering startups to develop core intellectual property. As always, we would like the Budget 2013-14 to provide for an income tax-exempted venture fund to
seed start-ups especially in the product domain.  This will strengthen the 3,000-plus product start-up eco-system in India.

We need to replicate institutional mechanisms to bootstrap growth in product start-ups, similar to what the STPI scheme did for the services companies in the 90s. 

Cybersecurity Enhancement, Increased E-governance Outlay: Zinnov is expecting an increase in the e-governance outlay by the Government in the Budget 2013-14, especially large programs like R-APDRP and UIDAI. An increased outlay combined with an effective and efficient implementation is likely to improve the quality of life of Indian citizens at large. It will also have a positive impact on Indian companies and MNCs in the IT sector. Other expectations from budget include clarity on double taxation on sale of software, enhancement of cyber security laws, clarity on mandates on datacenters in specific sectors (BFSI etc.) simplification of CENVAT refunds, clarity on MAT & Transfer Pricing related tax etc.

(Pari Natarajan, CEO Zinnov Management Consulting)