India budget targets electronics and industrial growth

The recent budget released by the Government of India targets a number of key
technology sectors for growth in 2022 – 2023.
Telecom
There were notable announcements for the telecom sector. The Budget announced that
spectrum auctions will take place in 2022 to facilitate the rollout of 5G mobile services
within 2022-23. Separately, the Economic Survey (2021-22) noted that telecom sector
reforms will boost 4G proliferation, infuse liquidity and create an enabling environment
for investment into 5G networks. Additionally, a scheme for design-led manufacturing
will be launched to build a strong ecosystem for 5G as part of the Production Linked
Incentive (PLI) Scheme.
Under the Universal Obligation Fund, 5% of annual collections will be allocated to enable
affordable broadband and mobile service proliferation in rural and remote areas. This is
also expected to promote R&D and commercialization of technologies and solutions.
The Budget also discussed the need to enable equitable access to e-services,
communication facilities, and digital resources for residents in urban and rural areas. To
this end, contracts for laying optical fibre in all villages, including remote areas, will be
awarded under the Bharatnet project through public-private partnerships (PPP) in 2022-

23. The project is expected to be completed in 2025.
    Connectivity and transport infrastructure
    The FM discussed the PM Gati Shakti master plan (PMGS), which is a digital platform for
    tracking infrastructure projects. It brings together 16 ministries (including railways, civil
    aviation, electronics and information technology, textiles, among others) for coordinated
    planning and implementation of infrastructure connectivity projects.
    PMGS will comprise of 7 engines, one of which will be logistics infrastructure,
    supported by complementary roles of energy, IT communication, bulk water and
    sewage and social infrastructure. The logistics infrastructure engine will be
    powered by clean energy.
    Projects in the National Infrastructure Pipeline (a whole-of-government exercise
    to provide world-class infrastructure facilities) will be aligned with the PMGS to
    enable logistical synergy across modes and accelerate development.
    A unified logistics interface platform to allow efficient movement of goods across
    modes reducing logistical constraints, enabling inventory management and
    eliminating documentation will be created. This will be an open-source platform
    along international standards which will provide real time information to all
    stakeholders and give them greater visibility.
    Multi-modal logistics projects led by PPP will be launched in 2022-23.
    In the context of developing efficient logistics through railways, the concept ‘One
    Station-One Product was promoted to help local businesses & supply chains.

Industry players believe that these initiatives along with an impetus to PMGS are likely
to strengthen the consumer sector supply chain. This is also in-line with the
government’s vision to build world class logistics and infrastructure facilities in the
country.
Micro Small Medium Enterprises (MSMEs)
The FM announced several initiatives to boost the MSME sector including an increase of
over INR 6,000 crores in its budgetary allocation for the year.
The ‘Emergency Credit Line Scheme’ (ECLGS) which provides credit to MSMEs in
the hospitality sector, among others, has been extended till March 2023. The
guarantee cover under this scheme will be expanded by INR 50,000 crore,
bringing the total scheme value to INR 5 lakh crores.
The ‘Credit Guarantee Trust for Micro and Small Enterprises’ (CGTMSE) scheme
which provides collateral free credit to MSME players, was proposed to be
revamped with the infusion of additional credit of 2 lakh crores. This is expected
to generate employment opportunities in the sector.
The ‘Raising and Accelerating MSME Performance’ (RAMP) programme (aims to
mobilize formal financing and boost competition in the sector) will be rolled out,
allocating 6,000 crores over 5 years.
Prioritising the facilitation of ease of doing business, the Budget noted that
25,000 compliances have been reduced and nearly 1486 union laws have been
repealed. The FM reiterated the government’s commitment to ‘minimum
government and maximum governance’ and proposed digitization of manual
processes, a single point access for all citizen-centric services, and
standardization and removal of overlapping compliances.
Electric vehicles (EVs) and clean mobility
The Budget placed emphasis on promoting public transport through clean and
sustainable technology, special mobility zones, zero fossil fuels policy and EVs.
Acknowledging that setting up charging stations in space-constrained urban areas will be
a challenge, it proposed a ‘Battery Swapping Policy.’ This will set out interoperable
standards for the EV ecosystem – meaning that EVs will be compatible with batteries
made by different manufacturers. This is expected to enable EV users to easily and swap
their discharged batteries for fully charged ones.
The FM also encouraged the private sector to develop sustainable and innovative
business models for ‘Battery and Energy as a Service’. This is in line with policy
initiatives introduced by state governments (like Delhi, Maharashtra etc.) to accelerate
EV adoption.
Data centres
To promote digital economy, fintech and technology enabled development, the Budget
introduced measures to improve digital infrastructure in the country.
Data centres and energy storage systems (including dense charging infrastructure and
grid scale systems) will be added to the harmonized list of infrastructure sectors, per the
FM. An infrastructure status accorded to these industries will facilitate credit availability
for digital infrastructure and clean energy storage.

The government had announced its intention to grant infrastructure status to data
centres in the Draft Data Centre Policy, 2020. The data centre industry is expected to be
accorded infrastructure status from 1 April 2022 onwards. After which, the industry will
be entitled to financial benefits, concessional rates for funding, and reduced costs of
setting up. This development along with the government move to de-license electricity
distribution last year, and breaking the monopoly of existing distribution companies, is
likely to allow greater flexibility in power procurement.

Digital health
As Per the FM, the government will roll out an open platform for the National Digital
Health Ecosystem consisting of digital registries of health providers and health facilities,
unique health identity, consent framework, and universal access to health facilities.
Acknowledging that the pandemic increased and exacerbated mental health problems in
the country, a ‘National Tele Mental Health Programme’ will be launched to provide
better access to quality mental health counselling and care services. A network of 23
tele-mental health centres of excellence will be established, with NIMHANS being the
nodal centre and International Institute of Information Technology-Bangalore (IIITB)
providing technology support.

Drones
Identified as a sunrise sector, the Budget promoted the multi-sectoral adoption of drones
led by start-ups. Start-ups will be promoted to facilitate ‘Drone Shakti’ through varied
applications and Drone-As-A-Service (DrAAS). To match increasing demand, select ITIs
in various states will offer the required courses to train individuals. In her speech, the FM
proposed the use of ‘Kisan Drones’ to aid farmers in crop assessment, insecticide
spraying, among other things.
Last year, the government notified the Drone Rules, 2021 and shared an airspace map
to regulate the movement of drones in the Indian airspace. Given the Budget’s push to
improve connectivity, use cases of ‘Drone Shakti’ may be in healthcare delivery, air
taxis, and survey and mapping services. This move is in line with the government’s
approach to the drones’ industry, an aspect that we have chronicled here.
Incentives for start-ups
The Budget extended the tax incentives to include start-ups established on or before
31st March 2023. Under this scheme, start-ups are eligible for incentives for up to three
consecutive years out of ten years from the day of incorporation.
Further, the FM announced that the government will set up an expert committee to
address the regulatory issues that private equity investors and venture capitalists face
when investing in the start-up ecosystem. The committee will recommend measures to
scale up investments while solving the frictions preventing such scaling up.
Electronics manufacturing
In line with the tech focus of the Budget, FM emphasised the importance of facilitating
and promoting the domestic manufacturing of wearable devices, hearable devices and
electronic smart meters. Duty concessions will be offered to transformers, mobile phone
chargers and camera lens of camera modules. This will enable domestic manufacturing
of high growth electronic items.

Online gaming

The Budget noted the potential of the animation, visual effects, gaming and comic
(AVGC) sector to employ young Indians. To facilitate the growth of this sector, it will set
up a task force for the promotion of the AVGC sector. It has invited recommendations
from all stakeholders on how to build capacity to better serve the Indian market as well
as global demand.
Last month, Karnataka became the first state in the country to set up an AVGC Centre of
Excellence and the Union Government is also collaborating with IIT Bombay to set up a
National Centre of Excellence in AVGC.