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  IESA WINWire May 20, 2017 - May 26, 2017 for Subscription click here  
12th Anniversary

GST regime: Higher levy won’t hurt IT firms
Source: The Hindu Business Line; May 20, 2017

The GST Council has classified IT services in the 18 per cent tax slab, Earlier, IT services were taxed at 13-15 per cent, but there were a lot of indirect taxes and areas that were open to interpretation.

Industry watchers say that despite the higher tax, the ambiguity will now be considerably less. According to MN Vidyashankar, President of the India Electronics and Semiconductor Association (IESA), earlier there were two to three levels of indirect taxation, which were subjective. As a result, they could be interpreted differently by the taxman.

“The fact that everything has moved online and there is no manual interference has also helped in transparency,” he added.

Others believe that this increase will hit the industry only in the short term. S Satish, Executive Director, RSM Astute Consulting Group, said the industry can absorb this cost, just as when VAT was introduced, companies took a hit but eventually bounced back.

The industry is also seeking clarity in some areas. “Clarity is awaited on GST on services and treatment of area-based exemptions,” said Rajeev Jain, Director and Group CFO, Intex Technologies. The industry is also awaiting clarity on differential duty on imports and local manufacturing. India has been a fast-growing IT market in the last couple of years as government initiatives such as Digital India, Smart Cities and a change in consumer behaviour with a preference to use more technology have spurred tech spending.

IT firms eye new markets in Japan, China, Germany
Source: Business Standard; May 20, 2017

The Indian information technology (IT) services sector is looking beyond its primary market, the US — at Germany, Japan and China, to expand its business.

The $150-billion sector gets about 60 per cent of its revenue from the US. Now, it’s looking at Germany, Japan and China as strategic markets, as these together have opportunities of about $300 billion, said the National Association of Software and Services Companies (Nasscom).

The market size for the sector in the US is about $400 billion. Indian firms have made a significant impact on it. However, since the election of President Donald Trump in November last year, a cloud has hung over the future prospects of Indian IT firms in the US. Trump has pushed for local hiring and is planning stricter clearances for H1B visas, traditionally used by Indian firms to send engineers on projects to the US.

Coupled with this, rapid shifts to automation have compelled IT firms to revise their earnings expectations. And, also to look at other markets.

In Germany, the Industry 4.0 initiative is expected to be a key to the plans of the Indian IT firms, said Gagan Sabharwal, director, Global Trade Development, Nasscom, in an interview. Industry 4.0 aligns factories using smart technology and with increased focus on engineering services. “We will invest in new areas for future growth, and have identified three geographies — Japan, China and Germany.”

To push manufacturing growth, domestic procurement is a legitimate tool; India has been defensive for far too long’
Source: The Financial Express; May 22, 2017

At last, India intends to adopt a national policy to give preference to domestic goods in public procurement. Last week, it was reported that there have been meetings in this regard at the PMO level. There are several estimates for the market size of government procurement, but an important aspect is that it is significant enough to drive manufacturing and create additional jobs in the country.

FICCI has been advocating for a long time for adoption of this policy to provide the requisite push to industrial growth. Particularly, in 2013, FICCI’s Manufacturing Agenda had explicitly asked for policies for various sectors where government procurement could be leveraged.

Such a policy has been under discussion for several years. The offset policy for the non-defence sectors was much talked about. The concept note developed by the government was discussed at inter-ministerial meetings, but couldn’t take off.

This single measure of the central government has the potential to revive growth in manufacturing, which has been sluggish on account of global slowdown. Several countries whether they are members of WTO’s Government Procurement Agreement or not have used this tool to encourage domestic industrial growth.

In fact, it is not only limited to goods and has been extended to the service sector too, of which the recent Trump order in April 2017 is a good example. Under the Buy American Act of 1933 (BAA), the purchase of supplies and construction materials by government agencies is limited to those defined as “domestic end-products.”

Centre of Excellence for IoT gives a big push for product startups in India
Source: Yourstory; May 22, 2017

Set up in 2015 as part of the government’s Digital India programme, the CoE-IoT was conceived by the Ministry of Electronics & IT (DeitY) and Education and Research Network (ERNET) in association with Nasscom.

“The CoE will cost about Rs 22 crore over a period of five years, with 50 percent of the cost to be met by the Centre and the rest by the Karnataka government and Nasscom,” a statement by the CoE-IoT said.

Dr Ajay Kumar, Addl Secretary at Ministry of Electronics & IT, is the Chair of this centre that also partners with industry giants like Intel, Cisco, Accenture, Qualcomm, and others. He was in Bengaluru last week visiting the centre for the first time after its launch and was pleased to see the vision being translated into reality.

“The question for us is where do we go from here,” Ajay Kumar told YourStory. “IoT has a huge interest for the industry. How can we scale this up? How can we take it to other places,” he added, sharing his agenda for the visit. Besides spending time with the startups here, he chaired a roundtable with other stakeholders, including industry leaders and academia to brainstorm on the future roadmap.

“CoE is a unique facility for deep tech startups where the product startups come and work on their ideas and take it to completion. We provide the right environment, equipment, and connects for them to be successful. IoT and related technologies is the next game changer for the industry and the economy,” said Sanjeev Malhotra, CEO at the IoT Centre of Excellence.

India's BEL and Israel's IAI ink $630M missile system deal
Source:; May 22, 2017

Indian state enterprise Bharat Electronics Limited signed a $630 million contract on May 19 with Israel Aerospace Industries to jointly produce four long-range surface-to-air missile systems for the Indian Navy.

"Yes, a contract was signed May 19 in Bangalore for [LRSAM] systems. However, work share and other commercial details are confidential and cannot be shared," BEL's marketing director, Anandi Ramalingam, told Defense News on Monday. "BEL will start delivering the [LRSAM] systems from early 2020, onwards."

Under the contract, BEL will produce a major portion of the multifunction active electronically scanned array naval radar system, or MF-STAR, and the rest of the weapon control systems, Ramalingam added.

The company will also carry out system integration and commissioning activities.

In a May 21 news release, IAI announced it was awarded "an additional, $630 million contract for supply of LRSAM air and missile defense systems for four ships of the Indian navy. The contract will be carried out, for the first time, with Indian government company Bharat Electronics Limited (BEL), which serves as the main contractor in the project as part of India's 'Make in India' policy."

IAI president and CEO Joseph Weiss offered: "The new contract adds to other deals signed in the last decade by IAI with India's defense forces, reinforcing IAI's global leadership position in air and missile defense systems. The inclusion of Indian governmental company BEL for the first time, is a step up in our relationship with the Indian industry as part of the 'Make in India' policy."

Ram Reddy, Chairman MosChip elected as an Executive Council Member in IESA
Source: India PR Wire; May 23, 2017

India Electronics and Semiconductor Association (IESA), today announced Ram Reddy as an Executive Council Member, effective immediately.

A veteran of the semiconductor industry for decades now, Ram is known for his global business, operational and industry expertise. He has over 40 years of experience in Silicon Valley in the areas of design, manufacturing and marketing of various integrated circuits (ICs). He has successfully started several semiconductor design companies and sold them to larger companies in the last 18 years.

While speaking about his current role at IESA, Ram, said "As an Executive Council Member of the IESA, I'm inspired by the Ideas and ability to push the boundaries of industry networking, which would further allow me to, enable innovations to drive the Indian Electronics Systems and Design the Semiconductor ecosystem forward." He further added, "I am honored to serve as an Executive Council Member and would like to thank to IESA for giving me this opportunity."

IESA is the leading trade body representing the Indian Electronic System Design and Manufacturing ESDM industry and since 2005. With over 230 members in domestic and multinational enterprises. IESA builds a global awareness for the Indian ESDM industry and supports its growth through focused initiatives in developing the ecosystem. IESA is also working towards government initiatives like 'Make in India', 'Start-up India' and 'Digital India' giving them valuable consultations.

No local sourcing needed for 'Make in India', govt tells Tesla
Source: The Hindu; May 23, 2017

The Commerce and Industry Ministry on Tuesday referred to the Foreign Direct Investment policy and clarified that it is not correct to say that the policy mandates any company — in this case US-based electric car major Tesla — to conform to any minimum sourcing of local components if it wants to establish a manufacturing unit in India.

The Ministry was responding to reports on launch plans of Tesla in India being delayed, and a tweet by Tesla founder Elon Musk that "Maybe I'm misinformed, but I was told that 30% of parts must be locally sourced and the supply doesn't yet exist in India to support that."

Government Working towards Developing Indigenous Defence Manufacturing Capability
Source: Business Standard; May 23, 2017

The Government is working towards progressively reducing dependency on foreign manufacturers and developing the defence capabilities indigenously. This was informed by Minister of State for Defence Dr Subhash Bhamre while addressing a seminar, jointly organised by the Indian Air Force (IAF) and Confederation of Indian Industry (CII), here today.

Dr Bhamre further said, We have included a new procurement category called the Buy Indian IDDM (Indigenously Designed, Developed and Manufactured) category in the DPP [Defence Procurement Procedure]. This would be the most preferred category for procurement and it is expected to promote indigenously designed products and bring significant investment in defence R&D."

Speaking of partnership with defence industry, Dr Bhamre informed that The Government of India has been working on formulating a Strategic Partnership model for creating capacity in the private industry on a long term basis." The Government had constituted a task force with experts from various fields to recommend criteria and prescribe methodology for selection of Strategic Partners.

The report submitted by the task force has been examined at length and Government shall be issuing the policy for selection of strategic partners shortly.

Alleviating concerns of the industry, the Minister said, the exchange rate variation protection has been made applicable for the Indian private sector at par with public sector undertakings for all categories of capital acquisitions.

Modi's 3 years: Government receives Rs 1.43 lakh crore of investment in electronics sector
Source: ETTelecom; May 23, 2017

Narendra Modi-led NDA government has so far attracted Rs 1.43 lakh crore worth of investment in the electronics sector from multinationals as well as domestic companies, Law & IT Minister Ravi Shankar Prasad Tuesday said.

In 2014, when NDA government came to power, the sectoral investment was merely Rs 11,000 crore which according to the department has grown manifold due to government’s ambitious programs such as Make in India.

“Rs 1.43 lakh crore of investments have been committed by companies in the electronics sector in 2017,” Prasad told reporters on the occasion of completing three years in office.

The Ministry of Electronics & IT (MeitY) Tuesday highlighted major achievement of Modi government with its flagship umbrella program Digital India that was announced on July 1, 2015.

“Digital India is creating a new paradigm of development which is transformational, inclusive and empowering,” Prasad said, adding that the platform is affordable and within the reach of a common man including those belonging to a lower strata of the society.

Government expects that India’s digital economy would become a $1 trillion worth sector, which according to Prasad would be be achieved within next five to six years.

The department has also roped in New York-based consultancy firm McKinsey & Company to prepare a roadmap for digital economy and is seeking advice from the national planning body, Niti Ayog.

Modi's 2-day flagship programme 'Startup India Summit' begins in UAE today
Source: Deccan Chronicle; May 23, 2017

A two day ‘Startup India Summit’ will begin in Abu Dhabi, UAE, on Tuesday.

This is the first ‘Startup Summit’ being held in the UAE by the Consul General of India (CGI) in Dubai and Embassy of India in Abu Dhabi in partnership with iSPIRIT, a nonprofit think tank and supported by TiE, Dubai.

The aim is to provide a shared platform for the Startup eco system in both India and UAE for greater collaboration, exchange of ideas, interaction with academia, investors and industry and for having access to funding from the venture capitalist in the UAE.

Elaborating on the type of Startup companies that are participating in the event, CGI in Dubai, Mr Vipul said 17 Startup companies from India in the space of Artificial Intelligence, Financial Technology or Fintech, Digi Medicine, Health care Technology, Innovative Technology and Software as Service will take part in the two day event .

Speaking to AIR/DD, Indian Ambassador to UAE Mr Navdeep Suri highlighted that ‘Startup India’ is the flagship programme of Prime Minister Narendra Modi and it is the endeavour of India as the third largest eco system in the world leading in tech innovation globally while UAE aims to be the world hub for technology in future.

iPhone production: India offers homemade road map to Apple
Source: Business Standard; May 24, 2017

India has offered its own electronics manufacturing road map to global tech giant Apple to comply with as it kick-starts local production of its flagship product iPhone and carve up a larger chunk of the country’s fast-growing smartphone market.

“We have drawn a road map of indigenisation, in consultation with the industry over the past two years. We have shared it (with Apple) and asked them to align with it… we don’t need to give them any separate concessions. Apple said they will examine this and get back,” said Aruna Sundararajan, secretary to the Ministry of Electronics and Information Technology.

Apple did not comment. It had requested the government to grant it 15 years of duty-free import of components to assemble its iPhones in the country, sharing a road map to slowly indigenise products.

The government has instead chalked out its own National Policy on Electronics to achieve its goal of a $400-billion market in the sector by 2020.

Earlier this month, the Cupertino-headquartered firm conducted a trial run for producing its low-cost iPhone SE at Taiwanese contract manufacturer Wistron’s facility in Bengaluru. Apple in a statement said its “Made in India” iPhones would hit store shelves in late May.

“They have big plans for India and they definitely intend, as they have told us, to make all their products in the next phase, for which they are evaluating various options. The first thing they had requested was 15 years of duty-free imports of their components,” said Sundararajan.

Google selects six Indian startups for Accelerator Program
Source: VC Circle; May 24, 2017

Search giant Google has shortlisted six Indian startups for its fourth class of Accelerator Program to be conducted at the Google Developers Launchpad Space in San Francisco, said a press statement.

With this batch, a total of 26 Indian startups have joined the accelerator programme so far, the statement added.

The fourth batch, which begins July 17, will include a two-week-long, all-expenses-paid mentorship bootcamp featuring veterans from Silicon Valley’s top technology companies and venture capital firms. Apart from the six Indian startups, it will also host early-stage ventures from Asia, Latin America, Africa and Europe.

The programme aims to empower startups with skills in the field of machine learning and artificial intelligence, and help them leverage Google’s latest technologies to scale their apps.

Additionally, the startups will receive equity-free support and credits for Google products. Following their return from San Francisco, they will continue to work closely with Google in India.

“These startups were shortlisted from hundreds of startups who applied this year based on their unique value proposition and use of latest technologies like machine learning and AI to build high impact solutions that are solving for the Indian context, focusing on new internet users and digital India,” said Paul Ravindranath G, program manager, Google India.

The shortlisted startups include companies that optimise financial services including loans and credit cards, offer online video platforms and leverage artificial intelligence or machine learning for applications ranging from image-recognition to medical diagnosis.

How to combine GST with a sharp Make in India strategy to convert India into a global manufacturing hub
Source: The Times of India; May 25, 2017

For most industrial products, GST rates have been slated at 18%. Today a manufacturer pays about 28-30% as taxes, so this means an average saving of around 10%. The lower tax rate is not the only benefit GST offers. It will provide a push to manufacturing in three big ways.

One, GST replaces eight central and nine state taxes such as central excise duty, service tax, state VAT and entry tax. This means the end of an era of multiple taxes levied at central, state and local levels, each with a different tax compliance system.

Two, GST reduces the cascading effect of taxes. An example will explain the current system. A manufacturer pays central excise at 20% on a shirt of value Rs 100. Next, the state government charges VAT not on Rs 100 but on Rs 120 which is the value of shirt and the tax already paid.

VAT rate of 15% in effect becomes 18%, leading to a higher price of the shirt. GST resolves the issue by integrating tax systems of Centre and state. Also, GST is to be paid only on the value addition and not on absolute value.

Three, GST would lead to lower transportation and distribution costs. Currently, firms spend a high 5-8% as product distribution and warehousing cost. The main reason for the high cost is the expense incurred on branches and warehouses that exist due to tax saving rather than business considerations. This would further reduce cost.

Make in India gets major sourcing push from Modi govt
Source: Business Standard; May 25, 2017

The Union Cabinet on Wednesday approved a policy providing preference to domestically manufactured goods for government procurements, in a major step to boost the government’s Make in India initiative.

It also approved the abolition of the Foreign Investment Promotion Board (FIPB), which has, for 25 years, been the single-point window for clearing foreign direct investment (FDI) proposals requiring government nod.

The Cabinet, headed by Prime Minister Narendra Modi, also gave its nod to a “strategic partnership” model under which select private firms would be engaged to build military platforms like fighter jets, submarines and battle tanks.

The Cabinet Committee on Economic Affairs (CCEA), which met before the Cabinet, approved the closure of Janpath hotel in the national capital. The property will be used for setting up government offices. It also cleared the hike in fair price for sugarcane by Rs 25 a quintal, a move that will benefit about five crore farmers across cane-producing states.

The new procurement policy mandates that only local suppliers will be eligible for procurement of goods and services above Rs 5 lakh, provided that the specific ministry determines that there is sufficient local capacity as well as competition.

The policy also has provisions for procurements beyond Rs 50 lakh, or where there is insufficient local capacity or competition. In this case, if the lowest bid is not from a foreign supplier, the lowest-cost local supplier, who is within a margin of 20 per cent of the lowest bid, will be given opportunity to match the lowest bid.

Indian firms to partner global defence suppliers
Source: The Times of India; May 25, 2017

Defence minister Arun Jaitley said on Wednesday that the Centre would like to swiftly roll out the new strategic partnership (SP) policy, under which selected Indian private sector companies will partner with global armament companies to jointly manufacture fighter jets, helicopters, submarines and armoured vehicles like tanks under the "Make in India" framework.

After the Cabinet meeting, which "took note" of the new policy, Jaitley said there was a need to involve Indian private sector in defence production in a major way since India continued to import "a lot" of its military requirements.

The "broad contours" of the SP policy, which has been under discussion for the last two years as a major step towards reducing India's strategically vulnerable dependence on military supplies from abroad, were cleared by the Jaitley-led defence acquisitions council on Saturday, as reported by TOI.

Holding that "one private sector SP will be chosen for each platform", he said tie-ups between private companies and foreign OEMs (original equipment manufacturers) would co-exist with the existing "capacity" of the defence PSUs.

Under the policy, one company will be selected as the strategic partner at a time in each of the four segments in "a transparent and competitive process".

The defence ministry will select the companies on the basis of adequate financial strength (Rs 4,000 crore in annual turnover over the last three fiscals, capital assets of Rs 2,000 crore etc), demonstrable manufacturing and technical expertise, existing infrastructure and the ability to absorb technology from their foreign partners.

Compiled by IESA Research

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