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indian economy: Lives and livelihoods: The two critical imperatives for India’s economy

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WorldIndiaConfirmed11,439Deaths377Confirmed1,976,192Deaths125,985By Debjani Ghosh

The speech by the Prime Minister Narendra Modi yesterday morning rightly focused on the imperative of the Covid-19 containment strategy and tighten the lockdown over the next 7 days to stop the emergence of any new red zones. He also touched on the economic imperatives for the country, particularly the poor and vulnerable sections and urged all citizens to support this national crisis.

There are enough debates ongoing in the country – whether India should focus on lives or livelihood and to my mind, this is not an either or scenario, it is an AND scenario, We need to do both and within the constraints of our economics and healthcare challenges. This is no easy task, every sector, every state needs support and the challenge of what to prioritise is a herculean task that the government is single handedly focused on.

The IT-BPM sector is a key pillar for India and in the last few weeks the sector has played a key role in supporting the lockdown with work from home for its employees; humanitarian assistance through donations, PPE, meals, volunteer efforts; and leveraging technology to address the Covid-19 challenges. There are today numerous large companies and startups that are working in partnership with central and state government on build apps, data analytics for war rooms, ventilator tech and other solutions.

I get asked a lot of questions on what the global crisis and lockdown means for the IT-BPM sector and what will be the downstream impact of other sectors that are being fueled by this sector. It is important to highlight that the IT-BPM sector is a predominantly export oriented, it is a part of global value chains and any disruption in client business will lead to a business impact on our sector. Given the global Covid-19 crisis is ongoing and there are no clear views on how long and how deep will this be, it is hard to analyse the exact implications for our sector. What is clear is that there will be short-term impact and if the crisis recedes over the next few weeks, the recovery process will get initiated. Whether the recovery will be V shaped, U shaped, L shaped, all will depend on what happens to global demand.

The IT-BPM sector is resilient and is making all efforts to ensure business continuity and also working on measures on cost optimisation and operational efficiencies. However, this is a people intensive sector and if business shrinks for companies, particularly, SMEs, there will be repercussions for the employee workforce also.

At the same time, in this environment of despair, one thing that has kept the nation afloat is access to technology. Industries, schools, hospitals, government have all embraced digital technology and collaboration tools and opened a floodgate of opportunities for digital solutions in the post Covid world. This is an opportunity that Indian IT-BPM sector, startups will look to harness and drive growth and innovation back to the sector.

However, it is important that we keep the sector afloat and hence NASSCOM has requested the government for immediate intervention on a fiscal and policy stimulus to help industry tide over the short term. NASSCOM has recommended a five pillar agenda for government to consider and provide relief to the sector. This includes:

Maintain Export Competitiveness: The global pandemic is getting nations to think more about self-reliance and it is important that the core value proposition of the IT-BPM sector – cost + quality + value + agility + innovation is retained and enhanced. A one year extension to the benefits under the SEZ Scheme and SEIS Scheme will help the industry address the immediate challenges.

Fiscal support for SMEs: Small and medium companies are the most impacted by this crisis. NASSCOM has recommended that the government provide fiscal support for 3 months for 50% of the employee salary subject to a cap of Rs 15,000 a month to help the SMEs retain their workforce. In addition, rent waivers / subsidies for SMEs when operating from government owned buildings maybe considered. All payments due to SMEs / MSMEs must be cleared immediately and GST / TDS refunds processed for access to working capital. Banks may also be encouraged to simplify norms to provide working capital loans to SMEs / MSMEs based on last 180 days past dues criterion.

Enable measures for cost optimisation: An option can be provided to the employers for a one-time PF/ESI opt-out option to reduce the costs, without affecting take home for employees. In addition, the government may provide exemption from GST on import of free of cost services as GST paid under reverse charge on such services import does not yield any extra revenue for the Government.

Extend policy support for Work from Home: There is an urgent need to extend the OSP policy to allow Work from Home till 30 June and also enable flexibility with permissions for dynamic IP. It is also important to allowing cross utilization of SEZ & STPI locations for BCP scenarios and permit personal laptops / desktops to be used in Work from Home. The government should also allow expenses incurred by companies in enabling Work from Home (WFH) for its employees as an eligible business expense. Currently such expenses are classified as perquisites as a result of which employees are liable to pay tax.

Accelerate funding for Startups: India’s vibrant start-up sector has taken a pause with this global crisis. Funding has nosedived and many nascent start-ups will need support for access to funding for product development, customer adoption etc. the Start-up India fund should prioritise seed stage funding and enable access to capital for start-ups

There are many other compliance measures which need support but are equally applicable across other sectors which I hope the government will consider. Lastly, its always said, don’t waste a crisis and I would urge the government to use the next few months to accelerate Digital India 2.0, build innovative solutions for the country in partnership with industry and demonstrate the resilience and agility of our country.

(The author is President – NASSCOM)


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