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IAMAI

1. How do you see the major trends witnessed since Covid-19 in your sector pan out in 2021? Has the pandemic fundamentally changed the sector’s position in India? Or will there be a return to a pre-Covid “normal?” 

Covid-19 has brought about four broad trends. First is the accelerated speed of growth for consumer internet companies, especially in sectors such as ed-tech, health tech, fintech, entertainment categories; second, traditional businesses are more keen on the digital way of doing business. For example, there is a major switch in print media and traditional media towards digital, and advertisers, too, are shifting their spending to digital. Digital transformation of many more traditional businesses such as logistics and supply chains will now happen irreversibly since there has not been a change of mind [e.g., health workers who were most resistant to using digital have started to embrace it]. Third, deeper penetration of internet to tier 3/4 cities and rural areas, and finally, there is an increasing demand for user end devices like smart phones, smart televisions etc. 

2. What are your expectations for the sector in 2021? Do you foresee a period of job creation across the country? Do you envisage this benefitting tier II and tier III cities in particular? 

Some sectors of our industry like travel-tech will take time to return to pre-pandemic levels of employment while others such as ed-tech have been employing extensively through the pandemic. Overall, due to the sudden spurt of demand in digital services, my guess is that employment is rising and is likely to rise for the next five years in our industry. The beauty of our industry is that if one sector reduces employment, the skills of most workers in product, sales, marketing, design, logistics are transferable to another sector. Hence, as long as there is a general growth in industry, employment is likely to go up.

Digital industry in India is more oriented towards services and not products and is going to create huge employment opportunities—both direct and indirect—wherever those services are rendered. Take the case of grocery delivery services, who would have thought that just one company would be supplying groceries to 300 cities? 

3. As the world’s third largest startup hub, how do you see the startup space in the IT sector this coming year and in the near future?

The record investments flowing into Indian consumer internet startups during the pandemic has shown that there is no dearth of risk money chasing a good and scalable idea. We are the third largest startup hub at a time when almost half the country does not have access to internet and those that use internet are small spenders compared to similar economies. Imagine how much headroom for growth we have! I would suggest that we have not yet reached the foothills of the peak as yet.

4. In your opinion, is the Indian IT sector a lucrative destination for foreign investors? 

In the consumer internet sector, investors bring in very high-risk capital and therefore, they expect windfall returns on the rare investment that pays off. The huge flow of investment of the last four years has been on some marquee exits. We need to keep up this trend of exits in order to ensure that India is the first choice for risk capital.
 
5. How have the pre-existing trends, particularly in business outsourcing, been altered with the events of last year? Has the growing digitisation and the shift towards an online economy affected the sector very much? 

I am not qualified to speak about the business outsourcing sector, but generally in the consumer internet industry and IT industry, the biggest shift has been the concept of working from home which has now metamorphosed into working from anywhere. I think from now on it is never going to be 100 per cent work from office. The shift has been made possible because of the ubiquitous access to digital connectivity and tools supported by positive government policies. This trend is going to stay with us in the future. 

6. Going ahead, what are the 2 most important things that you would want in budget 2021 for your sector?

Our budget asks are always very few but specific. This time we have requested the Honourable Finance Minister to consider a very low MDR since zero MDR is not helping the Indian fintech companies. The second request has been to reduce TDS on sellers on e-commerce platforms from 1 per cent to 0.25 per cent keeping in mind that while the government needs taxes, the small sellers too need cash-flows to survive. 

* The views and opinions expressed above are solely of the interviewee. The content does not reflect Invest India's position or opinion and Invest India bears no responsibility for the same.

We are India's national investment facilitation agency.

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