Also in the letter:
■ Alphabet Q2 revenue
■ Imported phones may get cheaper
■ Indian video market to touch $13 billion
Centre cuts budgetary allocation for UPI, RuPay payments
Charges on Unified Payments Interface (UPI) transactions continue to divide the industry and the government as the budget reduced the preliminary allocation to incentivise digital payments.
Details: The budget has allocated Rs 1,441 crore to incentivise payments made via RuPay debit cards and UPI, a sharp drop from the Rs 3,500 crore mentioned in February’s interim budget.
Yes, but: Industry insiders pointed out that in the past too, the government had made lower allocations, which were scaled up later. Payment startup founders said they were seeking clarification on how the reduced budgetary allocation would impact their business.
Quote, unquote: “The amount was approximately double at Rs 2,485 crore in last year’s budget. This can have a significant impact on the fintech and banking industry for promoting digital payments,” said Mihir Gandhi, partner, payments transformation, PWC India.
Context: In a bid to promote digital payments, low-value UPI and RuPay debit card payments attract zero cost. The government has been giving banks a subsidy to compensate for the revenue lost. Payment transactions above Rs 2,000 attract an MDR or merchant discount rate of above 1%.
The payments industry had asked for around Rs 4,500 crore as subsidy support for the zero MDR regime, to compensate for the revenue loss they incurred. They also sought an assured share of this amount.
ETtech’s in-depth coverage of Budget 2024:
ET Opinion | Boost to entrepreneurship, bid to curb speculation a hard balance : Nithin Kamath
Nithin Kamath, cofounder and CEO, Zerodha
Every year, I look at the budget for two things: what it means for our capital markets, and what it means for our entrepreneurial ecosystem. On these fronts, the budget brings both good and bad news.
Fine print: Finance minister Nirmala Sitharaman, in her record seventh budget, announced support for small businesses, giving them better access to capital and raw materials, and easing their logistical challenges. It also tries to improve the quality of our workforce, with its heavy focus on education and skilling. This is much needed because MSMEs are key to solving India’s unemployment challenges.
Also read: ETtech Opinion | Budget ringfences India growth story: Nykaa CEO Falguni Nayar
What this means: Most importantly, the budget makes investing in startups much more attractive. Earlier, private investments in startups attracted capital gains of 20%. This has now come down to 12.5%, in line with investing in listed securities. The budget also finally removes the dreaded ‘angel tax’ on investments into startups. The tax was introduced as a way to stop people from setting up shell businesses to launder money.
Read the full column here.
Alphabet beats Q2 revenue, profit estimates on strong ads, cloud
Sundar Pichai, CEO, Alphabet
Google parent Alphabet beat second-quarter revenue and profit estimates on Tuesday, driven by a rise in digital advertising sales and healthy demand for its cloud computing services. But the company cautioned that capital expenses would remain high for the year.
Tell me more: Alphabet’s results underscore robust demand for digital ads, driven by events like the upcoming Paris Olympics and elections in several countries, including the US. Strong adoption of generative AI technology also boosted its cloud business.
Financial highlights:
- Digital ads, Alphabet’s chief revenue source, rose 11% to $64.6 billion.
- Net income rose 28.6% to $23.6 billion, surpassing analysts’ expectations.
However, investor reaction was mixed, with the company’s shares initially rising about 2% before dipping by a similar percentage.
Google’s $23-billion plan to buy cybersecurity startup Wiz falls apart
Google was poised to snap up cybersecurity startup Wiz for $23 billion, but the deal fell apart on July 22, a company official confirmed.
Driving the news: This would have been Google’s largest acquisition ever, but the company would instead pursue a public listing on a stock exchange, according to media reports.
Quote, unquote: “While we are flattered by offers we have received, we have chosen to continue on our path to building Wiz,” CEO Assaf Rappaport wrote in a memo. “Saying no to such humbling offers is tough, but with our exceptional team, I feel confident in making that choice,” he added.
Apple iPhones, Google Pixels to get cheaper, thanks to Sitharaman’s budget
Phone geeks found some joy in the budget. Buying an imported Google Pixel or a high-end iPhone Pro may be a little cheaper after the basic customs duty on mobile phones was cut to 15% from 20%.
Tell me more: The cost of imported high-end smartphones will come down by 5-5.5% if brands pass on the benefit of the reduced customs duty to consumers, experts said. Currently, imported smartphones sold in India attract 18% GST and 22% customs duty (20% basic and 2% surcharge). The surcharge, which is 10% of the basic customs duty, will remain.
High-end phone bonanza? More customers could now find an Apple iPhone or Google Pixel within their reach. Almost 10-12% of Apple iPhones are imported annually into India. A 5% reduction in tax on these devices will result in an estimated $35-50 million annual benefit to Apple, as per a media report. Other manufacturers, like Samsung, are also set to gain.
Indian video market to touch $13 billion, create nearly 3 lakh jobs by 2028
India’s video market is expected to reach $13 billion in revenue by 2028, boosted by the streaming industry, which has continued to invest billions of dollars in content development every year, as per a new report.
By the numbers: India is the fastest-growing among major global video markets, according to research by Media Partners Asia. Content investment in India increased to $5.8 billion in 2023 from $3.3 billion in 2018.
The video entertainment economy is expected to post 8% annual growth through 2028, fueled by premium on-demand streaming, it said.
With the industry’s backing, the streaming sector will create 280,000 jobs by 2028, according to the report.
Major players: Netflix and Amazon are pouring in a combined $500 million a year in India to acquire and produce local content, said Vivek Couto, managing director of MPA. Jio Cinema is spending about $1 billion annually, led by sports, he said.
India, with 1.4 billion consumers, has become the third-largest driver of revenue growth for Netflix. Prime Video continues to grow, with plans to release more than 70 new series and films in the coming years.
Today’s ETtech Top 5 newsletter was curated by Riya Roy Chowdhury in Bengaluru and Megha Mishra in Mumbai.
