Progressive measures for startups will fuel India’s innovation economy

Since the onset of COVID-19, paving the way for repair and recovery of the economy has been a focus of the Indian Union’s annual budget.

Finance Minister Nirmala Sitharaman’s presentation of the Union budget for 2022 made it clear that this year too, the focus has not changed from the theme of rebuilding India in the post-pandemic transition. The series of measures that have been unveiled to support the momentum of Indian startups have been widely welcomed by the founders and ecosystem players of India Inc.

Budget has been widely praised by the startup community for its commitment to providing broad support across all sectors and creating meaningful employment opportunities in the future.

Personally, I found the relief and boost given to startups in the budget a sign of more positive changes on the anvil. This is a testament to India’s growing weight in the global innovation economy.

According to a recent report, Indian tech startups cemented their position in the global startup ecosystem by raising $42 billion in total funding volume in 2021.

Let’s see how the budget aligns with the government’s long-term vision and commitment to supporting Indian startups and building their resilience.

Extend tax holiday for young Indian startups

One of the main takeaways from the budget was the expanded tax benefits for fledgling startups. In order to support this segment during the pandemic, the government has extended the tax incentives it offers to eligible startups for one year until March 31, 2023.

These startups are granted 100% tax relief on profits for a period of three consecutive years during the first 10 years after incorporation, provided that the aggregate annual turnover does not exceed Rs 25 crore during the start-up period. a financial year. Previously, startups incorporated before March 31, 2022 were eligible for the same tax incentive.

Such an incentive program will allow new startups to grow quickly without being burdened with the tax burden during their first years of operation.

Reduce the tax burden of investors in startups

Apart from the startup community, even investors stand to benefit from the 2022 Union budget. -long-term values.

The main beneficiaries of this policy would be High Net Worth Individuals (HNWIs) who have invested in unlisted stocks and hold equity shares in startups for more than 12 months. Thus, the gains on the sale of these shares would be considered long-term capital gains.

Venture capitalists (VC) seeking to fund startups have welcomed the government’s decision to set up an expert panel to review the regulatory framework impacting the venture capital and capital industry. -investment (PE). This is a commendable move to validate the government’s trust in the investment community, especially when Indian startups are experiencing rapid growth and gaining global recognition.

Strengthen domestic manufacturing to become self-sufficient

In another progressive step, the government has offered a 15% preferential rate for an additional year until March 2024 for newly incorporated domestic manufacturing companies registered on or before October 1, 2019. This provision builds on the philosophy of Atmanirbhar Bharat which seeks to make India a self-sufficient global superpower with superior manufacturing capabilities.

In addition, to reduce arms imports and indigenize defense production, 68% of equipment purchases in the defense budget are allocated to domestic industry. This move will pave the way for increased engagement with defense startups that have the R&D capabilities to design and develop world-class military equipment for the government.

It is a fine example of how a unique model of public-private partnership can be built. Perhaps this can be replicated in other sectors as well.

Modernizing Indian agriculture with innovative solutions

The budget announced the creation of a fund dedicated to agritech startups, which will be facilitated by the National Bank for Agriculture and Rural Development (NABARD). The mixed capital fund will finance start-ups that work in agriculture and rural businesses and improve the value chain of agricultural products.

The budget also highlighted the importance of leveraging advanced technologies to modernize the agricultural sector and support farmers. He advocated the use of drones under the “Kisan Drones” program to spray insecticides and conduct field surveys and crop assessments. This announcement bodes well for drone startups that are ushering in a range of innovative solutions for the agricultural sector.

Disruptive agritech startups should seize these opportunities and collaborate with Farmer Producer Organizations (FPOs) to support the growth of the agricultural ecosystem.

Channeling the “Shakti” of Indian drone startups

The announcement of the revolutionary Drone Shakti program has sparked joy among booming drone startups in India. It follows the center’s new drone policy that was announced in 2021 to democratize the drone ecosystem.

The Drones-as-a-Service (DRaaS) model is a step in the right direction to fuel innovation in India’s drone industry, which is expected to hit $1.81 billion by 2026. The initiative will raise awareness how drones can be exploited in all sectors with the help of innovative startups that use the technology for various applications, including at the grassroots level.

Drone Shakti reflects the long-term vision of the government which advocates the use of digital technologies to solve India’s long-standing problems at scale.

Generate jobs in all sectors

According to the finance minister, the government’s flagship Production Linked Incentive (PLI) program has the potential to generate at least 60 lakh new employment opportunities in key industries such as pharmaceuticals, medical devices, large-scale electronics manufacturing, textiles, food products, solar electric vehicles. modules and automobiles, among others. Additional production of products worth Rs 30 lakh crore is also planned over the next five years.

Again, this program is in line with the government’s Atmanirbhar Bharat initiative which aims to boost domestic manufacturing. The announcement bodes well for Indian startups and MSMEs which are poised to employ a large workforce through their innovative activities.

Paving the way with optimism

Additionally, the budget provides a boost to startups across all industries. For example, EV startups have reason to celebrate as tariffs on lithium-ion cells will be reduced, which would reduce the cost of producing vehicles. Companies in the edtech space will also benefit from the budget’s focus on upskilling and digital learning.

However, I have some doubts about the budget. There is still a lack of clarity on the rules allowing direct registration abroad – a key request from the startup ecosystem that was not addressed in the budget.

Moreover, despite the recognition of virtual digital assets, the hefty 30% tax on cryptocurrencies has been a disappointment for blockchain startups and investors.

However, despite challenges abounding, India’s growth and recovery are at the heart of the budget. The government’s drive to promote an innovation-driven digital economy is reflected not only in its policies, but also in the Finance Minister’s presentation of a paperless budget for the second time, via the Union Budget Mobile app. .

It remains to be seen whether Indian entrepreneurs will take advantage of the budget’s startup-friendly measures and seize the big opportunities that will catapult them to new frontiers of innovation.

Edited by Teja Lele Desai

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)


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