Budget 2022: Boost For The Tech & Startup Ecosystem
The Union Budget 2022 pillared itself on promotion of technology and digitalisation across sectors. Aptly referred to by many as the ‘Budget for Digital India’, the announcements come as a welcome step for the tech and start-up ecosystem in India.
The (Indian) Government has time and again recognized and acknowledged that the start-ups are drivers for growth for the economy in today’s time. Accordingly, a boost(er) has been provided to the start-ups in form of an extension of the tax incentives by another year i.e. through 2023 (being an expected move in view of the COVID-19 pandemic).
Keeping in mind the growth required in the agriculture sector in the country, the finance minister has also proposed to boost the start-ups for agriculture and rural enterprise which are relevant for farm produce value chain. For such start-ups, a fund with blended capital (raised under the co-investment model) is proposed to be facilitated through the National Bank for Agriculture and Rural Development (which has invested in AIFs that contribute to the capital of the enterprises working for the benefit of agriculture and rural development). The activities of such start-ups are proposed to include, among others, support for farmer producer organisation, machinery for farmers on a rental basis at farm level and technology-based support. Further, it is proposed to promote start-ups to facilitate ‘Drone Shakti’ through varied applications and for Drone-As-A-Service. This achieves the dual purpose of boosting the start-up ecosystem as well as facilitating growth for the agri-sector. In a 2019 speech, the Minister of State-Finance (Mr. Anurag Thakur) had stated that “India needs to create agripreneurs for which skilling and tech-enabled services are crucial. Agri-based ecommerce platforms, farm monitoring, linking with fintech will help make youths become agripreneurs...”. The Budget 2022 is in line with this goal of the Union Government.
Interestingly, it has also been proposed that R&D for the defence sector will also be opened up for industry, start-ups and academia with 25% of the defence R&D budget earmarked for this. This will enable modernisation of the defence infrastructure with the help of start-ups and other technology companies.
Further, the Government recognises that the growth of the start-up ecosystem is dependent upon the venture capital and private equity investments, with approximately Rs. 5.5 lakh crores being invested last year. In view to scale up the investments, it has been proposed that an expert committee will be set up in order to examine the regulatory challenges being faced by the investor community, and to suggest appropriate steps to overcome such challenges. This is a great move by the (Indian) Government keeping in mind the investor sentiments. Lastly, the FM proposed to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15% with an aim to provide boost to the start-up community – a much lauded step by the start-up and investor community.
Other announcement in the Union Budget that will potentially provide boost to the start-up businesses is recognition of animation, visual effects, gaming, and comic (AVGC) sector. It has been proposed to set up a task force to realize the full potential of this sector in order to serve the global market. Even the ed-tech sector can expect a boom with the government’s emphasis on development of quality e-content to empower and equip the teachers with digital tools of teaching and facilitate better learning outcomes. The proposal is to develop high-quality e-content (in all spoken languages) for delivery by digital teachers. FM has also proposed establishment of digital university to provide access to students across the country for world-class quality universal education with personalised learning experience at their doorsteps. There has been a significant boost in the digital payments post the pandemic which was even encouraged by the government in the previous budget. It is proposed that the financial support for digital payment ecosystem will continue to apply to further encourage use of payment platforms that are economical as well as user friendly. These are steps aimed at providing fuel for growth of the tech companies in the country.
These announcements encourage the Indian entrepreneurs to continue with their ideas and ventures, and re-affirms the faith of the investors in country. It is a sincere hope that the implementation of these announcements will be done in an efficient manner by the (Indian) Government to provide the requisite impetus to the development of the tech and start-up ecosystem in the country.
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