In her Budget speech, Finance Minister Nirmala Sitharaman stated that startups have emerged as economic drivers, and that the country has seen a complicated expansion of productive businesses in recent years.
After adding 42 unicorns in 2021 (with two public firms crossing $1 billion in market cap), India currently has 90 unicorns, putting it in third place in terms of the most unicorns, with the United Kingdom in fourth place. Indian companies surpassed the magic number of $100 billion in investments in the ecosystem last year, with over $42 billion invested in 2021 alone. Given that Indian companies have already raised $4.6 billion in funding in the first month of 2022, the trend is likely to continue this year.
So far, 62,700 firms have registered under Startup India, with 552 startups benefiting from the fund of funds.
With rising revenues, substantial infrastructure investment, and social investments, the Union Budget 2022-23 presents some extremely promising signals of India’s growing economy. However, when it comes to startups, the budget offers little beyond lowering the tax on unlisted stocks and a few minor initiatives like a blended capital fund to assist agritech businesses, according to TV Mohandas Pai, partner at Aarin Capital.
The Union Budget 2022 has gotten the ball rolling for the country’s agritech sector. Agriculture employs 43 percent of India’s workers and accounts for 16.5 percent of the country’s gross domestic product (GDP). Traditional operating procedures have plagued the business for years, but the development of the agritech startup bandwagon in the country has given it a break.
During the pandemic years, India’s response was to better manage supply-side reforms (rather than relying solely on demand management), which included deregulation of numerous sectors, process simplification, the removal of issues surrounding retrospective tax, production-linked incentives (PLI), and so on.
Start-ups were looking forward to Budget 2022 policy announcements on enabling a direct offshore listing process (to enable wider and faster access to public capital) and easing tax consequences for all start-ups in terms of ESOP taxability (via shifting tax incidence to liquidity event) and aligning holding periods for unlisted and listed stock. Unfortunately, these issues were not rectified.
Given that start-ups are also going through a period of consolidation and acquisitions, certain provisions permitting tax-efficient M&A activity (including a deferral option on share-swap transactions) would have been welcome, which also appears to have been overlooked in the Budget statements.
On the plus side, announcements at the policy level in the areas of agri-tech (including Kisan drones), infrastructure (which should have a rippling impact on transportation and logistics start-ups), health-tech, education, fintech, and other areas would be welcomed by industry. Similarly, extending the deadline for tax benefits for DPIIT-registered start-ups by a year is a positive move in the right direction. The FM also stated that a taskforce in the AVGC (animation, visual effects, gaming, and comics) sector will be established to employ youngsters and boost domestic capacity to meet local and worldwide demand. Similarly, announcements for the issuance of digital rupees in FY 2022-23 are a step in the right direction.
While the consultation method is commendable, what is required here is a faster resolution to all stakeholder issues so that India can continue on its growth path of “Make in India,” “Vocal for Local,” and “Atmanirbhar Bharat.”
The government proposed on Tuesday to extend the time for qualifying companies to get tax advantages by another year, until March 31, 2023, in a measure aimed at empowering entrepreneurs.
In her Budget speech, Finance Minister Nirmala Sitharaman stated that startups have emerged as economic drivers, and that the country has seen a complicated expansion of productive businesses in recent years.
Here’s how the Union Budget for 2022–23 is being received by Indian startups.
The budget for 2022-23 displays some extremely promising signals of India’s developing economy, including increased revenues, substantial infrastructure expenditure, and social investments.
- While the budget has set a 15 percent surcharge on LTCG, it has not cut the tax rate from 20% to 10% as it has for foreign investors; this is a prejudice against Indian investors.
- Many believe that edtech ambitions will be fruitless unless the government strives to close the digital divide.
- The startup community’s main demand has been for the continuation of tax reforms, whether for ESOPs, capital gains, or reduced GST for EV, edtech, and other industries.
- While MSMEs want credit line programmes like TLTRO to be extended further, edtech companies are looking for PPP chances to expand their footprint in tier 3 and 4 cities.
- Faced with a chip scarcity, the electric vehicle sector wants the government to provide handholding support for infrastructural deficiencies, such as the scope and extension of FAME II, low-interest EV loans, and more.
- Deferring ESOP taxation and bringing tax parity on capital gains are two key takeaways for Indian startups from the Union Budget 2022.
- Increase the number of public-private partnerships (PPPs) used to implement national education policies.
- Government Funding And Incubation Support Are Required For Healthtech
- The emphasis on technology-assisted agriculture in the budget is crucial because it will enable Indian agriculture leapfrog into a more sustainable future.
- Drone startups are more interested in a favourable regulatory environment than in subsidies.
- More provisions for agritech businesses would have been ideal, given that the industry is still in its infancy.
- Has the government made crypto legal by announcing a 30% tax on crypto income?
- In terms of edtech, the FM has stated that it intends to go digital in a large way. Is it able to fill the void?
- Is Healthcare Allocation Appropriate?
Finance Minister Nirmala Sitharaman announced two major developments:
- The launch of the PPP initiative. To provide farmers with digital and high-tech services
- The use of ‘Kisan Drones’ for crop evaluation, digitization of land data, insecticide spraying, and nutrient application will be encouraged.
