The Indian startup ecosystem witnessed multiple new developments on the policy front across various sectors, as finance minister Nirmala Sitharaman tabled the Union Budget for FY23-24 on 1 February.
Several sectors like agritech, electric mobility and fintech saw announcements that are widely intended to provide a fillip to hundreds of startups across the nation.
For instance, finance minister Sitharaman announced the increase in the carry forward of losses due to a change in shareholding pattern from seven years to 10. She also announced the proposal of setting up 100 labs for developing applications using 5G services in engineering institutions.
In order to pave way for more production in electric passenger mobility, the Budget proposed a reduction in the basic customs duty for non-lithium and ion cell batteries utilized in electric vehicles, as part of the government’s efforts to promote ‘green growth’ in the 2023 Budget.
“The pro-EV Budget focuses on initiatives such as customs duty reduction from 21% to 13% on capital goods and machinery required for lithium batteries and an extension of the subsidies on EV batteries for one more year. This will certainly encourage each EV manufacturer to contribute to government initiatives to achieve mass EV adoption by 2030. This will also encourage investments in the EV sector” said Anmol Bohre, co-founder & managing director of Enigma.
In the agriculture and agritech sector, the finance minister announced the proposal to set up an accelerator fund to support agritech startups as well as to encourage entrepreneurship, primarily in rural areas.
Relaying the sentiment of the agritech sector, PC Musthafa, co-founder and chief executive of iD Fresh said, “The proposal to set up the Agriculture Accelerator Fund to encourage startups in rural areas has the potential to be a catalyst for growth.”
There was also an increased emphasis on the fintech sector and digital payments infrastructure with the budget proposing an expansion of the scope of documents available in DigiLocker for individuals to enable fintech innovative services. Additionally, business establishments will be required to have a Permanent Account Number (PAN) and the PAN will be used as the common identifier for all digital systems of specified government agencies.
In terms of its impact on the fintech sector, Harshil Mathur, co-founder and CEO of Razorpay said, “The move to provide credit guarantee for MSMEs through an allocation of Rs 9,000 crore will empower the growth of small businesses. One of the takeaways from this year’s Budget for the fintech sector is the Data Governance Policy and KYC simplification. The policy will bring in an additional layer of privacy and trust for the ecosystem and enable startups and research entities to safely access non-personal data. Meanwhile, simplification of the KYC process keeping a risk-based approach in mind is in tandem with the needs of India’s digital transformation. Making PAN the common identifier for all online businesses will ease the process of compliance for startups.”
Ravi Kumar, co-founder & CEO of Upstox added, “PAN as a common identifier will simplify the KYC process and also enhance ease of doing business. For individuals, the increase in the income tax rebate from ₹5 lakh to ₹7 lakh under the new tax regime will leave more disposable income in the hands of individuals, and thus higher investment potential.”
“Budget 2023 will put more money in the hands of mid-income users and that will have a direct impact on consumer spending, especially in the value segment,” said Himanshu Chakrawarti, CEO of Snapdeal while commenting about the budget’s influence on the direct-to-consumer (D2C) sector
Prashanth Aluru, co-founder and CEO of TMRW- House of Brands said, “The income tax slab revision is also expected to put more money in the hands of the common man, which will allow growth in the D2C ecosystem. The start-up world is also expected to benefit from the revamped Credit Guarantee Scheme for MSMEs giving a boost to the Atmanirbhar Bharat initiative.”
Concerning the infrastructure sector, Mohammad Athar (Saif), partner and leader of industrial development, PwC India said “Focus on 100 infrastructure projects for enabling last mile connectivity will promote the reduction of logistics costs. Upgrading 50 airports will enable connectivity across all major economic clusters. The new fund with an annual allocation of Rs 10,000 crore will provide impetus to the development of urban infrastructure across cities. India’s commitment to a greener world as it transitions to a major economic hub is evident from an outlay of Rs 35,000 crore to the energy transition, with a specific outlay of Rs 19,700 crore for green hydrogen.”
Ritesh Agarwal, founder & group CEO, Oyo said, “Increment in the capital investment by 33% in infrastructure and Urban Infrastructure Development Fund (UIDF) will have a multiplier effect. Announcing a capital outlay of Rs 2.4 lakh crore for the railway sector, the addition of 50 airports, heliports, water aerodromes and advanced landing grounds will provide impetus to overall infrastructure, leading to connectivity across the country.”
“The budget’s focus on transportation and infra projects with the Urban Infra Development Fund will give a boost to the logistics sector. The revamped credit guarantee scheme for MSMEs and the Rs 9,000 crore infusion amount in the corpus would push the entrepreneurial spirit of the country,” added Saahil Goel, co-founder & CEO, of logistics unicorn Shiprocket.
“The promotion of online learning through Mission Karmayogi and the IGOT platform will drive the adoption of digital technologies, even across rural and remote regions. Another milestone includes the focus on setting up more AI and 5G labs and R&D centres and the need for a skilled talent pool to support this adoption, The Budget’s proposal to provide stipend support to over 47 lakh youth is a major move to encourage skilling,” said Mayank Kumar, co-founder, and managing director, upGrad.