While some of the key budget announcements bear testament to the government’s belief in the potential of the country’s vibrant startup ecosystems to aid in sustainable economic development, do they measure up to overall expectations of the ecosystem? Let’s take a quick look.
The extension of the date of incorporation for claiming a tax holiday by a year and the proposal to increase the benefit of carrying forward losses for startups to 10 years certainly brought a brief reprieve to the space, along with announcements towards ease of doing business such as reduction of 39,000 compliances and decriminalization of over 3,400 legal provisions, etc.
The government’s vision announcement on ‘Make AI in India and make AI work for India’ also gave a boost to the AI startup ecosystem. The proposed National Data Governance Policy which provides access to anonymized data, will also go a long way in supporting the vision.
“The proposal to establish three Centers of Excellence for AI in top educational institutions will accelerate democratization of AI. These Centers will collaborate with leading industry players to drive interdisciplinary research, innovate cutting-edge applications, and provide scalable solutions in agriculture, health, and sustainable cities — an exemplary model showcasing the collaborative force of the country’s ecosystem,” said Raghu Ravinutala, Co-founder & CEO, Yellow.ai.
Arvind Kumar, Director General, STPI which supports startups with infrastructure, skilling, mentoring, market connect etc. said “Our country has tremendous data sets and with the introduction of the National Data Governance policy, entrepreneurs and startups will have the access to reliable anonymous data enabling them to create world-class products.”
Investors, however, feel otherwise. Sunil Shekhawat, CEO, SanchiConnect, a worldwide investor partner network said, “Although there are several areas where the budget might have done better for entrepreneurs, such as rationalizing capital gains tax to encourage capital flows to the startup ecosystem, which has seen over $100 billion invested in the previous six years. This year, the request was denied, which might be a setback.”
“It would have also been encouraging if the budget accommodated for an advisory on the PE/VC ecosystem. Easing of restrictions on domestic institutions like Provident Funds and NPS to invest in VC funds would have allowed for greater participation in domestic VC funds, which in turn, will help make patient and long term domestic capital available for AIFs,” said Manu Rikhye, Partner, Merak Ventures.
Jaisimha Rao, Founder & CEO, TartanSense said, “In the past technology and farming were viewed as independent silos. The 2023 budget, for the first time, plans to converge and marry contemporary technologies with farming, to provide cost effective solutions to the farmer, through initiatives like setting up of the Agriculture Accelerator Fund and research labs.”
Ankit Alok Bagaria, Co-founder, Loopworm however pointed out that there is not much for growth stage startups. “For young startups, the agri accelerator fund is a good initiative but there was less focus to promote agri-startups at the growth stage.”
Varun Khurana, Founder & CEO, Otipy said, “The government’s commitment to set up digital public infrastructure for agriculture will help the agritech startups to connect with more farmers and in turn enable them to realize better value for their produce.”
The vision of “Make AI in India and Make AI work for India” will boost the innovative use of technology for faster financial inclusion, better and faster service delivery, easier access to credit, and participation in financial markets, feel the FinTech startups.
“With the creation of ‘Centres of Excellence for Artificial Intelligence’, the incorporation of AI into the educational system will provide the talent required for the FinTech sector, and advancements in AI will result in better FinTech products. Moreover, the “National Financial Information Registry” is a positive move as it will strengthen financial stability and inclusion across the nation. However, It would have been great if some tax benefits had been provided to investors in new-age asset classes, in investments such as RBI-regulated peer-to-peer lending,” said Bhavin Patel, Co-founder & CEO, LenDenClub.
Embracing a ‘risk-based’ KYC, instead of ‘one size fits all’ approach will address the underlying issue pertaining to the customer verification process faced by banks, NBFCs and FinTechs.
“Currently, the KYC obligation is the same for customers doing small value as well as large value digital transactions. Those opting for minimum KYC wallets and e-KYC bank accounts have to eventually upgrade to a full KYC account after a stipulated period of time to keep availing the financial services. Once the risk-based KYC process is introduced, more customers will be encouraged to KYC for financial transactions, including the small-value transactions,” explained Mandar Agashe, Founder, MD & VC, Sarvatra Technologies.
To promote innovative FinTech services, the scope of documents available in DigiLocker for individuals has been expanded. “Entity DigiLocker for businesses and MSMEs will help businesses streamline and securely store their official documents and the same can be shared with banks, regulators, authorities and other business entities when needed,” said Swapnil Jambhale, Co-founder & COO, Safexpay.
Also, the proposed National Financial Information Registry has the potential to be a game changer in the coming months, believe the startups. It will facilitate efficient flow of credit, promote financial inclusion, and foster financial stability, they said.
Aarul Malviya, Founder, Zamit said, “Establishing a National Digital Library for children and adolescents will create a digital ecosystem in the education sector and encourage digital education. It will largely benefit the students who are lagging behind due to the pandemic. The decision of the government to set up 100 labs in engineering institutes for developing apps using 5G services will bring new opportunities in enhancing the concept of smart classrooms and enabling extensive reach of education.”
However, a reduction of taxes on online learning programs as well as incentives for those providing digital education and skilling programs in the private sector could have given a further boost, he added.
Mridul Ranjan Sahu, Co-founder, CuriousJr said, “The Indian government has announced plans to encourage students to pursue new age courses such as coding. These soft skills are must-haves for this digital era, this can make a student more efficient and help them in job creation.”
Tathagato Rai Dastidar, Founder & CEO, SigTuple said, “The newly announced focus on screening and eradicating sickle cell anemia in the country is a step in the right direction. Anaemias and other hematological disorders are endemic in tribal populations of the country. Use of advanced digital technologies can help vastly increase the scale of screening than what is possible today.”
Namit Chugh, Investment Lead, W Health Ventures said, “AI in Healthcare has already shown immense promise across the globe in improving care. We have seen use cases across diagnostics where AI tools are bettering accuracy, speed and also enabling early diagnosis, including mental health where AI chatbots can be used as the first line of treatment, etc. Given the potential to create large healthcare data sets in India used to train AI and the pool of highly qualified tech talent, this move by the government makes us more ready than ever to make AI in Healthcare a trillion-dollar opportunity.”
“The setting up of multidisciplinary courses for medical devices in existing institutions as well as the provision for new-age courses under PM Kaushal Vikas Yojana such as coding, AI, robotics, mechatronics, IoT, 3D printing, drones, etc. would definitely have a multiplier effect, while also giving an impetus to the skilling and upskilling of MedTech professionals,” said Pankaj Balwani, Founder, Xplore Lifestyle.
“However we expected the government to announce reductions on customs duties and GST on medical devices. Also, the government could have expanded the scope and budget for PLI programs for medical devices in the budget,” he said.
The government’s intent to support the transition towards a greener and more sustainable future has been reassuring in some of the key budget announcements.
Vinod Shankar, Co-founder & Partner, Java Capital said, “The broad horizontal direction across green fuel, green energy, green farming, green mobility, green buildings, and green equipment is unprecedented if executed well. With this positive direction we should expect more startups and increased venture capital funding in green startups.”
Swapnil Shrivastav, Co-founder, Uravu Labs said, “The focus on the green economy not only addresses climate change problems but also provides a favorable environment of growth for startups like those in the water and climate-tech domain to grow and expand.”
“The push towards green mobility will propel the growth of the EV sector in India and will encourage further investments. Additionally, the vehicle scrapping policy will also be beneficial if the old vehicles are replaced by EV. This will further aid in the country’s vision of mass EV adoption by 2030,” feels Pratik Kamdar, Co-founder, Neuron Energy.
The extension on customs duty on the import of capital goods and machinery for developing lithium-ion cells will have a considerable impact. Shailesh Vickram Singh, Founder, Climate Angels said, “This will result in huge domestic expansion as well as lead to innovation in the battery space where new battery packs will be more aligned to Indian conditions than global settings which will ultimately make EVs safer, cheaper, and better.”
“This would also enable EV manufacturers to localize their products in the long term, leading towards reduction in the cost of an EV for the consumer in the years to come. The changes in the Income tax slab structure has enhanced the purchasing power of the populace and the availability of FAME-II subsidy will further boost the EV sales of electric vehicles,” said Kapil Shelke, Founder & CEO, TORK Motors.
Pankaj Sharma, Co-founder & Director, Log9 Materials said, “Considering EV batteries account for approximately up to 60% of the EV cost, this relaxation will make EVs more affordable and hence enhance the EV adoption rate.”
NOTE: This story is the 7th in line of a short series on Budget stories from ETCIO