By Ankur Pahwa
On the back of economic recovery from the pandemic-years and positive economic indicators for the year ahead, the finance minister (FM) presented the annual Budget proposals on Tuesday morning.
The Budget proposals made by the FM were focussed on four broad pillars, namely inclusive development, productivity enhancement, energy transition, and climate action.
A big (and very positive) announcement was around large capital expenditure increases of approximately 35.4% in FY 2022-23, taking the capital expenditure spends of the government to 2.9% of GDP – a move which was primarily intended to help create jobs and boost the consumer economy.
There were significant allocations in the areas of infrastructure, healthcare / health-tech, education, fin-tech, agriculture, etc.
Specific to achieving an objective of wider benefits and growth opportunities to be percolating within Bharat, there appeared to be a focus on expansion in the rural outreach and increased rural consumption by providing and promoting internet services / broadband services in rural areas as well. In addition, announcements around setting-up a Digital University and TV-based education for the student population are only intended to steer the economy longer-term in the right direction.
Recognising that health (especially mental health) plays a key role in nation building, the FM also announced a push around tele-mental health (including an open platform for the National Digital Health Ecosystem, which will consist of digital registries of health providers and health facilities, unique health identity and universal access to health facilities).
Setting-up of digital banks and support for digitized payments, spends on highways, etc., coupled with the above larger proposals will only aid in achieving the government’s larger vision of “Make in India” and “Atmanirbhar Bharat”.
Specific to the start-up ecosystem, and viewed purely from a tax perspective, announcements leading to a reduction in the effective tax rate by approximately 5% for sale of long-term shares is a welcome proposal (though it would have helped if the holding period for unlisted shares was also aligned to that being applied for listed shares, which the start-up ecosystem has been duly requesting for a while now). The extension of timelines for tax benefits as applicable to DPIIT-registered start-ups is also a welcome announcement.
Announcements related to kisan drones and financing for the agri-sector would help the agri-tech and UAV start-up players, respectively.
Setting-up of a separate task-force for the AVGC (animation, visual effects, gaming and comics) sector to employ youth in this sector and to unlock both local and offshore market potential is only a vindication of this high-potential sector.
Additionally, announcements related to a battery-swapping policy and focus on the electric vehicle (EV) segment will perhaps only catalyse adoption of such technology across the nation and serve the larger “go-green” objective.
Having said the above, what remained unaddressed was for a clear path enabling direct offshore listing for start-ups (and what has been a long-standing ask of the start-up industry, including based on a very recent meeting held with the PMO by start-up founders and various senior representatives from PE / VC world). A clear direction around this topic would only help start-up founders establish base in India as against seeking offshore lands to set-up HQ, as this is only a means to access capital easily and facilitate treasury functions.
Start-ups would also have been aided by a favourable tax regime enabling tax-efficient consolidation (given that several entities have undergone and are expected to continue undergoing mergers & acquisitions) and also some element of tax deferral mechanism for stock-based exits (to the point of cash-based exits).
Though the FM’s announcement as regards the setting-up of an expert taskforce in the PE / VC space is positive and brings about the “consultative approach” adopted by the government around policy-making with varied stakeholders involved, much work needs to be done and at an appropriate pace given that India is the fastest-growing start-up ecosystem in the world.
In line with the governmental vision towards “Amrit-Kaal”, start-ups would play a central role in driving innovation, employability and employment, and wealth creation – in the dream to achieve the $ 5-trillion economy for India.
The writer is E-commerce and Consumer Internet Leader, Transactions Diligence Partner, EY India. Views expressed are personal.