Union Budget 2021 India: The Budget, which has addressed core industries big-time, has also touched startups in impactful ways, for both the short and the long term
By Srinath Srinivasan
Indian Union Budget 2021-22: The first alL-digital Union Budget was well-received by industry sectors such as BFSI, infrastructure, healthcare as well as the small to medium sized business segment. While there were no direct announcements to further push the digital agenda that the Indian tech startup community already has, it has a lot to look forward to because of the Budget and the resulting pull from the core industries that directly benefit from the Budget.
Starting with the fintech hub in GIFT city, finance minister Nirmala Sitharaman gave an overview on what’s about to come for BFSI firms and the startups in the fintech sector. The hub will bring world-class fintech businesses, from domestic and international markets, in one place. Again, an allocation of Rs 1,500 crore to provide financial incentives for digital payments will encourage payments startups to expand their services and reach out to the masses.
The opening up of insurance sector to 74% FDI, tax incentives for relocating foreign funds in International Financial Services Centre in GIFT city and the allocation of Rs 15,700 crore towards MSMEs open up new opportunities for Indian fintech companies. “Year 2020 saw an 80% increase in digital payments, especially from Tier 2 and 3 cities, and the government has focused on capitalising on this momentum and incentivising the adoption of digital payments for the year ahead. I’m hoping the initiatives by the government will bring digital financial literacy in vernacular languages,” says Harshil Mathur, CEO and co-founder of Razorpay.
The Budget proposals addressed both the pandemic and the existing health infrastructure, with a 137% increase in allocation to healthcare, up at Rs 2.24 lakh crore from the current Rs 54,000 crore. This will cover the immediate issue of vaccine availability and boost the participation of private sector, especially startups, in the expansion of heathtech infrastructure. “The launch of PM Aatmanirbhar Swasth Bharat Yojna and the push to set up primary, secondary and tertiary healthcare centres are great strides forward to which healthtech companies can help by providing speed, scale and sustainability,” says Gaurav Gupta, co-founder, Navia Life Care. “In order to help health tech startups further, the government could consider tax exemptions for allied and digital health services, similar to the prevailing exemptions to other healthcare services,” he adds.
The Budget also focused on fisheries in addition to agriculture. Announcements were made to increase credit flows to animal husbandry, dairy and fisheries. The announcement to invest in modern fishing harbours and fish landing centres in Kochi, Chennai, Visakhapatnam, Paradip, and Petuaghat is considered as a long-term positive move by startups in the aquaculture sector.
“Fishing harbours and fish-landing centres along the banks of rivers and waterways is a visionary move. Also, many startups which are working to streamline agricultural lending will get a boost. We are partnering with banks to extend credit products to aquaculture farmers,” says Rajmanohar Somasundaram, CEO, Aquaconnect. The Budget also had a proposal to promote seaweed cultivation, by way of setting up a Multipurpose Seaweed Park in Tamil Nadu. “As a push towards Aatmanirbhar Bharat, there is an increase of duty from 5% to 15% on the imported prawn feed. It will lead to an increase in adoption of domestic shrimp feed and provide competitive edge to the domestic feed producers,” he adds.
Startups also get opportunities in space exploration and deep sea exploration. Another Rs 4,000 crore was proposed for deep ocean missions in the Budget. The announcement to allocate Rs 50,000 crore over five years for National Research Fund and a separate programme for National Language Translation Mission to translate government information to major Indian languages are also set to attract more startups. Further, the proposal to amend the apprenticeship law to boost skilling and the announcement regarding taxes will directly impact startups in the short term.
According to Nasscom, extending tax holiday of three years to all startups registered under DPIIT, would impact over 40000 startups in the country and is considered a disruptive move. The Budget also saw steps to incentivise incorporation of one-person companies and extension of tax holidays and claiming capital gains for one more year.