Budget vision: Thumbs up to the 25-year vision of the Finance Minister. Fine print holds the key

The run up to the Budget was marked with expectations around revamping of tax structures to an expenditure-based tax system, tax breaks and other consumption boosters to leave more money in the hands of the people. Thankfully, the government has outlined its priority and what personally gives me a lot of comfort is the audacious thinking and planning for the next 25 years. This would hold true not only for the overall flavor of the budget, but also the developments from the lens of the blooming startup ecosystem.

Roti, kapada, makaan for India’s masses needs to happen faster and the only hope that it can happen at a pace that will matter is that we get our investments in Education, Health, Agri and Financial Services right. And this budget seeks to do that. Coming to new economy (both the startups, digital first businesses and their investors in private and public markets), there’s a lot to look forward to:

Investment/Funding related initiatives would soothe the investor sentiments and has all of us waiting for its outcome. Expert committee on AIFs, funding initiatives for startups and funds through institutions like NIIF & SIDBI will surely give a boost to the Alternatives industry and widen the available pot of capital that goes into startups (which are as good as SMBs for the first 2-3 years of their corporate lives). For the first time, we are creating a ground up strategy to build our own wealth base & do justice to our own constituency of rupee investors. I am hoping that it will trigger not only innovation, but also bring about a massive change in manufacturing, creating jobs and wealth.

Capital allocation to SMEs, startups & CGTSME – Allocation of Rs. 4 Lakh Crore (>$ 25 Bn) is a massive sum. The CGSTME scheme is being replenished and enhanced is a welcome move and will go a long way to support SMEs and startups alike. I would love to see a slight flexibility of quantum and terms for the benefits to make a greater impact. This measure of fostering small / medium enterprises in some sense reduces the pressure on the government from the job of creating jobs. It also has a potential to ensure the government shouldn’t have to continue to be in the business of doing business. The fact that they will carry out the 5G auctions augur well for media, entertainment, financial services, edtech and plethora of startups.

Mainstreaming of digital currencies is a strategic move that can potentially help India push its trade and fiscal dominance around the SAARC apart from making digital currency mainstream within the country. If executed well, it could even be a strategic tool to manage our payment equations with our trading partners. Not banning existing digital currencies is a positive step that indicates willingness to make accommodations for emerging trends and work with a new economic world order. On taxing the Crypto also, there has been a balancing act and at 30% it will be lower than the taxes on Speculation income is an indication of sorts on that.

Agri allocation – Drones as a Service (DaaS) for surveillance for farmers and initiatives on MSP would help farmers worry less about their liquidity. Successive budgets have provided for allocations for crop insurance and other initiatives. Coupled with agri startups that are attempting to lend to the rural ecosystem, we are hopefully going to have a better farmer ecosystem.

Clean Energy – Implementing PLI for solar panels, push for battery swap infrastructure, EVs, etc are interlinked initiatives that aim to take India to a renewable energy driven economy and at our scale as a nation, this is a 25-year effort. We are seeing startups for battery swapping, private investments in charging infra which at scale will need higher power supply whilst reducing needs on fossil fuels.

Creation of Digital University, connecting post offices through the core banking initiatives, continuing to push aggressively for digital payments are going to be more than line items. The postal infrastructure can prove to be a solid financial distribution platform and can augment the banking infrastructure to help the rural and masses save as well as invest.

There are a few misses-efficient tax rates on startups, its employees’ funds and fund managers alike & measures to free up liquidity crunch faced at NBFCs level. The capping of overload on capital gains to 15% is a welcome move and big thank you to the government for taking due consideration of the Indian Venture and Alternate Capital Association (IVCA)’s pre-Budget asks. We have started on a high note. While Indian citizens wait for their booster doze against Covid, The FM and her team have delivered an economy booster.

Ashish Fafadia is Partner, Blume Ventures and VC Sector Council member, Indian Venture and Alternate Capital Association (IVCA).

(The one-stop destination for MSME, ET RISE provides news, views and analysis around GST, Exports, Funding, Policy and small business management.)

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