With the country emerging from another year of COVID-19, against the backdrop of a new wave, the upcoming Budget is expected to be one of transition. Budget 2022 therefore could lay the foundation for the next stage of development. Fuelling the growth of the Indian economy, the Indian Startup ecosystem has a host of expectations on various aspects for a positive future outlook.
The government’s narrative places the surge in entrepreneurial success in the recent months front-and-centre in presenting India’s story to the world.
This Budget has an opportunity to ensure this momentum endures by further removing barriers to the ease-of-doing business for entrepreneurs and by galvanising the entrepreneurial ecosystem to serve the needs of early-stage ventures.
Driving growth post-pandemic
Priority sector lending: To accelerate innovation, priority sectors could include health, agriculture, defence, export-focused industries, and other high impact areas. This would allow banks to lend at a lower rate of interest. Financial assistance to growth-oriented startups could enhance R&D, prototyping and product development.
GST Exemption: Apart from Tax Exemption under Section 56 of the Income Tax Act (Angel Tax) and under section 80 IAC of the Income Tax Act on registering a startup with Department for Promotion of Industry and Internal Trade (DPIIT), offering a GST exemption would encourage more founders to register under this Startup India Initiative.
Waivers for commissions to marketplaces: Considering several offline businesses are now selling online, a waiver or reduction of the 18% GST on commissions paid to online marketplaces like Amazon, Flipkart etc. would help businesses find it more viable to benefit from the e-commerce landscape.
Higher credit guarantee schemes: Increasing the current Credit Guarantee Scheme for Startups of Rs. 2,000 crore to specifically support women-led businesses and non-internet start-ups providing services to tier-2 and tier-3 cities would be a great booster for those building for ‘Bharat’.
Extending tax holiday on income and capital gains: Further extension of tax holidays for start-ups will encourage more entrepreneurs to take the plunge and start-up.
Galvanising the entrepreneurial ecosystem:
Catalysing and scaling IP-led innovation: Encourage collaboration between universities, research labs and entrepreneurial ventures to help create IP-led innovation, and to commercialize fundamental research. Like China’s Torch Program and the NSF Grants of United States, seed funds would encourage further growth of entrepreneurial clusters.
Encourage corporate to collaborate with entrepreneurs: Corporate accelerators play a vital role in creating sandboxes for ventures to design and validate innovation. Tax breaks and incentives will further expand the collaboration between entrepreneurs and corporates.
GST waivers for incubators: Incubators form the backbone of democratizing entrepreneurship in the country. GST waivers for all incubators will support these ecosystem enablers.
The entrepreneurial ecosystem is on the cusp of breakthrough growth. This budget can provide the necessary stimulus to ensure this growth endures.
(Ganesh is COO, NSRCEL, IIM Bangalore and, Sachdev is Head of Marketing, NSRCEL, IIM Bangalore)
