The budget presented on the 5th of July by the country’s first female finance minister, Nirmala Sitharaman, contained a host of pleasant surprises for the thousands of startups in various parts of India.
According to the finance minister, the policy changes and initiatives were designed to ‘release the entrepreneurial spirit’ of the Indian populace and promote the growth of small businesses in the country.
TV Programs and Policy Measures
It was announced that a TV program will be organized on the DD channel, exclusively for the benefit of entrepreneurs and startups. Moreover, foreign direct investment (FDI) rules vis-à-vis certain startup segments such as insurance intermediaries, e-commerce, fintech, grocery, and food delivery will be eased by the Modi 2.0 government.
Some incentives have also been planned for the design and manufacturing of electric vehicles, which is expected to provide a boost to EV startups in India.
A host of enhancements have been proposed for the fast-growing digital payment ecosystem in the country, which is expected to help the fintech sector grow exponentially over the next few years as more and more people try online payments for the first time in India.
Additionally, the government will be taking pains to ensure that startups are not burdened by excessive angel tax, for which they might previously have felt some heat from the income tax authorities.
Bringing Investors and Startups Together
National broadcaster Doordarshan or DD will host a new TV program launched by the government and meant exclusively for Indian startups.
This TV program, it is hoped, will provide an effective platform for matching startups with venture capitalists who might be interested in investing in their ideas.
Sitharaman said that the startups will themselves design, operate, execute, and run this TV program as they might see fit.
The government will also set up and initiate more than twenty tech business incubators and eighty livelihood business incubators this fiscal year.
Sitharaman predicted that these incubators will end up helping in the creation of more than 75 thousand skilled businesspersons and entrepreneurs in the industrial as well as agricultural sectors.
Opening Up the Economy for Foreign Direct Investments
Another proposal made during the budget was to allow for 100 percent foreign direct investment (FDI) in the insurance intermediaries sector, since a majority of the new digital insurance companies and startups fall within this category.
Permitting 100 percent FDI in other consumption-driven sectors such as single-brand retail had already been a point of contention in the country for many years now. Finally, the government has allowed for cent percent FDI in this sector and even proposed that the regulations stipulating 30 percent local sourcing be removed.
It is expected that these new norms will also benefit online startups which operate offline single brand stores such as Lenskart, Pepperfry, and Livspace. Urban Ladder, Kautage, and HomeLane are some of the other companies that will benefit from the inflow of FDI when these proposals have been implemented.
Modernizing the Labor Laws
In addition to the above, several measures to streamline education, labor laws, and land acquisition norms were also announced by the finance minister, which will help make India an easier place to do business in.
These policy changes will also have a direct impact on small businesses and startups around the nation, as they will find it easier to hire employees, get capital, and buy land for their operations.
Labor laws, said Sitharaman, will be modernized and streamlined into a group of no more than four well-defined ‘labor codes’. This will, she claimed, reduce the number and frequency of disputes while helping to standardize registration and the filing of annual returns.
A Government that Pays Attention
Capital intensive sectors such as insurance and aviation will be opened further for the inflow of foreign direct investment. Rajesh Thakkar of the Tax and Regulatory Services said that the request for more FDI in these sectors is made frequently by various members of India Inc.
The government paying heed to these demands made by the business world is being seen as a huge positive, and a step forward in terms of industry-friendly policymaking in India.
The streamlining of the ‘four labor codes’, in conjunction with the standardization of laws, is expected to cause a reduction in the rates of disputes and litigation.
Entrepreneurship Among Women and Marginalized Communities
The Standup India scheme, launched by the government to promote entrepreneurship amongst women and the SC/ST communities, is set to be extended even further during the next five years, the finance minister said during her first budget speech.
She also proposed that the rate of GST be reduced for the electric vehicle sector, which will benefit EV manufacturers in the country such as Her Electric and Ather Energy.
Startups that file all the requisite paperwork and declarations under the Modi 2.0 regime will also not be subject to scrutiny for their share value premium.
Capital Flow and Dispute Resolution
Moreover, loans of up to ₹1 crore, applied for by MSMEs, will be cleared via an online portal in less than an hour, the finance minister said in her budget speech.
Special arrangements will be made by the government and the Central Board of Direct Taxes to speedily resolve cases and pending reviews associated with startups in the country. This will help businesses save time and focus better on their core products or services, thus enhancing customer satisfaction.
