Budget 2021 Evaluating Possibilities For The Startup Ecosystem-Viiveck Verma


The Budget arrives in unprecedented times, with the COVID-19 pandemic and India’s economic struggles very much in sight. The Finance Minister began her speech by acknowledging the ravages of the pandemic and the global economic contraction it caused in its wake.

Finance Minister Nirmala Sitharaman presented the Union Budget of India today and unveiled several measures to boost the economy and provide growth across sectors. The Budget arrives in unprecedented times, with the COVID-19 pandemic and India’s economic struggles very much in sight.  In the CII-Moneycontrol CEO Budget Survey, leading figures of India Inc. recognized higher public spending, and a focus on infrastructure and manufacturing sectors as the three key priority areas that required addressing. The Budget acknowledged these concerns and domains and presented changes which could signal important opportunities for the economy and the society at large, but also for the startup ecosystem. At the same time, it can be seen as a mixed bag of sorts, as the co-COVID universe requires particular responses with regard to entrepreneurship and innovation. 

The Finance Minister began her speech by acknowledging the ravages of the pandemic and the global economic contraction it caused in its wake. Highlighting what the government did to battle several contemporary challenges in the past year, she went on to announce the six pillars that the Union Budget of 2021, the first digital budget ever presented, bases itself on. These pillars meant to usher in an age of ‘Aatmanirbhar Bharat’ or self-reliant India were— health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and research and development and “minimum government, maximum governance”. Under these six headings, a number of measures ranging from a new health scheme— The Prime Minister Aatmanirbhar Swasthya Yojana to infrastructural projects to amendment of acts and monetization of assets. ₹5.54 lakh crores have been dedicated to capital expenditure while ₹20,000 crores have been assigned for the recapitalisation of government banks. Metro rail projects were announced across the country, alongside mega textile investment parks, public health units and regional research labs. The central government proposes to form a special purpose vehicle to monetise land owned by Public Sector Units (PSUs). 

An Investor Charter has been introduced to ensure investor protection, an amendment to the Insurance Act was declared, with aims to increase the limit for Foreign Direct Investments (FDI) from 49 to 74 percent with safeguards. ₹15,700 crores were provided for the Ministry of Micro, Small and Medium Enterprises (MSMEs). Asset reconstruction and management companies were announced, alongside proposals of income tax filing exemption for those over 75 years of age who have only pension and interest income. There were allocations for the agricultural sector and announcement of grants to bring universities in one location under an umbrella structure and of a National Apprenticeship Scheme. Social security net was extended for gig and platform workers and public-private partnerships and collaboration with foreign actors were repeatedly emphasized. The minister also projected the fiscal deficit for the financial year 2021, expected to be around 9.5 percent. to drop to 6.8 percent of the GDP by FY 2022. 

Some key changes introduced could mean good news for the Indian startup domain. The Finance Minister specifically stressed on enabling growth of one person companies (OPCs), with easing of restrictions. In what she labelled would be “a big boost to startups”, to grow without restriction on paid up capital and turnover, allowing conversion into any other type of company at any time, truncating the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days, and allow non-resident Indians to incorporate OPCs in India. The compliance requirements of Small Companies were eased, the threshold was increased to Share Capital upto ₹2 crore and turnover upto ₹20 crore. The decriminalisation of limited liability partnerships, with the flexibility to convert a company to any form or LLP to benefit more than two lakh companies was also declared. The other focus was on increasing the role of technology and artificial intelligence which could ensure better innovation, transparency among actors in the sector and ease of doing business. Data analytics were part of the conversation as ML driven MCA 3.0 version and an ecourt system to be implemented as a special framework for MSMEs were also discussed. 

Massive allocations for infrastructural development also mean a general improvement in ways of doing business. Furthermore, as Yourstory reported, before the Budget, startup founders such as Nilesh Aggarwal of MedTalks and Bhavin Turakhia of Zeta hoped for budgetary support to healthcare and technology. Vivek Bindra of Bada Business wanted the government to provide support to the Micro, Small and Medium Enterprises (MSME) sector to tide over a recessionary phase. Since the Budget has responded to these concerns with utmost urgency, one can assume that the startup universe was kept in mind. 

However, to critically evaluate the budget, one might in fact need to keep in mind how the pandemic has turned our world upside down. Budget 2021, appears to be, in some ways, a missed opportunity to stimulate the startup and innovation ecosystems. There was a general dearth of innovative schemes aimed at inducing innovation and encouraging entrepreneurship. A fresh and creative approach to rejuvenate the startup sector was very much required, and the Budget did not go beyond listing familiar-sounding measures. Therefore, one can assess this as proclamation of opportunities, without enough stimulus. 

All in all, Budget 2021 has its highs, but deft implementation of schemes would be key. For the realm of startups, there could have been greater measures to accentuate innovation and endeavour. In a co-COVID world, incentives must go beyond the usual expectations, and thus, the Budget remains an ambivalent development for the startup sector. 


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