Union Budget 2022-23: The government should set aside funds and loans at low interest rates for tech firms
A startup is an onerous process, but it is a critical component of economic development. It creates jobs, establishes new markets, develops new technologies, and contributes to the GDP. Encouraging home-grown startups would mean a reduction in dependency on foreign goods and services. This could positively impact the Balance of Payments, inflation and exchange rate.
The Indian economy, on the other hand, could create an amicable and accessible environment for small businesses. Surviving in a world of monopolies, stagflation, and volatile financial markets is undeniably arduous in the current unpredictable situation.
The 2022 Budget is expected to encourage a startup environment that would boost the fintech industry, life sciences and healthcare, artificial intelligence, gaming, edtech, robotech and cybersecurity, to name a few. The Indian startup ecosystem crossed 90 unicorns across the country in 2021. We are still miles away from creating a sustainable and encouraging startup ecosystem.
What govt can do to boost startup sector
The process of startup funding (or crowdsourcing) could be made more accessible. India will be able to enter the 12 percent growth rate only with policy intervention. This involves moving businesses to tier 3 and 4 cities by establishing IT parks and smart cities.
Taxation a bane for fledgling startups
Startups, although small, produce a ripple effect in the economy generating employment opportunities at multiple levels, improving the quality of life in the locality, and making communities more self-dependent. To encourage a more robust startup culture, there needs to be an in-depth review of tax policies. The burden of taxation often falls upon businesses even before they start earning revenue.
Owing to the lack of sustainable funding sources, startups usually opt for a loan or equity share capital. Bank loans are frequently avoided by entrepreneurs due to high interest rates and collateral issues. Whereas equity financing necessitates several investors, this results in dilution of control and administration roadblocks during a company’s most crucial years.
The government should formulate robust policies so that taxes are levied only once startups hit a certain revenue bar. Venture capitalist firms should be given tax benefits and crowdfunding could be made easier and more accessible to entrepreneurs.
The 2021 Budget was aimed at taking our country to the next economic level after experiencing a setback due to COVID-19-induced recession. One of the Budget’s focal points was startups.
India’s brain drain
Despite having excellent universities such as IITs, India is forced to import most of its technology. In recent months, there has been a lot of debate on brain drain, too. The technology industry has extremely high growth potential and can solve many everyday problems to help build a stronger economy. According to projections, the technology industry has the potential to increase to over $5 trillion by 2022.
The government should set aside funds and loans at low interest rates for tech firms. This would encourage more people to work in this sector in India rather than seek opportunities abroad. When starting up, inexpensive infrastructure, and fewer legal barriers are a boon. A specialised cell could be established under the Ministry of Commerce. Creating a more conducive business environment in India will curb brain drain.
In the technology space, Artificial Intelligence (AI) innovation needs to take priority. An accelerated ‘AI4All’ initiative is required to get the next generation prepared for a future with AI. Entrepreneurship should be made mandatory as part of school and college curriculum. Mentoring by large multinationals would encourage creativity, facilitate dorm-room ideas into real world products.
The government should consider investing in developing design thinking, AI-led innovation, liberal arts, blockchain, etc. It should promote creative learning by granting scholarships, form new programs to recognise innovation, set up specialised institutions, finance meritorious and aspirational learners. Such prudential initiatives by the government could contribute to India’s goal of a sustainable economic ecosystem.
Ritesh Mehta is Head of Finance, and Siddhant Bhandari, Strategy Lead, Toch.ai, AI driven platform.