The Big Bang Budget For Startups

Presenting the Union Budget 2022, Finance Minister Nirmala Sitharaman, made a slew of announcements for the startups in the country

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Finance Minister Nirmala Sitharaman on Tuesday, presented her fourth Union Budget in the Parliament. Highlighting an array of announcements for the growing startup ecosystem in India, she said, "Startups have emerged as drivers of growth for the Indian economy. Over the past few years, the country has seen a manifold increase in successful startups."
Here are the key announcements for startups and the reactions it invoked from the industry leaders.

PIB

Agriculture
A fund with blended capital, raised under the co-investment model, will be facilitated through NABARD. "This is to finance startups for agriculture and rural enterprise, relevant for farm produce value chain. The activities for these startups will include, inter alia, support for FPOs, machinery for farmers on rental basis at farm level, and technology including IT-based support. States will be encouraged to revise the syllabus of agricultural universities to meet the needs of natural, zero-budget and organic farming, modern-day agriculture, value addition and management," said Sitharaman. Use of Kisan Drones will be promoted for crop assessment, digitization of land records, spraying of insecticides and nutrients.
Pravesh Sharma, director of Samunnati Agro, said implementation capacity of the new announcements will be the key to success, "The overall thrust of the Union Budget 2022 seems to be towards building a more robust and resilient agriculture sector. This is sought to be achieved through modern technological interventions and incentivising investments. A new focus is on digital and other cutting-edge technologies, such as drones, delivered through the agency of new-age agritech start-ups and other private partners. The focus on funding for agri startups through a dedicated fund is also worth appreciating. Of course, like in all government initiatives, implementation capacity will be key, as well as easy to enforce and follow rules of the game."

Startups will be promoted to facilitate "Drone Shakti' through varied applications and for Drone-as-a-Service (DrAAS). "In select ITIs, in all states, the required courses for skills will be started," said the minister.

Jinesh Shah, managing partner at Omnivore, said, "A blended capital fund under NABARD is also interesting as it can provide the FPOs with much-needed assistance. Keeping up with the times, the government's support for drone use in agriculture and stressing the role of startups in facilitating 'drone shakti' is a great leap forward for driving precision farming at scale."
MSMEs
Emergency Credit Line Guarantee Scheme (ECLGS) has provided much-needed additional credit to more than 130 lakh MSMEs. The ECLGS will be extended up to March 2023 and its guarantee cover will be expanded by INR 50,000 crore to total cover of INR 5 lakh crore, with the additional amount being earmarked exclusively for the hospitality and related enterprises.

Chandan Garg, chairman and MD, Innovana Group, said, "The extension of ECLGS scheme is a welcome move for MSMEs. The credit and fiscal support of 5 lakh crore will give a huge boost to this sector encouraging new businesses to come to the fore. This announcement will certainly generate more than 10 lakh employment opportunities in a short span of time. However, a slight focus on easing the trade and the taxation policies for MSMEs facilitating more freedom to do business was also expected from this year's budget announcement."

Boost for Electric Vehicles
Impetus will be on using public transport in urban areas. This will be complemented by clean tech and governance solutions, special mobility zones with zero fossil-fuel policy and EVs. "Considering the constraint of space in urban areas for setting up charging stations at scale, a battery swapping policy will be brought out and interoperability standards will be formulated," said Sitharaman.

The private sector will be encouraged to develop sustainable and innovative business models for "Battery or Energy as a Service'.

However, bringing EVs and batteries into the priority lending sector was also expected but was missed in this budget, said Akshay Singhal, founder of Log9 materials, working in the advanced EV battery-technology domain. "The government's constant push for EVs and climate action is commendable. openness to accommodate new age business models like battery swapping are a welcome step, financial decoupling of batteries irrespective of swapping will enable faster adoption. It would be exciting to see some great climate focussed debt lines coming in from blended finance. Bringing EVs and batteries into the priority lending sector was also expected but missed in this budget."

Digital Banking

"In recent years, digital banking, digital payments and fintech innovations have grown at a rapid pace in the country. Government is continuously encouraging these sectors to ensure that the benefits of digital banking reach every nook and corner of the country in a consumer-friendly manner. The financial support for the digital payment ecosystem announced in the previous Budget will continue in 2022-23. This will encourage further adoption of digital payment," said the minister.

Taking forward this agenda and to mark 75 years of independence, the government has proposed to set up 75 digital banking units (DBUs) in 75 districts of the country by Scheduled Commercial Banks.

Appreciating the government's intent in improving the ease of doing business, Deena Jacob, co-founder and CFO, Open, said, "We will wait and watch to see how this will be implemented. We welcome the announcement of setting up 75 digital banking units by scheduled banks across 75 districts and the efforts of the FM in taking digital banking to every Indian."

Inclusivity in Defence
Defence R&D will be opened up for industry, startups and academia with 25 per cent of defence R&D budget earmarked. "Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organizations through the SPV model. An independent nodal umbrella body will be set up for meeting wide ranging testing and certification requirements," said the minister.

"IAN is glad that our demand for an expert committee to look at regulatory frameworks for the VC industry is addressed in the Union Budget 2022. This budget opens up huge opportunity for startups across defence, agriculture, drone, fintech and mobility sectors. The focus on digitization across sectors will lead the way towards innovation for startups," said Padmaja Ruparel, co-founder of Indian Angel Network and founding partner at IAN Fund.
Tax Incentives
Eligible startups established before 31.3.2022 had been provided a tax incentive for three consecutive years out of ten years from incorporation. In view of the pandemic, the period of incorporation of the eligible startup has been extended by one more year, that is, up to 31.03.2023 for providing such tax incentive.

"In view of the pandemic, I propose to extend the period of incorporation of the eligible startup by one more year," said Sitharaman.

"We appreciate the government's empathy towards the startups. The extended period by a year to avail tax incentives around the tough times of COVID-19 will help us a lot," said Tanmay Kumar, chief financial officer, Shiprocket.