Union Budget 2023-24 Expectation: Companies anticipate that regulatory requirements will be simplified to make doing business easier.
The announcement of India’s Union Budget is quickly approaching. The entire country is eagerly awaiting the presentation of the Union Budget 2023-24 by Finance Minister Nirmala Sitharaman on February 1st. The government has been working to encourage the growth of new businesses in the country. So it’s no surprise that the startup sector has high hopes for this year’s budget. Every year, the budget offers some relief and benefits to various sectors. The following are the expectations of various industry players for the upcoming budget.
Gaurav Rathore, Co-founder – EVeez, a pioneer in Electric Mobility as a Service (eMaaS) shares his expectations for the Electric Vehicle sector, “With Fame II subsidy drawing to a close, a key expectation from Budget 2023-24 is a newer and broader FAME III to be introduced which has at least five times the targets of FAME II. In addition, it must also include electric vehicles (EVs) which are currently sold without a battery and which rely on battery swapping networks so that EV adoption (especially by commercial fleet operators and logistics companies) through newer operating models like electric mobility as a service (eMaaS) can be accelerated.”
“Secondly, it is imperative that financing of EVs be brought under the ambit of Priority Sector Lending (PSL); primarily as upcoming EV businesses encompass two sectors under PSL i.e. renewable energy and MSMEs. Public and private sector banks have generally been slow to financing EVs for business and commercial use; and bringing this under PSL will accelerate EV adoption to a critical mass of the population.” adds Gaurav.
Sharing his expectations for the MSME sector, Arjun N, Founder & CEO – SolutionBuggy, India’s largest manufacturing consulting platform, says, “Budget 2023 will arrive at an uncertain time of geo-political conflict, high inflation and fear of global recession. Expectation from the budget is to do a balancing act between global volatility (survival) and focus on growth. MSMEs are the backbone of the Indian economy. The existing production-linked incentive (PLI) schemes are limited to corporates and big players concentrated in specific sectors. Extending the scheme to manufacturing MSMEs can provide a boost to Atmanirbhar Bharat (especially focus on Import substitution) and create jobs. Revamping of the Credit Guarantee Scheme for MSMEs can provide an easier line of credit which is one of their essential requirements to maintain liquidity for the sector. Lowering compliance costs (regulations/ licences/ compliances) especially for Micro enterprises can also be a small but positive step towards supporting MSMEs”
Urvisha Panchani, Director – Fabcurate, an online fabrics store, expects the textile industry to flourish and says, “If the government relaxes tax laws and opens up more opportunities for foreign investment, the budget for 2023–24 might boost the textile industry. By 2025–2026, the Indian textile and apparel market is projected to increase at a 10% CAGR, totaling US$184.44 billion. Around 4.5 crore people work in India’s textile industry, and the government should take into account the enormous number of people involved in the industry and offer new programs with lower tax burdens. Rules governing the export and return of goods should be made simpler to enable SMEs to export their goods smoothly. Additionally, the documentation process needs to be made more compatible. The upcoming year is very crucial for the retail industry and there are many criteria that are going to decide the future of the business.”
Talking about the expectations of the advertising/tech companies, Harsh S Kedia, Co-founder – Auburn Digital Solutions, a full-service digital agency, shares, “The benefits of SEIS export incentives to advertising/tech companies based in India are multifold. While the proposed incentives will push the country’s service-based exports to global clients, these will also help in intensifying digital penetration among the masses in the country. These benefits will boost India’s digital economy and lead to the creation of a Digital Advertising Ecosystem with all-encompassing benefits for all participating stakeholders. Experts also hope that the creation of the Digital Advertising Ecosystem will prove instrumental in the development of better policies for e-commerce, fintech, agri-tech, and other such tech-based industries. This, in turn, will push the envelope on Digital Adoption and support for digital advertising companies across the spectrum. Further, the segment of the creator economy will receive its share of benefits.”
Mayank Verma, Co-Founder – Leadup Universe, an Executive Education Acceleration Firm, talks about the expectations of the edtech sector, “Imperative for the Union budget 2023 to look at investment in the learning tech infrastructure ensuring multimodal learning to boost quality education and training. The use of digital technology in the learning process will make quality resources accessible to students till the last mile, irrespective of their demographic and geographic locations. The reduction of GST on learning tech solutions can help make it affordable across the country, further boosting smart classroom deployment & usage. In sum, the budget allocation should look at subsidising the use of tools and technologies to help digital penetration for advanced learning solutions in 2023.”
Sourabh Deorah, Co-Founder & CEO, Advantage Club “This is a defining year for India as the entire world is watching us. During times of global economic slowdown, India can prosper with the right budget moves.There is a high expectation among income taxpayers, including salaried employees, that the current government will introduce tax relief measures or change the income tax rate structure to support more tax-free deductions. Startups play a vital role in creating jobs throughout the world, as our government has also recognized.So, expectations are very high for the upcoming budget 2023. In addition to launching some path-breaking initiatives towards the digital transformation of India, the event will be a milestone for such new age startups.Hope we get a balanced budget which while uplifting the lower classes while also taking into account the middle class.”
Ali Sait, CEO, Tech Avant-Garde – Education, “The Union Budget should prioritise creating an enabling environment for education by focusing on the sector’s digital transformation. While the primary goal of the NEP is to ensure everyone has access to education, it suffers from lack of infrastructure, especially digital, in rural and semi-urban areas. We believe that there should be dedicated funds to assist educational institutions in building and scaling digital infrastructure to become hybrid learning centers. Given that India is one of the world’s youngest and largest countries, hybrid learning is the best way to ensure that quality education reaches every corner of the country.”
Yuichi Nagano, Managing Director, Sakra World Hospital – Health, As a country, India has shown remarkable growth and progress while managing a pandemic and becoming a preferred destination for medical treatments over the last few years. However, we are still reeling with certain infrastructural shortcomings that must be addressed in the upcoming union budget. As we know, that by 2025, the government is expected to increase the public investment from 1.29% of GDP to at least 2.5-3%. While we are taking steps towards becoming a digitized nation, we must also look into strengthening the medical fraternity holistically in terms of healthcare education, training and skill development and thereby, increasing the number of doctors available geographically for every nook and corner of the country, invest towards building more care and awareness programs for intensive care and preventive healthcare which includes mental health and overall wellness. It is only after we start investing in infrastructure and innovation, that we can look at strong private and public partnerships to create a technologically-advanced robust healthcare ecosystem that offers affordable, newer, out-of-the-box, innovative healthcare solutions to further reduce the burden, especially while catering to the underprivileged.
Vijender Reddy Muthyala, Co-founder and CEO of DrinkPrime – Startup, While we applaud the government for making drinking water more accessible through initiatives like the Jal Jeevan Mission-Har Ghar Jal, we believe it is critical to make safe drinking water more affordable. Lowering or eliminating GST on water purifiers, as consumer durable, will help treat them as an essential service required by all Indians. It will encourage people to invest in their health while helping mission oriented brands like DrinkPrime provide clean, safe and healthy drinking water to everyone.
Lake rejuvenation and ground water regeneration is the need of the hour. There are several NGOs and startups that would benefit greatly if the government would sanction some budget for the same or launch initiatives that serve the purpose.
Similarly, taxation on ESOPs should occur at the final sale of shares rather than when they are offered. This makes attracting good talent difficult in an already competitive market with a severe talent shortage. If this is addressed, organisations will be able to offer additional benefits to potential or high-performing employees.
As more smart city plans flow out, we request the government to also focus on IoT technology as it is definitely the future of smart ownership.
Pradeep KP, Co-founder and CEO, Dhiway – Technology Startup, “The Indian IT ecosystem is perfectly positioned to build the web3 and blockchain economy of the future and is poised to play a crucial role in fulfilling the Government of India’s vision and mission of ‘Make in India’ for the world.”
With the Digital economy and web3 making deep inroads into various use cases and purposing of the blockchain for use as a Public Digital Infrastructure, it is time that the government actively brings in fiscal reliefs and policies that incentivizes use of these technologies.
The push for the CBDC and the regulatory framework for digital wallet companies is much awaited. ”
Anushka Iyer, Founder and CEO, Wiggles, “With the 2023 budget, we expect an increase in the healthcare sector which is the need of the hour, especially for animals and some species that are on the brink of extinction. The healthcare sector is important for both humans and animals. The first and foremost area that needs to be focused on is an increase in financial support for veterinary services. A substantial budget will foster an environment that pushes more people towards creating quality services that can serve both pets and community animals. It shall also help veterinarians to provide better treatment. Secondly, there must be a concerted effort towards education and sensitization for all, not and not limited to the younger generation. Everyone should be educated on the simplest way to approach or help a pet and community animal. Sharing the same envirnoment, it’s important that government should lend support in creating animal-friendly neighbourhoods that ensure animals are safe and healthy like human beings. Think of this as a green city equivalent for animals, which requires funding and intent.”
“With the 2023 budget, as a startup founder, I hope that the government continues to increase fund allocation towards supporting the MSME sector. As more MSMEs are coming up, they are one of the major contributors to the country’s economic growth. We are excited about ONDC as it has the potential to fundamentally improve the customer’s experience of discovering brands digitally. This also helps in setting up a vision and products and sales increase. The impact that the budget has on the growth of the platform will directly affect many companies like us. We are looking forward to the Budget and expecting an increase with more attention towards the startup sector.”
Agnishwar Jayaprakash, Founder and CEO, Garuda Aerospace, “The drone industry budget expectations will be Service Linked Incentive. The industry is huge and its main aim is to receive a major nitro boost propulsion for Service Linked Incentives schemes as for every 1 indigenous drone manufacturer in the country, there are more than 450 drone service providers. With this India is nearing to its goal of becoming the global hub for drone technology. The budget should include more subsidies for drone pilots for their training and skilling programmes with government partnerships. The industry budget should be used for drone applications in fields like defence, mining, logistics and transportation with providing jobs.”
“Budget 2023 is expected to be a culmination of governance, environmental sustainability and innovation. The government should start recognizing the startup community, as it has great potential to aid in India becoming the number one global economic superpower. From a manufacturing startup perspective, the government has laid out the PLI Schemes, but I believe that a Service Linked Incentive (SLI) should also be introduced as well, especially for the drone segment. Government organizations like Invest India, Startup India, and Make in India, should connect more with the startup community and develop a separate ministry for startups. The budget expectation for startups would be to simplify the regulations and incentives scheme aimed for startups and their stakeholders.”
Bharat Sethi, Founder & CEO, Rage Coffee, “From this year’s budget we expect a focus on bolstering the startup economy in India. Despite the spell of low funding and a conservative market sentiment, we believe that this year’s budget will provide relief to customers with major modifications to the tax slabs. It would be beneficial for the FMCG marketplace as well, since we are driven by customer sentiments. Resultantly, we also expect greater investment flows into the segment.”
Neetika, Finance Head, Yash Pakka Ltd., We hope that the budget will be more capex and expansion friendly. Given the urgency for an increase in production capacity, the current need is the filip to promote industrial expansion
Sakshi Vij, Founder, Myles Cars, The Electric Vehicle adoption is at an inflection point in India. While the commercial/logistics sector has seen a good adoption, the individual vehicle owner is still on the fence. If the budget addresses issues such as high initial cost of ownership through incentivising individual vehicle owners the EV adoption will see a boost. Ease of registration, electric bill incentives as well and carbon footprint saving incentives could be a step in the right direction for individual travelers as well.
Vidyarthi Baddireddy, CEO and Co-founder at PickMyWork, “Despite pandemic-induced inflation, the nation witnessed flourishing entrepreneurial ventures as a consequence of early-stage acceleration and venture capital, as well as a push from the gig economic model to initiate and prepare businesses for the future of work. Given the prospects that the Indian startup ecosystem holds for global investors, this year’s Budget will be worth watching out for. While this is a promising indicator, the urgent priority of the hour is to devise a policy that further encourages a sturdy startup ecosystem through easier loan disbursements, e-approvals, and more government-led incentives in India’s tier-I and tier-II cities. Although the Fund of Funds for Startups (FFS) has played an integral role in mobilizing domestic capital in the Indian startup ecosystem, government interference should occur directly in this respect to ramp up the startup perks being offered, particularly for early-stage startups. Moreover, the government should also recognize relieving angel tax constraints in Budget 2023, as startups are frequently in the early stages of their growth and may not generate the same level of income or revenues as established businesses. Taxing the funds startups secure from investors may demotivate them from advancing creative solutions and developing new technologies.”
Mayank Arya, Co-founder at Yes Madam, While the Union Budget 2023 is aiming to drive nationwide comprehensive holistic growth, it should also recognize the critical need for tax structures that make it easier and more advantageous for startup entrepreneurs – especially those who are bootstrapped – to raise capital. Furthermore, it should applaud reforms that promote the expansion of women-led or pro-women empowerment enterprises. Given the high GST in the salon and wellness industries, customers are often motivated to pay cash instead of using credit cards or other forms of payment processing; thus, there needs to be a proper tech solution created in order to circumvent this issue. To encourage a thriving tech driven salon industry similar in stature as Zomato – and stimulate online transaction usage – we believe that GST should be decreased from 18% down for salons and related wellness establishments.
Sujata Pawar, Co-Founder & CEO at Avni- A Feminine Hygiene and Menstrual Healthcare Startup, “While the Union Budget 2023 will primarily focus on promoting comprehensive holistic growth across the nation, but it would be great if women’s health and wellness, particularly menstrual hygiene, are kept on high priority. For India to spring up from its menstrual waste problem, we eagerly await policies from the government that fosters the marketing and sale of organic biodegradable menstrual products. This small step has the potential to reduce the tons of commercial plastic sanitary napkins that end up creating mountains of landfills. Although the emphasis should be ‘Make in India’, lowering import taxes on raw materials could assist address the initial bottlenecks and motivate more female-led businesses to start contributing towards a greener India.
In terms of financing, the seed fund scheme is a great initiative, however, it needs to be more transparent and structured so that startups can easily navigate it. A central database of all possible schemes through which startups can access funding must be established. It will also be beneficial to have a counsellor or guide accompany the startup to the appropriate incubator. Moreover, a single-window policy for all registrations such as incorporation, Pan, GST, MSME certificate, and so on will help save time, effort, and money.”
Dr. Ganesh Nikam, Managing Director and CEO of Biojobz– An Industry leader in “Executive Search” & recruitment for the Biotech & Pharmaceutical industry, “Since it is a budget wish list, I would like to limit my wishes to two very important demands on taxation. One, considering the holding period, ESOPs should be considered long-term capital gains (LTCG) for tax purposes and should only be taxed at the time of sale rather than at the time of exercise. Two, to incentivize and increase retail investments into early-stage startups, a) Tax credit upto to Rs 5 Lakhs from personal taxable income for any investment loss in recognized startups b) Deferring of capital gains in case it is reinvested again in startups or any SEBI recognized funds.”
Soham Chokshi – CEO and Co-founder, Shipsy, “National Logistics Policy has been a landmark development in mobilizing the power of digitization to improve the state of logistics in the country. The budget will most likely be aligned to augment it through concerted efforts. This entails more investments in connectivity projects and building logistics infrastructure in various economic zones, especially under the PPP model, to expedite the execution of these. In addition, India’s last-mile emissions per delivery being higher than the global average is an area that needs immediate attention. Reducing miles travelled per package and ensuring that the distance is covered through eco-friendly modes can help lower carbon emissions. So generous incentives for the deployment of EVs in deliveries backed with stringent policies can prove critical to addressing climate change concerns.”
Ripunjay Bararia, Co-Founder & CTO, Sugarbox, shares industry expectations for the upcoming Union Budget 2023, “The public cloud spending in India is estimated to touch $7.5 billion, scripting a 29% growth from 2021, as per a Gartner report. However, latest projections indicate a modest growth of 2.6% in IT spending by Indian businesses and forecasts weakening demand for public cloud services, which could lead to a staggering 35% decline in growth in 2023.
Thus, the following are some recommendations for the Hon’ble Finance Minister for the Budget 2023. The sector would require dedicated allocation of funds and new measures to promote, support, and incentivize Indian technology start-ups and their made-in-India technologies. The support to native technologies will solve many problems, drive employment, and cater to data security issues. Technology has been one of the biggest FDI magnets. A budgetary focus on pushing research and innovation in the tech space would be viewed positively by Global investors, apart from infusing energy in the Indian R&D space.”
Mr. Bararia further adds, “India’s challenge of the existing digital divide stems from two factors. The first factor being high cost and unavailability of IT and electronic devices and equipment from both B2B and B2C perspective. Reducing tax or lowering cost of IT technology goods will help the businesses innovate and develop cost effective solutions. It will also make IT devices more accessible and affordable, empowering relevant stakeholders to enhance digital connectivity.
The second factor is ensuring equitable access to network connectivity. A fiscal policy to drive decentralization of Cloud network, promoting edge and hyperlocal cloud technologies, and exploring innovative content and services delivery systems, will help to enhance remote access to digital services, bridge the digital divide, boost local economy, and support socioeconomic development.”
Rakesh Kaul, Executive Director & CEO – Clix Capital, “In India, NBFCs have played an instrumental role in making credit available to small businesses, so as to help them to grow and scale. Considering that MSMEs contribute to one-third of the country’s GDP, account for 48% of exports and create 111 million jobs, it is imperative that the Government protect their interests. This is absolutely indispensable if India aims to become a $5 trillion economy by 2025.
Furthermore, as NBFCs have been playing a critical role in providing MSMEs with easy access to credit, in the upcoming budget, the industry expects the Government to implement budgetary relaxations to support the growth of NBFCs. This will let them participate in co-lending programs and enable them to push adequate funds in priority sectors.
The Government should also create a liquidity support system for NBFCs and broaden the guarantee scheme under CGTMSE, which in turn, will go a long way in ensuring a transparent and seamless flow of credit to MSMEs. Access to formal credit is one of the biggest challenges that MSMEs in the country is facing. Only 16% of MSMEs get access to loans from banks, while the rest has to rely on informal sources. MSMEs currently need around ₹25.8 lakh crore formal credit.
In this year’s budget, the Government should also look at simplifying the taxation regime as that would broaden the tax base bringing more funds into the national exchequer. NBFCs are demanding that they should be taxed in a manner that is at par with that of banks, since this is impacting their efficiency to reach out and serve the last mile customers and MSMEs, that are spread across the length and breadth of the country.
To empower NBFCs and such new new-age entities, the Government should look at introducing reliefs such as – no TDS on interest income, allowance/deduction on the provision made for NPAs, and centralized and uniform GST registration. Such holistic measures will help NBFCs proliferate deeper into our country making their innovative products and services available to vast cohorts of unserved and underserved sections of the population, including micro and small business owners.”
Rahul Jain, Director – Crayon Motors, “Even when the EV sales have doubled in the last year, the industry still suffers from higher initial ownership costs of EVs, which is a direct result of higher input costs. We hope the upcoming budget will reduce GST on raw materials/components, thereby accelerating India’s EV race. Because battery manufacturing in India relies heavily on imports, some duty relief could help reduce overall costs. EVs have fewer financing options and higher interest rates than ICE vehicles. The EV industry is hoping for a positive outcome from the government’s meeting with the World Bank. Aside from the PLI expansion, other state government programs such as GEDA and central government initiatives such as “Atmanirbhar Bharat” would undoubtedly benefit.”
Jyoti Prakash Gadia- MD at Resurgent India, “Banking Industry is at present on the threshold of more opportunities for playing a significant role towards the revival and sustainable development of the Economy. The Government can provide the required enabling environment for a robust Banking sector.
Generally, the Government needs to take care of the capitalisation aspects of the Public sector Banks in case of need. However, the Public sector banks have performed well on the profitability front as well as in the recovery of NPAs in the recent past. These banks are adequately capitalised at present in terms of CRAR requirements under the Basel norms and therefore may not require any immediate capital induction.
Regulations on NPA norms are primarily the domain of the Reserve Bank of India . The RBI is taking steps to strengthen the banking sector through suitable regulations relating to Risk Management, Basel Norms and provisioning.However, the Government can also play an important role in the recovery of Bad Loans through suitable changes in the Insolvency and Bankruptcy code. The issues relating to delays in the resolution process and a very high amount of haircuts need to be addressed. This will entail modified processes and provisions to reduce litigation and delaying factors. The prepacked resolution process scheme also requires greater clarity and positive action for providing requisite comfort to the lenders in the absence of a regular full-fledged bidding process.
Climate change and sustainable finance is one area where the Government can pitch in by introducing suitable policies and incentives. The banks will be required to gear up for financing renewable energy, green hydrogen and other newly emerging sectors/projects. For these sectors, concessional customs duty and widened PLI schemes will be required to give a boost to investments and bank funding.
In Funding, infrastructure projects, and banks are playing a significant role . To make sizeable funding in future the Government can bring a detailed dedicated Law relating to the intricacies of Infrastructure financing. This will include a thorough review of the Public Private Partnership (PPP) structure of infrastructure creation with more robust and equitable distribution or Risks among the various stakeholders. The special institution created for Infrastructure Financing _NABFID needs to take up the funding activity in a comprehensive manner at the earliest.
The setting up of a separate institution to facilitate a ‘credit enhancement scheme ‘ should be considered, which in turn will boost the bond market
The COVID pandemic adversely impacted the capacity utilisation and cash flows of the MSME sector. The instalments under the restructuring process taken up to handle the COVID-related stress are now going to become due and some sops may be required for the MSME in exceptional circumstances. In the long run, the DICGC scheme should be revamped to provide better support to MSMEs.The receivables funding for MSMEs can be made more effective by building a simpler and more flexible funding mechanism.
The one-district product kind of scheme can be considered at the national level by integrating the same to MSME funding in a seamless manner through end to funding right from procurement of raw material to production and realisation of dues by MSME. The completion of the proposed privatisation of IDBI needs to be expedited to generate and supplement resources for development.”
Divya Gokulnath, Co-founder, BYJU’S, “The world’s growth prospects have been clouded by difficult macroeconomic and geopolitical factors, but India has proven to be a resilient force by placing a strong emphasis on the digital economy, innovation, skilling, and sustainability. I look forward to a Union Budget that will advance the Digital India mandate, offer GST reduction on educational products and services to help businesses diversify their offerings, and further the cause of holistic education. For consumers, the introduction of new tax breaks for digital-focused education and upskilling will also help boost employability. Extending the ideas behind successful initiatives like PM e-Vidya and One Nation, One Classroom into a wider range of developmental economics will be welcomed, as will the fast-tracking of the National Education Policy 2020. Investments in the development of human capital and skilling will give momentum to a massive increase in productivity. The finance minister in the previous budget set aside a record Rs 1-trillion-plus for expenditure on education, and we hope for a continued outlay in this year’s budget as well. The setting up of the National Digital University, as envisioned under NEP 2020, is a pathbreaking event that can potentially enable our youth to skill, upskill and reskill without the constraints of space and time. Along with steps to increase employment, capacity utilisation, and social infrastructure, measures to lower the cost of capital, power, and logistics would be most welcome.”