Union budget 2022-23: Government should earmark funds and low-interest loans for tech companies
Indian Union Budget 2022: Startups need fiscal boost. Reuters
A startup is an expensive process, but it is an essential part of economic development. It creates jobs, establishes new markets, develops new technologies and contributes to GDP. Encouraging local startups would mean reducing reliance on foreign goods and services. This could have a positive impact on the balance of payments, inflation and the exchange rate.
The Indian economy, on the other hand, could create a friendly and accessible environment for small businesses. Surviving in a world of monopolies, stagflation and volatile financial markets is undeniably difficult in today’s 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, robotics and cybersecurity, to name a few. to name a few. India’s startup ecosystem has crossed 90 unicorns across the country in 2021. We are still miles away from creating a sustainable and nurturing startup ecosystem.
What the government can do to boost the startup sector
The process of financing startups (or crowdsourcing) could be made more accessible. India will only be able to enter the 12% growth rate with political intervention. This involves moving businesses to Tier 3 and Tier 4 cities by establishing IT parks and smart cities.
Taxation, a scourge for budding startups
Startups, although small, create a ripple effect in the economy by generating employment opportunities on many levels, improving the quality of life in the locality and making communities more self-sufficient. To encourage a stronger start-up culture, tax policies need to be overhauled. The burden of taxation often falls on businesses before they even begin to generate revenue.
Due to the lack of sustainable funding sources, startups usually opt for a loan or social capital. Bank loans are often avoided by entrepreneurs due to high interest rates and collateral issues. While equity financing requires multiple investors, it results in a dilution of control and administrative barriers during a company’s most critical years.
The government should formulate strong policies so that taxes are only levied when startups reach a certain revenue bar. Venture capital firms should benefit from tax advantages and crowdfunding could be made easier and more accessible to entrepreneurs.
Budget 2021 aimed to bring our country to the next economic level after experiencing a setback due to the COVID-19 induced recession. One of the focal points of the budget was startups.
The brain drain in India
Despite having excellent universities like IITs, India is forced to import most of its technology. In recent months, there has also been a lot of debate about the brain drain. The tech industry has extremely high growth potential and can solve many everyday problems to help build a stronger economy. According to projections, the tech industry has the potential to grow to over $5 trillion by 2022.
The government should set aside funds and low-interest loans for tech companies. This would encourage more people to work in this sector in India rather than seeking opportunities abroad. At startup, inexpensive infrastructure and fewer legal hurdles are a boon. A specialized cell could be created within the Ministry of Commerce. Creating a more conducive business environment in India will curb the brain drain.
In the tech space, innovation in artificial intelligence (AI) must be prioritized. An accelerated “AI4All” initiative is needed to prepare the next generation for a future with AI. Entrepreneurship should be made compulsory as part of the school and college curriculum. Mentoring by large multinationals would encourage creativity, make it easier to turn dorm ideas into real-world products.
The government should consider investing in the development of design thinking, AI-led innovation, liberal arts, blockchain, etc. It should promote creative learning by providing scholarships, create new programs to recognize innovation, create specialized institutions, fund deserving and ambitious 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, Head of Strategy, Toch.ai, AI-driven platform.
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