India (44) recently surpassed the UK to become third in terms of the number of unicorns produced in the year 2021 after the US (487) and China (301). The Economic Survey of India released on Monday reported that there are 61,400 recognised start-ups in India in fiscal 2021-22. They are pioneers in creating jobs and matching the aspirations of young people in India. The Indian start-up ecosystem saw record investments of approximately $36 billion in private-sector businesses in 2021-22.
A UK-based investment data platform, Preqin, reported that venture and private equity investments surged thrice, from $11 billion in 2020 to $31 billion in 2021. Start-ups, along with MSMEs, are vital to creating jobs. In the coming years, they must get the right incentives and policy support from the government and private sector to thrive and ensure India's economic growth.
In the 2022 budget announcement, tax exemption in capital gains from investment in start-ups has been extended by another year and is expected to boost the financing of start-ups. The duration of tax incentives for start-ups has increased from three to four years. The Emergency Credit Line Guarantee Scheme (ECLGS), announced during the pandemic for small and medium-sized businesses, has also been extended to March 2023.
Agritech start-ups, for example, received a big boost as the government announced plans to set up a fund through NABARD using the Co-Investment Model. The agriculture and allied sector start-ups, in turn, will help Farmer Producer Organisations (FPOs) and cooperatives through new technologies and innovation, positively impacting the entire value chain.
Moreover, start-ups will be the key drivers to implement 'Drone Shakti,' a new initiative where drones could be used as services for the larger public good. Drones will also assist in modernising farming by assisting in crop assessment, spraying insecticides and nutrients, digitising land records and effective implementation of crop insurance schemes through real-time data.
The launch of the National Digital Health Ecosystem, an open platform, will be an opportunity for start-ups in the healthcare sector. The national Tele-Mental Health Mission will boost the start-ups in the mental healthcare space, which has emerged as a big issue in recent times and saw a surge during the pandemic.
The extension of digital services in rural India is another favourable opportunity for start-ups. The optical fibres programme by 2025 is ambitious and requires extensive support from start-ups to deliver it on the ground.
The government is continuing the National Action Plan for Climate Change, a policy launched in 2008 to mitigate and adapt to the negative impact of climate change. The government has also allocated Rs 19,500 crore to manufacture solar equipment in production-linked incentives. However, start-ups need more policy and ecosystem support to make it a reality. Currently, start-ups working in electric vehicles, CleanTech, and other advanced technologies in AI and genomics could ensure sustainable development.
With the aim to launch a digital rupee starting 2022/23, the Budget focused on technology-driven transformations in India in the years ahead. Among its implications is the potential for cheaper currency management. A push for cryptocurrency and Web 3.0 will incentivise tech start-ups to create more products and services catering to consumers in this sector. This comes when start-ups are leveraging the substantial spike in the adoption of digital payments in recent years. However, it will take some more time to know the impact of the 30 per cent tax on virtual digital assets (cryptocurrencies, NFT, etc.). According to industry estimates, about 15 million to 20 million cryptocurrency investors in India with crypto holdings estimated at approximately Rs 40,000 crore ($5.29 billion).
Overall, the Budget lacks a clear vision and action plan for start-ups. If India has to achieve double-digit growth in the post-pandemic world, a coherent and ambitious start-up policy and action plan are needed. The thriving entrepreneurial ecosystem needs policy support from the Centre and state governments and the backing of the investor community. Initiatives like Shark Tank India and Entrepreneurship Sports Generation will also increase the visibility of start-ups amongst the masses, enhance awareness about entrepreneurship, and ensure 100 unicorns annually in India in the next couple of years.
(The authors are associated with The Global Education and Leadership Foundation)
Disclaimer: The views expressed above are the authors’ own. They do not necessarily reflect the views of DH.
Check out the latest DH videos on Union Budget here: