LIVE Union Budget 2019: News, Analysis And Impact On Indian Startup Ecosystem

To Focus On AI, Robotics, Big Data Education, National Research Fund

Nirmala Sitharaman: The Government will bring in a New National Education Policy to transform India’s higher education system to one of the global best education systems. The new Policy proposes major changes in both school and higher education among others, better Governance systems and brings greater focus on research and innovation.

Massive online open courses through the SWAYAM initiative have helped bridge the digital divide for the disadvantaged section of the student community. To up-grade the quality of teaching, the Global Initiative of Academic Networks (GIAN) programme in higher education was started, aimed at tapping the global pool of scientists and researchers. The IMPRINT or IMPacting Research INnovation and Technology scheme began as a Pan-IIT and IISc joint initiative to develop a roadmap for research to solve major engineering and technology challenges in selected domains needed by the country.

India has the potential to become a hub of higher education. I, therefore, propose to start a programme, ‘Study in India’, that will focus on bringing foreign students to study in our higher educational institutions.

The Government enables about 10 million youth to take up industry-relevant skill training through the Pradhan Mantri Kaushal Vikas Yojana (PMKVY). This is helping to create a large pool of skilled manpower with speed and high standards. Demographic trends worldwide show that major economies will face severe labour shortages in the future. To prepare our youth to also take up jobs overseas, we will increase focus on skill sets needed abroad including language training.

We will also lay focus on new-age skills like Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics, which are valued highly both within and outside the country, and offer much higher remuneration.

Inc42 Take: “India is the only country trying to become a global economic power with an uneducated and unhealthy labour force.” – Amartya Sen In its latest World Development Report of 2018, it says the percentage of Class II students who could not read a single word of a short text or perform a 2-digit subtraction is higher in India than even in Uganda and Ghana. After eight years of schooling, only 43% of 14-18-year-olds could do simple division. Slightly less than half couldn’t add weights in kilograms, More than 40% couldn’t tell hours and minutes from a clock, 46% didn’t even know which city is the capital of India.

A much-needed push from the government in improving the education quality of India to rank at par with its equivalents in the world, and a call for the edtech startups to come up with more innovative education formats and not just focus on the mainstream e-learning. Specially India choosing to benchmark itself on PISA this year (2019), which measures learning outcomes rather than rote outcomes, signals that India is changing its systems of education to adapt to the future. It is a massive signal. Today around 3,500 startups in India are catering to the education space, creating content in various formats and languages for students to consume at their own convenience. As per the census of 2011, more than 50% of India’s population is below the age of 25 and more than 65% is below the age of 35. It is expected that in 2020, the average age of an Indian would be 29 years. According to a Google-KPMG report, India’s online education market is set to grow to $1.96 Bn and have around 9.6 Mn users by 2021. In 2018, Indian edtech startups received close to $700 Mn in funding — an 85% jump from the $375 Mn funding in 2017.

Despite the abundance of the labour force in India, the quality of skills remains the biggest bottleneck in terms of improving labour productivity in the country. Focus on skill development in new tech will improve the quality of the workforce in India, eventually increasing the culture of innovation and entrepreneurship in the ecosystem. It also makes India a more attractive destination for international tech companies who have not yet entered in India.

SKill India failed terribly in its aim to provide skill and jobs to India youth in the country. According to IndiaSpend Factcheck, with less than two years for Skill India’s deadline in 2020, the government has placed just 1 Mn trainees in jobs — 90% short of the 10 Mn target. Enrolment is short by 64% and certification by 74%. Besides, the actual spending has been far less than what was allocated to the programme. As per a report entitled ‘Young India and Work: A Survey of Youth Aspirations’ released by World Economic Forum in October 2018, 66% of male respondents and 79% of female respondents reported being unaware of government-run skills development programmes.

Last-Mile Connectivity In Railways

Improving the country’s infrastructure is the need of the hour. The increase in the number of metro cities is inclined with the cities growth and the rise of the state on the investor ladder in the Tier 2 and tier 3 cities. The rise of Jaipur as a startup ecosystem is a clear example here.

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11:53 AM

Urbanisation Is An Opportunity And Not Challenge

Nirmala Sitharaman: Urbanisation is an opportunity rather than a challenge. We have to make both cities and villages better at using technology this will reduce migration to cities and provide essential services to all.

Inc42 Take: Increased urbanisation will increase access to the internet in rural and suburban India, which will increase the total addressable market for tech startups in India. As of 2018, 35.36% of the total 604 Mn internet subscribers are rural. Urbanisation of rural areas will provide a boost to the top sectors of the Indian startup ecosystem such as ecommerce, fintech and consumer services in these parts of India.

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11:52 AM

Waste-Management Now Takes Centre Stage

Nirmala Sitharaman: More than 95% of our cities have declared themselves open-defecation free, says Sitharaman.
Swachh Bharat has brought enormous environmental and health benefits. 9.6 Cr toilets have been constructed and more than 5.6 Lakh villages have become open-defecation free, she said while proposing to expand and undertake solid waste management in every village.

Inc42 Take: The government proposes to make India open defecation free by October 2, this year, on 150th birth anniversary of Mahatma Gandhi. A good sign for the waste management startups that have been receiving a step-motherly treatment in the past few years. A focus on improving public cleanliness can bring in innovative social entrepreneurs and startups and inevitably.

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11:50 AM

Gramin Digital Saksharta Abhiyaan, A Push For Rural Education And A Chance For Edtech

Nirmala Sitharaman: Under the Pradhan Mantri Gramin Digital Saksharta Abhiyan, over two crore rural Indians have so far been made digitally literate. To bridge rural-urban digital divide, Bharat-Net is targeting internet connectivity in local bodies in every Panchayat in the country. This will be speeded up with assistance from Universal Service Obligation Fund and under a Public-Private Partnership arrangement.

Inc42 Take: Certainly, it’s a good move to promote digital education in the country. The internet user base in India has exceeded 600 Mn mark in 2018 and is likely to reach 627 Mn by end of 2019. digital adoption is now being propelled by rural India and figures show that it has registered 35% growth in internet users over the past year. It is now estimated that there are 251 Mn internet users in rural India, and this is expected to reach 290 Mn by the end of 2019. Also, the rising number of vernacular platforms in India is helping the government to reach rural areas in a better manner.

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11:45 PM

Allow Farmers To Benefit From e-NAM

Nirmala Sitharaman: This Government will work with State Governments to allow farmers to benefit from e-NAM. The Agriculture Produce Marketing Cooperatives (APMC) Act should not hamper farmers from getting a fair price for their produce. Ease of doing business and ease of living both should apply to farmers too. We shall go back to basics on one count: Zero Budget Farming. We need to replicate this innovative model through which in a few States farmers are already being trained in this practice. Steps such as this can help in doubling our farmers’ income in time for our 75th year of Independence.

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11:43 AM

75K Skilled Entrepreneurs In Agro-Rural Industry Sectors

Nirmala Sitharaman: To improve the technology of such industries, the Scheme for Promotion of Innovation, Rural Industry and Entrepreneurship’ (ASPIRE) has been consolidated for setting up of Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs). The Scheme contemplates to set up:

• 80 Livelihood Business Incubators (LBIs)
• 20 Technology Business Incubators (TBIs) in 2019-20 to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.

We will invest widely in agricultural infrastructure. We will support private entrepreneurship in driving value-addition to farmers’ produce from the field and for those from allied activities, like Bamboo and timber from the hedges and for generating renewable energy.

Inc42 Take: Rural entrepreneurship can help in boosting platforms such as e-Nam, which can make the agri supply chain of India more streamlined and effective. There’s a dire need to develop rural and Tier 3 economy in India, especially through MSMEs and startups. As DataLabs by Inc42 has shown, 97.67% of all startup funding in India is skewed towards startups from Tier 1 areas in h1-2019.

In line with the Vision 2024, the govt now wants to take entrepreneurship from Tier 2 and Tier 3 cities to rural areas. In October last year, Suresh Prabhu, then India’s Commerce Minister while speaking at Inc42’s The State of Indian Startup Ecosystem had said, “We want startups in every district, every village of the country.” Clearly, Modi 2.0’s schemes are focussing on rural entrepreneurship to further accelerate the Vision 2024 plans. which aims to have 50K new startups in India.

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11:42 AM

Agri Innovation Focus

Nirmala Sitharaman: Majority of people still live in villages and depend on agriculture and traditional industries, the scheme of fund for development and regeneration of traditional industries through SFFURTI, aims to set up more common facilities centres to facilitate cluster-based approach to create sustainable employment opportunity. Focus sectors are bamboo, honey and khadi clusters. Setting up of 100 new clusters during 2019-20, which will enable 50K artisans to join the earnings.

Inc42 Take: According to DataLabs by Inc42, between 2014 to 2019 (H1) agritech startups in India have raised more than $60 Mn, the lack of tech readiness, and adaptability remain the bottleneck in terms of penetration of agritech in the Indian agriculture Industry. A push to include bamboo, honey and khadi in the agri-cluster showcases the government’s push to bring the most traditional agri-segments to the forefront of agritech development.

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11:41 AM

“Focus On Fisheries With PM Matsya Sampada Yojana

Nirmala Sitharaman: Fishing and fishermen communities are closely aligned with farming and are crucial to rural India. Through a focused Scheme – the Pradhan Mantri Matsya Sampada Yojana (PMMSY) – the Department of Fisheries will establish a robust fisheries management framework. This will address critical gaps in the value chain, including infrastructure, modernization, traceability, production, productivity, post-harvest management, and quality control.

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11:40 AM

“Gaav, Garib Aur Kissan”: The Central Point For New Government Says FM

Nirmala Sitharaman: Household access to clean cooking gas has seen unprecedented expansion, through the provision of more than 7 crore LPG connections. All villages, and almost 100% households across the country have been provided with electricity.

• By 2022, the 75th year of India’s independence, I would like to assure the nation that every single rural family, except those who are unwilling to take the connection will have electricity and a clean cooking facility.
• Pradhan Mantri Awas Yojana – Gramin (PMAY-G) aims to achieve the objective of “Housing for All” by 2022. A total of 1.54 crore rural homes have been completed in the last five years. In the second phase of PMAY-G, during 2019-20 to 2021-22, 1.95 crore houses are proposed to be provided to the eligible beneficiaries.
• These houses are also being provided with amenities like toilets, electricity and LPG connections.

With the use of technology, the DBT platform and technology inputs, the average number of days for completion of houses has reduced from 314 days in 2015-16 to 114 days in 2017-18.

Inc42 Take: Despite Jan Dhan push, financial inclusion has remained slightly harder to achieve in rural India. As of 2017, a mere 5% of the Indian population aged 15 years or above had used the mobile phone or internet to access bank accounts or financial services. The fact that the government is pushing for basic amenities and household in rural, this can also be seen as a push for financial inclusion in the near future. However, the government is yet to mention anything about agri-startups or taking the support of agri-startups in fulfilling these plans.

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11:34 AM

Incorporation Of NewSpace India Ltd.

Nirmala Sitharaman: India has emerged as a major space power with the technology and ability to launch satellites and other space products at globally low cost. Time has come to harness this ability commercially. A Public Sector Enterprise viz. New Space India Limited (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the Research & Development carried out by ISRO. The Company will spearhead commercialization of various space products including the production of launch vehicles, transfer to technologies and marketing of space products.

Inc42 Take: Investments in aerospace startups remain low due to lack of private-public partnerships opportunities, as available in developed startup ecosystems such as US, Europe etc. The commercial arm of DoS would help indigenous technology developed by India’s space scientists to reach other companies and nations who are working in spacetech. NewSpace India Ltd was incorporated in March 2019. It will be India’s second public commercial venture in space technology. It will join Antrix Corporation, ISRO’s commercial arm that has been functional since 1992. While Antrix has brought huge success to ISRO’s space venture, startups will be looking forward to working with NewSpace India to bring their products to the global space market. Unlike Antrix, NewSpace is supposed directly work under the Department of Space. Can NewSpace address the issues that space startups have been facing? We’ll know more when the functional division lines between Antrix and NewSpace are finally drawn.

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11:30 AM

FDI Declines For The Third Consecutive Year, FM Rolls Out New Measures

Nirmala Sitharaman: FDI inflows into India have remained robust despite global headwinds. Global Foreign Direct Investment (FDI) flows slid by 13% in 2018, to $ 1.3 Tn from $ 1.5 Tn the previous year – the third consecutive annual decline, according to UNCTAD’s World Investment Report 2019. India’s FDI inflows in 2018-19 remained strong at $ 64.375 Bn marking a 6% growth over the previous year. I propose to further consolidate the gains in order to make India a more attractive FDI destination:

a. The Government will examine suggestions of further opening up of FDI in aviation, media (animation, AVGC) and insurance sectors in consultation with all stakeholders.

b. 100% Foreign Direct Investment (FDI) will be permitted for insurance intermediaries.

c. Local sourcing norms will be eased for FDI in Single Brand Retail sector.

Inc42 Take: Foreign Direct Investments (FDI) in India declined for the third time in the last six years in 2018-19, falling by 1% to $44.37 Bn as overseas fund inflows subsided in telecom, pharma and other sectors, official data showed. According to the latest data of the Department for Promotion of Industry and Internal Trade (DPIIT), FDI in 2017-18 was a record $44.85 Bn. While, in its last few budgets the government has made efforts to relax FDI in ecommerce and retail, this year the FM’s announcement to boost FDI in aviation, animation, Media and individual and single brands is a clear effort to arrest the declining FDI trend. However, the new move fails to address structural issues which are keeping foreign investors away such as an unstable bond market and slow on ground reforms.

Sitharaman’s focus is now on boosting FDI in media, single brand and aviation and this will hopefully directly push the growth of aerospace-tech, media and private label markets in the Indian startup economy.

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11:24 AM

A Modern Tenancy Law To Be Introduced

Nirmala Sitharaman: It is proposed that several reform measures would be taken up to promote rental housing. Current Rental Laws are archaic as they do not address the relationship between the Lessor and the Lessee realistically and fairly. A Model Tenancy Law will also be finalised and circulated to the States.

Inc42 Take: The new law is expected to boost revenue and business prospects of house rental startups. Till date, real estate startups in India have raised more than $1.58 Bn (2014 to 2019- H1), according to Inc42 DataLabs, but with a model tenancy act, there will be greater clarity on rental and lease regulations.

The act is also likely to give a boost to the rental economy of India and open up new opportunities for startups working in real estate tech, as well as coliving and coworking segments in the Indian ecosystem.

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11:22 AM

INR 1 Cr Credit In 59 Mins For MSMEs Announces FM

Nirmala Sitharaman: For ease of access to credit for MSMEs, Government has introduced providing of loans upto INR 1 crore for MSMEs within 59 minutes through a dedicated online portal. Under the Interest Subvention Scheme for MSMEs, INR 350 crore has been allocated for FY 2019-20 for 2% interest subvention for all GST registered MSMEs, on fresh or incremental loans.

Government payments to suppliers and contractors are a major source of cash flow, especially to SMEs and MSMEs. Investment in MSMEs will receive a big boost if these delays in payment are eliminated. The government will create a payment platform for MSMEs to enable filing of bills and payment thereof on the platform itself. 29. Encouraged by the overwhelming response, the Government of India has decided to extend the pension benefit to about three crore retail traders & small shopkeepers whose annual turnover is less than INR 1.5 crore under a new Scheme namely Pradhan Mantri Karam Yogi Maandhan Scheme. Enrolment into the Scheme will be kept simple requiring only Aadhaar and a bank account and rest will be on self-declaration.

Inc42 Take: Lack of access to finance and a dearth of funds for the country’s MSME sector has been crippling the sector, an Under Intellecap report pegs the credit gap at a humongous INR 16.66 Lakh Cr. What is worse for millions of enterprises that form a part of the MSME sector is the fact that the credit gap has increased over the last five years. This is a huge boost for the MSME sector which has been grappling with the challenges of timely funds. Majority of these measures were recently proposed by the MSME committee to RBI under former SEBI chairman, U K Sinha.

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11:14 AM

A Push to Sustainable Mobility

Nirmala Sitharaman: Phase-II of FAME Scheme, following approval of the Cabinet with an outlay of 10,000 crore for a period of 3 years, has commenced from 1st April, 2019. The main objective of the Scheme is to encourage faster adoption of Electric vehicles by way of offering an upfront incentive on the purchase of Electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles. Only advanced battery and registered e-vehicles will be incentivized under the Scheme with greater emphasis on providing affordable & environment-friendly public transportation options for the common man.

Inc42 Take: The focus of the government to improve sustainable mobility has been quite evident. The total funding raised by EV focused startups between 2014 to 2019 (H1) is more than $400 Mn, Ola Electric quickly prepares a $300 Mn war chest along with partnerships with Hyundai and Kia to become the frontrunner of the nascent industry.

The EV market size of India is expected to reach $707 Mn by 2025. Companies like Mahindra and Mahindra are investing heavily in this segment. Even the Environment Ministry has acquired electric cars for official use, a move aimed at reducing air pollution.

“The boost will be a win-win for the country – it will help reduce environmental impact, position India as a global manufacturing hub for EVs and increase employment opportunities,” Akhil Aryan, founder and CEO ION Energy.

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11:13 AM

HNIs are banking On The Current Government To Be Favourable to Wealth Creation

Nirmala Sitharaman: India Inc is the nation’s job creators, they are India’s wealth creator. Together with mutual trust we can gain catalysed and attain growth.

Inc42 Take: The Attitudes Survey of ultra-high net worth individuals (UHNWI) by Knight Frank found that 28% of respondents in India believe that economic and political factors would be favourable for wealth creation this year, up by 3% from last year.

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11:12 AM

Industrial Corridors To Improve Connectivity And Boost Economic Growth

Nirmala Sitharaman: 

• The Government has given a massive push to all forms of physical connectivity through Pradhan Mantri Gram Sadak Yojana, industrial corridors, dedicated freight corridors, Bhartamala and Sagarmala projects, Jal Marg Vikas and UDAN Schemes. While the industrial corridors would improve infrastructure availability for greater industrial investment in the catchment regions, the dedicated freight corridors would mitigate the congestion of our railway network benefitting the common man.
• The New Metro Rail Projects for a total route length of 300 kilometers have been approved during 2018-19. Also, during 2019, about 210 kms metro lines have been operationalized. With this, 657 kms of Metro Rail network has become operational across the country.
• India’s first indigenously developed payment ecosystem for transport, based on National Common Mobility Card (NCMC) standards, was launched by Hon’ble Prime Minister in March, 2019. This will enable people to pay multiple kinds of transport charges, including metro services and toll tax, across the country. This inter-operable transport card runs on RuPay card and would allow the holders to pay for their bus travel, toll taxes, parking charges, retail shopping and even withdraw money.

 

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11:11 AM

The Numbers Behind The Growth

Nirmala Sitharaman: Will be focusing on investment, digital infrastructure and job creation. MSMEs have played a great role in boosting India’s growth

Inc42 Take: Data for 2018-19 indicates that the services sector attracted the highest FDI equity inflow of $9.16 Bn, followed by computer software and hardware – $6.42 Bn, trading – $ 4.46 Bn and telecommunications – $ 2.67 Bn. Most recently, the total FDI equity inflows for the month of March 2019 touched $ 3.60 Bn.

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11:10 AM

Through “Minimum Gov Max Governance” Taking India To Be The $3 Tn Economy This Year

Nirmala Sitharaman: The Indian economy will grow to become a $3 Tn dollar economy in the current year. It is now the sixth largest in the world. Five years ago, it was at the 11th position. In Purchasing Power Parity terms, we are in fact, the 3rd largest economy already.

So when we aspire to reach a $5 Tn level, many wonder if it is possible. If we can appreciate our citizens’ “purusharth” or their “goals of human pursuit” filled with their inherent desire to progress led by the dedicated leadership present in this House, the target is eminently achievable.

Inc42 Take: The actual revenue deficit for 2018-19 is worse than the revised estimates (RE) for the last financial year. That, in turn, is largely because of a massive gap of INR 1.67 Lakh Cr between the expected tax revenues for the past year and the actual figures. This gap is mainly on account of lower revenues from GST, customs duty and corporation tax. The fall in revenues meant that both the actual revenue expenditure and capital expenditure were lower than the revised estimates for the last financial year. Deficit mixed with higher borrowings programmes from the centre and states means that there are no quick fixes for India’s economy.

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11:07 AM

$5 Tn Economy Within 5 Years

Nirmala Sitharaman:  Our economy was at approximately $ 1.85 Tn when we formed the Government in 2014. Within 5 years it has reached $ 2.7 Tn. Hence, it is well within our capacity to reach the $ 5 Tn in the next few years.

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11:03 AM

Hope For Bright And Stable India: FM

Nirmala Sitharaman states that government has performed on an unprecedented scale. While the GDP growth rate has dwindled and the fiscal deficit seems to be revised form 3.4% to 3.5%.

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10:57 AM

Cabinet Approves The Union Budget 2019

The union cabinet has approved the Union Budget 2019, which will be presented by Sitharaman in the Lok Sabha shortly.

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10:50 AM

The Ever Elusive Double-Digit, Medium-Term Growth Trajectory

In the 2015 Annual Economic Survey, the government report card tabled in the Parliament a day before the Budget proclaimed that “India has reached a sweet spot — rare in the history of nations — in which it could finally be launched on a “double-digit, medium-term growth trajectory.”

Four years later, with the newly appointed Finance Minister Nirmala Sitharaman a few minutes away from presenting the Union Budget for 2019-20, the double-digit growth story has proved to be elusive.

Last month, a research paper by the former chief economic adviser to the finance ministry, Arvind Subramanian, reignited the controversy surrounding India’s GDP calculations. In his paper, Subramanian suggested that India’s growth rate in recent years had been grossly overestimated. He argued that actual growth was most likely under 6% and closer to 5-5.5% taking the old and traditionally used GDP (2004-05) series.

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10:41 AM

Market Swings Prior To The Budget

Benchmark indices breached the 40K mark for the first time in three weeks earlier in the day ahead of the Union Budget 2019 but are currently trading flat to lower.Currently the BSE Sensex down 37.10 points at 39,870.96 and the NSE Nifty down 19.10 points to 11,927.70.

The rupee was down 20 paise compared to the dollar and was trading at 68.70

According to reports, as of July 1, the Sensex has gained 3,429.81 points – or 9.46 per cent – since the February 1 Interim Budget announcements. The analysts expect an uptrend despite market fluctuations.

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10:24 AM

Finance Minister Arrives At The Parliament

Finance Minister Nirmala Sitharaman has reached the Parliament and cabinet meeting is now underway, before the Union Budget 2019 session kicks off. The first full-time woman finance minister was seen with a traditional Indian ‘bahi khata’ (accounts folio) outside the parliament.

This is a departure from the budget briefcase that has been used by finance ministers since India’s first ever budget presented by R.K. Shanmukham Chetty on November 26, 1947.

So, what can we expect from the Union Budget 2019? Besides endorsing the giant leaps of the interim budget which included no direct tax up for individuals with up to INR 5 Lakh income, the Pradhan Mantri Kisan Samman Nidhi for minimum yearly income for farmers, and other reforms, the FM is expected to address some unaddressed issues such as the EV industry, epharma, education and healthcare. The FM is also expected to bring clarity over the cryptocurrency regulations, which have unsettled crypto startups for the past couple of years.

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