Union Budgets are as much about a government’s vision as it is about earmarking public funds for the country’s future. As finance minister Nirmala Sitharaman gets ready to present her first budget today, the common man, as well as industry heads, will be watching intently for signals about what Modi 2.0 has in store for them.
The runup to budget has been a rocky one. From rising unemployment to flagging foreign investments, India’s growth story, which defied a global slowdown in the 2014-17 period has taken a few hits in the last year. In times when the private sector growth weakens, it is common practice for countries to loosen the state’s purse strings to kick-start the economy. But with the national fiscal deficit mounting, and borrowing programmes from the states sucking up most of the national household savings stocks, the Modi government does not have too much room to manoeuvre. For Sitharaman there will be no quick fixes.
The Indian Startup Ecosystem meanwhile will be looking for the government to walk the talk with this budget. Many industry watchers felt that the Piyush Goyal-helmed interim budget in February had glossed over their problems. This time Indian startup ecosystem stakeholders are voicing demands for more affirmative action from the government.
In the buildup to the budget, Inc42 reached out entrepreneurs to understand their hopes and needs. Here’s what they have to say:
- Union Budget 2019 Survey: Startups Demand An Innovation Fund For Each Sector
- Union Budget 2019: Tech Startups Look For Action On Digital India Front With New Budget
- Union Budget 2019: What Women Leaders From The Indian Startup Ecosystem Expect From This Historic Budget
- Union Budget 2019: Blockchain Startups Call For Greater Access To Funding, Talent
- Union Budget 2019: What Do Fintech Startups Want From The Upcoming Budget
This Union Budget will, therefore, be a tightrope walk for all involved. Between BJP naysayers, global trade turbulence, rising crude oil prices, lukewarm stock markets, and a fiscal policy which is trying to play catch-up with the economic realities of Bharat, all eyes will be on Sitharaman come 10:30 am.
Watch this space for live updates and what it means for India’s startup ecosystem, as we go through India’s 89th Union Budget (including the interim ones) with a fine tooth comb.
Additional Burden for Consumer Logistics And Last Mile Delivery Startups
Nirmala Sitharaman: Propose to increase special additional duty and road and infrastructure cess on diesel and petrol by INR 1
Inc42 Take: This would be an additional expense for startups like Dunzo, Swiggy, Zomato and micro logistics companies increasing their operation cost.
Simplifying The GST Returns Process
Nirmala Sitharaman: GST rates have been eased with a relief of INR 92,000 Cr provided during the year. Further measures are being worked out to ease filing returns and tax compliance.
Discourage Business Payments In Cash
Nirmala Sitharaman: To discourage cash payments, TDS of 2% for withdrawals of INR 1 Cr in a year from bank accounts for business payment purposes has been proposed. Further, low-cost digital modes of payments such as BHIM, UPI, Aadhaar Pay, certain debit cards can be used to promote a cashless economy.
Inc42 Take: Today, a large number of startups are specialising in facilitating electronic invoices. The promotion of these instruments from the government’s side will result in boosting the adaptability of electronic invoices over cash-driven paper invoices. This will also help in formalisation of the record keeping in the context of trade invoices, particularly in the MSME sector.
For Digital Payments, New Levy On B2B Cash Transactions
Nirmala Sitharaman: To promote digital payments further, I propose to take a slew of measures. To discourage the practice of making business payments in cash, I propose to levy TDS of 2% on cash withdrawal exceeding INR 1 crore in a year from a bank account. Further, there are low-cost digital modes of payment such as BHIM UPI, UPI-QR Code, Aadhaar Pay, certain Debit cards, NEFT, RTGS etc. which can be used to promote less cash economy. I, therefore, propose that the business establishments with annual turnover more than INR 50 crore shall offer such low-cost digital modes of payment to their customers and no charges or Merchant Discount Rate shall be imposed on customers as well as merchants. RBI and Banks will absorb these costs from the savings that will accrue to them on account of handling less cash as people move to these digital modes of payment. Necessary amendments are being made in the Income Tax Act and the Payments and Settlement Systems Act, 2007 to give effect to these provisions.
Inc42 Take: This is a big leap for the government’s push to the digitisation and making the transaction go digital. Post demonetisation, the push to digital transaction hit a never-seen-before high due to the necessity of cashless transactions. India’s push to build a less-cash economy seems to be gathering momentum with the central bank recording phenomenal growth in digital transactions till March 2019 and setting an ambitious target to push up the volume by four times by 2021.
Total digital transactions in volume terms recorded a growth rate of 58.8% during 2018-19, on top of a growth of 50.4% during 2017-18.
Also, with UPI in place and a number of local and foreign players including Paytm, Google Pay and upcoming WhatsApp Pay, this move can be a milestone in making India a cashless economy.
The total funding in fintech startups from 2014 to 2018 is $6.97 Bn. This push to digitisation would be an icing on the cake for fintech startups.
Ease Of Doing Business Has Improved
Nirmala Sitharaman: Ease of doing business has significantly improved in the Bharatiya Janta Party’s tenure.
Inc42 Take: Although India’s rank improved 23 positions in the latest ease of doing ranking, In the context of ease of doing business, enforcement of contracts remain a major roadblock—provided the improved of contract enforcement factor was only a mere 1 point in comparison to 129 points in construction permits and 66 points in trading across borders.
Online Tax Assessments, Facial Assessment To Avoid Harassment
Nirmala Sitharaman: The existing system of scrutiny assessments in the Income-tax Department involves a high level of personal interaction between the taxpayer and the Department, which leads to certain undesirable practices on the part of tax officials. To eliminate such instances, a scheme of faceless assessment in electronic mode involving no human interface is being launched this year in a phased manner. To start with, such assessments shall be carried out in cases requiring verification of certain specified transactions or discrepancies.
Cases selected for scrutiny shall be allocated to assessment units in a random manner and notices shall be issued electronically by a Central Cell, without disclosing the name, designation or location of the Assessing Officer. The Central Cell shall be the single point of contact between the taxpayer and the Department. This new scheme of assessment will represent a paradigm shift in the functioning of the Income Tax Department.
PAN And Aadhaar Are Now Interchangeable
Nirmala Sitharaman: More than 120 Crore Indians now have Aadhaar. Therefore, for ease and convenience of tax payers, I propose to make PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income Tax returns by simply quoting their Aadhaar number and also use it wherever they are required to quote PAN.
Inc42 Take: This move has certainly made Aadhhar a valid document after the much controversies and would highly improve the efficiency of tax filing by an individual. It also opens the doors for the financial institutions and fintech startups who are troubled over the KYC issues.
Major Reforms On Angel Tax Issues For Startups
Nirmala Sitharaman: To resolve the so-called ‘angel tax’ issue, the startups and their investors who file requisite declarations and provide information in their returns will not be subjected to any kind of scrutiny in respect of valuations of share premiums. The issue of establishing the identity of the investor and source of his funds will be resolved by putting in place a mechanism of e-verification. With this, funds raised by startups will not require any kind of scrutiny from the Income Tax Department.
In addition, special administrative arrangements shall be made by the Central Board of Direct Taxes (CBDT) for pending assessments of startups and redressal of their grievances. It will be ensured that no inquiry or verification in such cases can be carried out by the Assessing Officer without obtaining approval of his supervisory officer.
At present, startups are not required to justify the fair market value of their shares issued to certain investors including Category-I Alternative Investment Funds (AIF). I propose to extend this benefit to Category-II Alternative Investment Funds also. Therefore, the valuation of shares issued to these funds shall be beyond the scope of income tax scrutiny. I also propose to relax some of the conditions for carrying forward and set off of losses in the case of startups. I also propose to extend the period of exemption of capital gains arising from the sale of residential house for investment in startups up to 31.3.2021 and relax certain conditions of this exemption.
Inc42 Take: This is a most welcome move for the Indian startup community. After almost a year of fighting over angel tax, the angel investor community has been in low sentiments. According to DataLabs by Inc42, angel investments touched a low in India in 2018. Starting from 106 in 2014, the number of angel investors deals in India grew at the highest with over 653 in 2016 and came down tumbling in 2017 by 22% and stood at 512. In 2018, the number of unique angel investors that participated in Indian technology startup funding was 416 — a 42% drop compared to 2016 and a 30% drop compared to 2017. The new changes will certainly boost morale and will increase startup investments in the country.
Economic Growth Through Make In India
Nirmala Sitharaman: In order to boost economic growth and Make in India, the government will launch a scheme inviting global companies through a transparent competitive bidding process to set up mega manufacturing plants in sunrise and advanced technology areas such as semiconductor fabrication, solar photo-voltaic cells, lithium storage batteries, solar and electric charging infrastructure, computer servers, laptops etc, and provide them investment-linked income tax exemptions.
Inc42 Take: The devil lies in the detail. Finally, the government is looking into the more minute aspects of the electric vehicle industry, instead of simply offering some incentives. The establishment of EV infrastructure which includes manufacturing will boost the market size for startups working in EV-related industries. The tax exemption on EV will help drive up the demand for such vehicles on the consumer side. Overall, this will improve the entire electric mobility ecosystem of India. The increased investor confidence towards EV startups is evident from the capital infusion in startups like Ola Electric, Ather Energy and others, from marquee investors.
Major relaxation for companies on Corporate Tax
Nirmala Sitharaman: Currently, the lower rate of 25 % is only applicable to companies having an annual turnover up to 250 Crore. I propose to widen this to include all companies having an annual turnover up to INR 400 Cr. This will cover 99.3% of the companies. Now only 0.7% of companies will remain outside this rate.
Inc42 Take: While the personal tax slabs remain the same as proposed in the interim budget, the government has provided relaxation to corporate taxation for businesses. Earlier companies with a turnover of less than 250 Cr could avail 25% corporate tax and those with revenue higher than 250 Cr paid 30% tax. This year the FM declares to increase the turnover limit to 400 Cr. This is a relief for Startups and small businesses.
More Provisions For NBFC Provided They Are Financially Sound
Nirmala Sitharaman: One-time six-month partial credit guarantee to buy pooled assets of sound NBFCs, Sitharaman said. Meanwhile, Public Sector Banks are now proposed to be further provided INR 17,000 Cr of capital to boost credit
Boost To Credit Capacity For Public Banks
Nirmala Sitharaman: Public sector banks will be provided INR 70K Crore to boost capital and improve lending capacity, which should act as a strong impetus to the economy. To further improve the ease of living, banks can leverage technology for online personal loans, doorstep banking and interoperability i.e. enabling customers of one public sector bank to access services across all public sector banks. In addition, the government will initiate steps to empower account holders to remedy situations where they do not have control over deposits of cash by others into their accounts.
Inc42 Take: Despite such measures in terms of capital creation, the cost of capital in India remains high. As of 2018, nearly 40% of the credit supply in MSME sector was still through informal channels. In addition to presenting new schemes a drive towards improving tech and financial literacy in the informal economy of India will be more beneficial. The domestic credit to the private sector by banks for India was 48.78% as a percentage of the GDP in 2017, comparatively lower than the global — 97.52%.
Aadhaar Cards To NRI Without Waiting For 180 Days
Nirmala Sitharaman: I propose to consider issuing Aadhaar Card for Non-Resident Indians with Indian Passports after their arrival in India without waiting for 180 days.
Inc42 Take: Aadhaar linkage to NRI passport holders will reduce the friction in the current process for such citizens. This can provide a much-needed push to the tourism sector of India, and could make the opening of bank accounts easier for NRIs in the country.
Nari Tu Narayani
Nirmala Sitharaman: This Government believes that we can make progress with greater women’s participation. In India’s growth story, particularly in the rural economy, “grameen arth vyavastha” the role of women is a very sweet story. This Government firmly believes that the socioeconomic transformation that is taking place particularly in the last decade, Indian women’s role and leadership is distinct. The recent elections have shown record turnout of women voters at par with men. We also have a record 78 women MPs here. This reinforces our approach of going beyond just women-centric-policy making to building women-led initiatives and movements.
This Government has supported and encouraged women entrepreneurship through various schemes such as MUDRA, Stand UP India and the Self Help Group (SHG) movement. In order to further encourage women enterprise, I propose to expand the Women SHG interest subvention programme to all districts.
Furthermore, for every verified woman SHG member having a Jan Dhan Bank Account, an overdraft of 5,000 shall be allowed. One woman in every SHG will also be made eligible for a loan up to 1 lakh under the MUDRA Scheme.
Inc42 Take: Here’s where we stand on the issue of participation of women in the formal economy: Indian women’s contribution to the GDP is a mere 17% in comparison to China’s 40%.
Equal employment opportunity for female can add more than $770 Bn to Indian GDP by 2025. The unpaid work minutes for urban women workforce is 10.75x higher than their male counterparts. As per DataLabs by Inc42’s secondary research, the representation of women as a percentage of the overall senior management workforce in India is a mere 4%, whereas at the board room level is 11%. In contrast to the low concentration of female employees at the top level management positions, the representation of female at graduation is 43% along with 25% at entry-level corporate positions. The gap in the representation of women at entry-level and senior management positions highlights how career opportunities are skewed in favour of males in the Indian corporate ecosystem.
A National TV Channel For Startups By Startups
Nirmala Sitharaman: We propose to start a television programme within the DD bouquet of channels exclusively for startups. This shall serve as a platform for promoting startups, discussing issues affecting their growth, matchmaking with venture capitalists and for funding and tax planning. This channel shall be designed and executed by startups themselves. Stand-Up India Scheme has delivered enormous benefits. The country is witnessing the emergence of thousands of entrepreneurs from women and also from the Scheduled Castes and Scheduled Tribes, most of them assisted to set up their businesses and industry with capital provided under the Stand-Up India Scheme. Considering the beneficial results of the Scheme and strong demand for its continuance by the SC and ST communities, the Scheme would be continued for the entire period coinciding with the 15th Finance Commission period of 2020-25. The Banks will provide financial assistance for demand-based businesses, including for example for acquisition of scavenging machines and robots.
The Stand Up India Scheme has made human dignity and self-esteem go up. “Kayakave Kailasa”.
The Ministry of Petroleum & Natural Gas has enabled SC/ST entrepreneurs in providing Bulk LPG Transportation. In a matter of two years over 300 entrepreneurs have emerged. Machines and robots have been deployed to do scavenging which also saved the manual scavengers their dignity. The synthesis between stand up and start up with commercial banks playing the catalyst has brought this transformational change.
Inc42 Take: The mention of startups in the full budget in such a clear manner is certainly a boost for the Indian startup ecosystem. With more than 3000 startups entrepreneurs emerging under Standup India scheme so far, the government is further optimistic on promoting startups by solving their issues, getting in touch with the startups and investors directly. According to Datalabs by Inc42 estimates, there are total 39K startups active in India currently.
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.
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.
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.
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.
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.
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.
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.
“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.
“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.
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.
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.
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.
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.
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.
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.
Industrial Corridors To Improve Connectivity And Boost Economic Growth
- 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.
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.
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.
$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.
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%.
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.
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.
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.
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.