Inc42 Daily Brief
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Tune into the live updates of Union Budget 2019-20
This year is the last full Union Budget for NDA government before the elections of 2019. For Indian startups, what really matters are the direct and indirect taxations proposed by the government for the current year. In the 2015 Union budget, finance minister Mr Arun Jaitley laid down the plan of reduction of corporate tax from 30% to 25% over the period of 2015-2018. Not only this government has to give away with the sure charge and excess and actually bring down to 25%
This will put India back on the map among top global economies. While the reduction seems low as compared to that of Singapore (15%), Hong Kong (17.5%), USA (21%), China (25%) and UK(19%), it will nevertheless be a great push for the Indian economy and will boost investments and businesses in India.
In terms of personal taxation, the mid-level bracket is expected to increase from INR 5-10 lakhs with 5% taxation. This will put more money in the pocket of the common man and budding entrepreneurs and boost the economy with the higher flow of liquid money in the economy, which will further boost government investments in infrastructure and social reform.
One of the most awaited reforms for the startup ecosystem is the dreaded Angel Tax and Indian startups & investors are eagerly looking forward to the government to address it.
GST has been the right decision from the government. However, the norms and application challenges still need to be reformed. A better roadmap for GST could be observed in Union Budget 2018.
The indirect effect of the Union Budget 2018 for the startup ecosystem is always the policies and reforms around agriculture, infrastructure and information technologies. Indian startups are working a lot around agritech and enhancing the clean power sector which is an impediment to driving India towards global competitiveness.
With such considerations, we would start our live reporting of Union Budget 2018-19 which is to start in a few minutes. The honourable finance minister has already arrived at the Lok Sabha and will be addressing the Speaker shortly.
Jaitley: GST has made indirect taxation simpler. India is now a $2.75 Tn economy, the 7th largest in the world and soon to be the 5th largest.
Jaitley: Digital has played a key role to provide benefits to the poor, demonetisation has encouraged digital infrastructure and recapitalization of the banks.
Ease of Doing Business a Key Focus
Jaitley: We are not only focussing on ‘Ease of Doing Business’ but also ‘Ease of Living’
The government’s ‘minimum government, maximum governance’ methodology, combined with reforms has led India into the top 100 ranking in ease of doing business, a jump by 42 places.
Relieving Indian Youth From Slow Processes
Jaitley: Passport in 2-3 days, 1-day registration of company
No need for attestation of certificates. Government is working on relieving struggling youth from slow processes.
Higher Scope For AgriTech Startups To Work With The Government Towards A Common Goal
Jaitley: “For better price realization farmers need to make decisions based on prices likely to be available after its harvest. The government will make an institutional mechanism for participation of all concerned ministries to develop appropriate policies and price demand forecast and use of futures and options market, expansion of warehouse depositories systems and to take decisions about specific export and import related measures.”
Inc42’s Take: Agritech startups are already working on creating better cold storage and supply chain management, will get higher scope working with the government to achieve the common goals. Read the complete story here.
Operation Greens Might Give A Boost To Logistics & AgriTech Startups
Jaitley: Operation Greens to promote FPO’s, agri-logistics, processing facilities, professional management. Agri-Market Infrastructure Fund with a corpus of Rs.2000 crore will be set up for developing and upgrading agricultural marketing infrastructure
Inc42’s Take: Supply chain management and farm-to-fork startups will benefit with this proposal given greater mobility in this sector and especially the boost to the infrastructure.
Education A Serious Concern. EdTech Will Have Massive Scope
Jaitley: Quality of education cause of concern. Education will be treated holistically, without any segmentation. Tribal students
to get Ekalavya Residential School in each tribal block by 2022.
Inc42’s Take: EdTech startups will have more scope to expand their means of elearning and e-training to augment the traditional education system of India. Besides student training, new opportunities will come up in upgrading teachers’ skills.
From Blackboards to Digital Boards
Jaitley: Technology will play a major role in redefining India’s education system. Will be used to upgrade skills of teachers through the portal, Diksha.
Addressing The Core Issue Of India’s Infrastructure
Jaitley: Government proposes 14.34 Lakh Crores in rural development. Amongst other things, it will provide 3.17 Lakhs Km of roads and 51 Lakhs houses.
Inc42’s Take: This is a good sign for the real estate sector, which can now break free of current slowdown and collaborate with the government to facilitate the reforms. It will further expand the horizon of ecommerce and logistics startups for whom rural penetration has been a challenge so far.
Revitalising of Infrastructure and Education by 2022
Jaitley: To set up investment in research and related infrastructure including health institutions I propose the launch of Revitalising Infrastructure and Systems in Education (RISE) by 2022 with a total investment of 1 Lakh Crores in next four years. Higher education agencies would be suitability structured for funding this initiative. 18 new schools of planning and architecture in IITs and NITs along with fellowships for 1000 best BTech students from premier institutes.
Inc42’s Take: These institutions are the breeding ground for our entrepreneurs. A boost in PHD programs through fellowships will provide better scope for R&D in the country, which is one of the cornerstones for the growth of the countries. Overall this will build and nurture the future entrepreneurs who will be more skilled and equipped to take on the challenges of developing businesses in India.
Incentivising Women Employment
Jaitley: To incentivise employment of more women in the formal sector and to enable higher take-home wages I propose to make an amendment to the EPF and Miscellaneous provision act to reduce women contribution to 8% for the first 3 years of their employment as against 12% or 10%, with no change in employers’ contribution.
Inc42’s Take: Gender diversity has been a cause for global concern, with even VCs investing and reforming the businesses worldwide for greater women participation. This reform will definitely bring more women contribution to the formal sector pushing India to showcase better gender diversity in the business sector.
The National Health Policy 2017
Jaitley: 1.5 Lakh centres will bring health care closer to home, provide comprehensive care, including maternal, child care and free essential drugs. INR 1200 Crores being allocated for this flagship policy. Private sector & CSR will be encouraged to adopt these centres.
Inc42’s Take: A greater adaptation of medicine-to-home model will increase the penetration of startups. Furthermore, pharmaceutical manufacturing will get a boost, with new medical research startups coming up in recent years.
Launch Of Flagship National Health Protection Scheme
Jaitley: Huge announcement for the health sector. To cover 10 crore poor & vulnerable families, approx 50 crore people will get insurance of INR 5 lakh rupees each for treatment of a disease. World’s largest government-funded healthcare program!
Inc42’s Take: This scheme will bring more awareness amongst the common man to take up and improve their healthcare plans, thus incentivising the health insurance and healthtech sector to benefit more people. This will improve both the health index of the country in the global arena as well as improve the business processes with the adoption of modern healthcare technologies by new-age startups.
Boost For Textile Sector
Jaitley: The government has approved a comprehensive textile package of INR 6000 Cr in 2016 to boost the apparel and makeup segments. I now propose an outlay of INR 7148 Cr for the textile sector for 2018-19.
Inc42’s Take: This will be a huge support to vertical fashion ecommerce startups in expanding procurement as well as their product base, thus creating greater value in the segment.
Boost To Travel Sector
Jaitley: To further boost tourism, the Union Budget 2018 proposes to develop ten prominent tourist sites into Iconic Tourism destinations by following a holistic approach involving infrastructure and skill development, development of technology, attracting private investment, branding and marketing.
Inc42’s Take: This will be a great boost for the OTAs and travel startups operating in the country, creating more valuable packages and exciting opportunities to monetize tourism.
No Clarity On Angel Tax Yet
Jaitley: Additional measures will be taken to strengthen the environment for Venture Capital Funds and for their growth and successful operation of alternative investment funds in the country.
Inc42’s Take: What kind of measures will be taken to boost the startup ecosystem haven’t been announced. We are yet to receive clarity on Angel Tax and the recent surge in IT notices and how they shall be tackled going forward.
Granular State Level Reforms for Better Ease of Doing Business
Jaitley: For ease of doing business at a deeper level in all states of India, Government of India has identified 372 basic business reforms. Each state will take up these reforms and simplification in a mission mode, constructively competing with each other. Evaluation the performance under this programme will now be based on feedbacks.
Inc42’s Take: This push to make ease of doing business in India and taking it to the granular level will take India to a higher rank in ease of doing business globally. We could expect India to catapult to one of the most competitive business ecosystems in recent years.
Indian Government Bullish On 5th Gen Technologies like AI, ML, IOT, 3d Printing, etc.
Jaitley: Global economy is transforming into a digital economy thanks to the development of cutting-edge technologies like Machine Learning, Internet of Things (IoT), Artificial Intelligence (AI), 3D printing etc. Initiatives like Digital India, Make In India, Startup India will help to establish itself as a knowledge and digital society.
NITI Aayog will establish a national program to direct our efforts in the area of AI including research and development of its applications. Combining cyber and physical systems with greater potentials to transform not only innovation ecosystem but also our economies and the way of life. The government will invest in research, training and skilling in robotics, AI, Digital manufacturing, Big Data intelligence, Quantum communications.
Dept of Science and Technology will launch a mission in cyberspace to support the establishment of centres of excellence. And double the allocation to digital India program to INR 3073 Crore in 2018-19.
Inc42’s Take: With increasing investment in the digital economy, India will see more and more application of Machine Learning and Big Data in the decision making of the government. Furthermore, emphasis on AI and 3D printing suggests that the government is ready to adopt the new-age 5th gen tech in bringing the economy at par with developed countries.
This is great news for Indian startups as a whole because a lot of progress has been observed in Hardware and AI & Big data sector. Adaptation of such technologies will surely boost the businesses as well as the speedy operation of the economy. In lieu of the global digital security threats, the Indian government has rightly proposed more spending in cybersecurity, giving room for cybersecurity startups to grow.
Boost To Internet Infrastructure, Road Towards Tapping The Next Billion, More Indian Language Users Will Come Online
Jaitley: The task of connecting 1 lakh gram panchayats to high-speed optic fibre network has been completed in phase 1 of the Bharat Net Program. This has enabled broadband to cover 20 crores rural Indians in about 2.5 lakh villages. Govt. also proposes to set up 5 lakh wifi hotspots which will provide internet to 5 crore rural citizens. INR 10,000 crore allocated for creation and augmentation of this infrastructure. To harness the benefits of the new emerging technologies, especially the 5th gen tech, Department of Telecom will support the establishment of an indigenous 5G Test Bed at IIT, Chennai.
Inc42’s Take: The successful completion of Phase 1 of Bharat Net Programme to cover 2.5 lakh villages, will enable social media, digital media, consumer services and ecommerce sector to capitalise on this scope of expanded penetration, which was a major obstacle so far. This will also boost entrepreneurship and bring up new and innovative business and startups form Tier II and Tier III cities, which so far were left behind majorly due to the connectivity issues.
Furthermore, with more and more rural population getting access to internet services and online content expansion, vernaculars will see a great boost giving room to one of the most untapped offline segment in India.
#Breaking – Cryptocurrencies Are Not Legal Tender, Will Take Measures To Eliminate Crypto Assets
Jaitley: The Government doesn’t consider cryptocurrency as a legal tender or coin and will take all measures to eliminate the use of these crypto assets in financing illegitimate activities or in becoming the part of the payment system.
Inc42’s Take: With government reinforcing that cryptocurrencies as illegal transactional currencies and its vow to flush it out of the economy, the crypto-market will receive a major blow in India. This is concerning for the crypto-traders as well as Indian startups in this space. This will limit the possibility of ICO’s coming up as an alternative form of investment for new age startups and innovations in India. Read the complete story here.
Govt. To Explore Blockchain Technology Proactively
Jaitley: Distributed ledger system on the blockchain technology allow the organisations to manage any chain of records or transactions without the need of the intermediaries. The government will explore the use of blockchain technology proactively, to usher in the new digital economy.
Inc42’s Take: Although the government is sceptic towards the idea of cryptocurrency, it has not failed to notice the untapped potential of Blockchain and its application in government operations. Upon incorporation of blockchain in governance, India government will be expected to have quicker operational responses and decision making.
Minor Updates On The Long Awaited Corporate Taxation Reform
Jaitley: Reduction of the tax rate to 25% for companies who have a reported turnover of up to INR 250 crore.
Inc42’s Take: Union Budget 2018-19 concluded with the long-awaited cut in corporate taxations. We at Inc42 have been banking on Mr. Jaitly to fulfill his promise of taking down the corporate tax to 25% and placing India as a prime country in the global competitiveness forum. While, there will be no changes for Corporate India as such, Startup India will be able to reap some benefits from this deduction. However, the Government will not lose much taxation revenue as most Indian startups operate under losses.
The Smart Cities Mission – An Opportunity For Indian Startups To Define The Indian Landscape
Jaitley: Smart Cities Mission aims at building 100 Smart Cities with state-of-the-art amenities. I am happy to inform that 99 Cities have been selected with an outlay of Rs. 2.04 lakh crore. These Cities have started implementing various projects like Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks. Projects worth Rs. 2350 crore have been completed and works of Rs. 20,852 crore are in progress. To preserve and revitalize the soul of the heritage cities in India, National Heritage City Development and Augmentation Yojana (HRIDAY) has been taken up in a major way.
Inc42’s Take: The prospect for startups to be a provider of Smart Command and Control Centre, Smart Roads, Solar Rooftops, Intelligent Transport Systems, Smart Parks for smart cities could be a great opportunity for Indian startups to build innovative products and contribute in the growth of Digital India.
Fintech to Facilitate MSME’s
Jaitley: Use of Fintech in financing space will help the growth of MSMEs. A group in the Ministry of Finance is examining the policy and institutional development measures needed for creating the right environment for Fintech companies to grow in India.
Inc42’s Take: This is clearly an opportunity for fintech companies to expand their clientele and play a critical role in revamping the traditional architecture of the financial sector in India.
National Logistics Portal
Jaitley: Department of Commerce will be developing a National Logistics Portal as a single window online marketplace to link all stakeholders
Inc42’s Take: This step by the government will create a centralised information system which will help in further organising the logistics sector and will provide greater visibility in mobilising logistics to the deepest corners of the country.
After GST, Aadhaar Transcends To Panic Enterprises
Jaitley: While AADHAR has provided identity to every Indian, every enterprise, big or small, also needs a unique ID. The Government will evolve a scheme to assign every individual enterprise in India a unique ID, the Finance Minister announced.
Inc42’s Take: While GST and Aadhaar have been constructive reforms so far, the format of implementation had put the country in the panic last year. Now, with this new effort to create Unique IDs for enterprises, SMBs and MSMEs, we can expect another countrywide havoc amongst businesses, more compliance burdens and costs in the short run. Read the complete story here.
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