SUMMARY
Outside of highlighting the Indian economy's growth in the past 10 years, there was precious little in terms of new announcements or allocations for the key startup sectors in the Interim Budget 2024-25
Finance Minister Nirmala Sitharaman’s Interim Budget 2024-25 address was more of a recap of the past decade than a look at the current focus of the central government. And as expected, there were not too many big announcements, particularly when we look at the Indian startup ecosystem.
While the full budget for 2024-2025 is expected in July, we can tell from Sitharaman’s speech — one of the shortest budget addresses — which way the government is looking when it comes to the next decade.
The Interim Budget’s key announcements were for four segments of the Indian economy seen as key pillars for growth — poverty alleviation, youth development, women empowerment and a sharp focus on food security and production.
Besides revisiting the government’s various schemes for these four key areas, Sitharaman delved into how India is preparing for its net zero emission goals by 2070.
But outside of highlighting the growth of the Indian economy in the past 10 years, there was precious little in terms of new announcements or allocations for the key startup sectors. The word ‘startup’ itself was mentioned just four times during the whole speech and two of those were in relation to Startup India and the Startup Credit Guarantee schemes.
As usual, there was focus on physical infrastructure with new rail corridors announced as well as the potential of the ‘India-Middle East-Europe trade corridor’ which was announced at the G20 Summit in 2023. The new global trade corridor will be a game-changer for India and the rest of the world for decades to come, the FM said, echoing Prime Minister Narendra Modi’s words about India’s growing stature in the global economy from the summit.
Essentially, this was not so much a budget for startups, but actually about the key sectors that will get the full government focus in the next few years. Here’s a look at the key takeaways for the Indian tech and startup ecosystem from the Interim Budget 2024-2025:
Big Push For Climate Resilience
An analysis by Inc42 showed that across 13 deals climate tech startups raised just $24 Mn between January and November 2023. This is less than half of the tally of $66 Mn in 2022.
Climate tech investments from venture capital and private equity dipped by 40% last year, as economic uncertainty and geopolitical conflict dented investor confidence.
But the FM’s clear and specific claim of boosting electric vehicle manufacturing and charging Infrastructure could be the catalyst that the climate tech ecosystem needs.
Revealing their outlook for climate tech in 2024, several investors noted that the focus of funds is shifting from EV makers such as Ola Electric, Ather Energy and others towards sub-segments such as battery technology, EV management software and battery recycling.
Sitharaman also announced that the government would focus on greater adoption of electric buses for public transport networks through payment security mechanisms. The payment security fund would provide interest-free capital to boost EV adoption in public transport.
Presenting her sixth budget, the finance minister also spoke about a central government-backed rooftop solarisation project that would cover 1 Cr households and provide up to 300 units of free electricity every month. This is expected to bring in savings worth INR 15,000 to INR 18,000 annually for households.
In a bid to push for regenerative standards in industrial manufacturing, the government claimed to be working on a new scheme of bio-manufacturing and bio-foundry for biodegradable polymers, bio-plastics, bio-pharmaceuticals and bio-agri-inputs. These environmentally friendly alternatives to harmful plastics will help in transforming the current-day consumptive manufacturing paradigm towards regenerative principles, Sitharaman added.
Modernising Agriculture And Boosting Income
As usual, India’s massive agricultural economy received significant attention from Sitharaman even in her short speech.
The biggest announcements were for the government’s push to encourage private and public investment in post-harvest activities, as well as programmes to support dairy farmers, boost livestock productivity. These are key areas for agritech startups working in the market linkage, agri marketplace, dairy supply chain and livestock management spaces.
Five integrated aquaparks will be set up to enhance aquaculture productivity 5 tonnes per hectare and double exports to INR 1 Lakh Cr. These are expected to generate employment for 55 Lakh individuals.
“For promoting climate resilient activities for Blue Economy 2.0, a scheme for restoration and adaptation measures, and coastal aquaculture and mariculture with integrated and multi-sectoral approach will be launched,” FM Sitharaman said.
Boosting Entrepreneurship & Startup Ecosystem
Arguably the only announcement from the Interim Budget that directly pertained to the startup ecosystem was the extension of the tax holiday to startups incorporated till March 31, 2025. Last year, this was extended from March 2023 to March 2024.
Eligible startups (i.e. those that meet specific criteria set out by the DPIIT) can avail a tax holiday for three out of seven years, from their date of incorporation, provided that the business’ annual turnover does not exceed INR 25 Cr in any of these financial years.
The move to extend the tax holiday was on expected lines and is meant to boost the ease of new venture creation and drive more Indians towards entrepreneurship. As we have noted in our annual Indian startup funding report for 2023, the pace of new startup creation has slowed down in recent years after skyrocketing till 2021.
The tax holiday, while welcome, is only applicable to a small proportion of Indian startups given the narrow scope of the criteria.
Besides the tax holiday, the government is hoping to boost new business creation, innovation and research in emerging areas by establishing a 1 Lakh Cr corpus for 50-year interest free loans. These loans will have long tenors and low or nil interest rates to scale up research and innovation.
Sitharaman mentioned that the government would continue to drive female enrolment in STEM, which has grown by 28% since 2014, as well as offer more loans to women entrepreneurs under the Mudra scheme.
As for startup-specific schemes, one of the areas that got the FM’s attention was domestic deeptech technologies for defence. This is likely to be a big boost for India’s drone tech ecosystem, which has been seeking easier access to defence bids and public-private partnerships for deeptech technologies in defence.
Eyes On Next-Gen Tech
Speaking of emerging technologies, the government has revealed that it will be increasing its allocation for semiconductor and display manufacturing development by more than 2X.
Besides this, there is a 30% higher allocation for 2024-25 for production-linked incentives (PLI) across all sectors, as well as 2X higher allocation for green hydrogen and solar power production and development. The latter is a critical focus area given its linkage to the net zero goals and climate resilient growth that India is gearing up for over the next decade.
As ever, the implementation of schemes will be critical for climate tech development and transition to sustainable energy sources.
PLI schemes for sectors such as electronics manufacturing, pharma, food processing, EV manufacturing, medical appliances and other areas have not only increased India’s industrial production index but have also been key in attracting greater FDI. Since 2014, over $596 Bn in FDI has come into India boosting key sectors. The global China+1 movement is expected to drive FDI inflows in the years to come.
“For encouraging sustained foreign investment, we are negotiating bilateral investment treaties with our foreign partners, in the spirit of ‘first develop India’,” the FM added.
In particular, India’s smartphone exports have seen the fruits of this Make-In-India push. Morgan Stanley estimates that India’s smartphone market could triple in size by 2032 to reach $90 Bn in value, driven by PLI schemes.
Skill Development & Education
Ever since its launch in July 2015, the Skill India Mission has become a critical vehicle for the government’s efforts to boost employability of youth and getting Indians ready for more modern employment opportunities.
Sitharaman announced that the Skill India mission has trained 1.4 Cr youth, and upskilled and reskilled 54 Lakh Indians. This is thanks to 3,000 new Industrial Training Institutes (ITIs), 7 IITs, 16 IIITs, 7 IIMs, 15 AIIMS and 390 universities that have been set up in the past decade.
The government is increasing its allocation for the PM-SHRI scheme to boost development of schools and curriculum as envisaged by the National Education Policy 2020. The estimated allocation for 2024-2025 is expected to be INR 6,050 Cr, up from INR 4,000 Cr last year.
The finance minister also announced plans to set up several new medical colleges by utilising existing hospital infrastructure.
“Our Government plans to set up more medical colleges by utilising the existing hospital infrastructure under various departments. A committee for this purpose will be set up to examine the issues and make relevant recommendations,” Sitharaman said.
Tourism In The Spotlight
Domestic tourism has been a major focus for the Indian government since 2020 and the global travel restrictions amid the pandemic. This has undoubtedly thrust travel tech platforms and OTAs into the spotlight and opened up new revenue streams.
In last year’s Union Budget , the government announced that 50 iconic destinations will be selected for promotion as well as a dedicated mobile app to boost domestic and foreign tourism, focussing on aspects such as connectivity, entertainment, culture, food and tourist security.
The Interim Budget 2024-25 continued this domestic tourism focus, For one, Sitharaman said the government would look to back state-level development of iconic tourist centres, helping them with branding and marketing these destinations at a global scale. Projects for port connectivity, tourism infrastructure, and amenities will be taken up on islands, including Lakshadweep.
“The success of organising G20 meetings in 60 places presented the diversity of India to a global audience. Our economic strength has made the country an attractive destination for business and conference tourism. Our middle class also now aspires to travel and explore. Tourism, including spiritual tourism, has tremendous opportunities for local entrepreneurship.”
In addition, a new framework for rating tourism centres is also in the pipeline for improved measurability of whether investments in tourism are paying off. “Long-term interest free loans will be provided to states for financing such development on matching basis,” the FM added.
