This Interim Budget 2019-20, unlike farmers and middle-class salaried people, startups did not have too many fund-related demands. They had, however, expected the government to address primarily tax-related issues, FDI (in epharmacy), GST issues specifically in edtech and electric vehicles (EVs), and hoped for a better implementation scheme for the Fund of Funds for Startups (FFS).\r\n\r\nAhead of the General Election 2019, interim finance minister Piyush Goyal, while delivering the Budget speech on February 1, missed a huge opportunity to address the core concerns of startups and remove the roadblocks that are hindering the growth of the startup ecosystem in India.\r\n\r\nRamesh Srivats, a media and startup consultant and celebrated satirist on Twitter, in 2013 had defined the budget as \u201cthe noble democratic process through which money is transferred from those who work to those who vote.\u201d This is typical of the nature of the Interim Budget in India.\r\n\r\nThe Interim Budget 2019 is the BJP-led government\u2019s all-out effort to woo the middle class and farmers, both segments that supposedly don\u2019t have a high opinion of government schemes. This is a view inferred from the recent five state elections where the BJP lost in all the five states.\r\n\r\nOn freebies announced in the Budget, Sanjeev Ahluwalia, advisor to India\u2019s leading think tank ORF, said,\r\nThe Modi government is an extremely responsive government. They hit the right buttons, right before the election.\r\nHowever, the devil lies in the details, and the recently presented Budget, in the garb of an interim Budget, is almost a full-fledged one. A vote-on-account, which merely presents the expenditure to be sanctioned, can\u2019t alter direct taxes. The introduced Budget not only presented the budget estimates for the entire fiscal year but also proposed changes in direct taxes through the Finance Bill 2019.\r\n\r\nThis is the last budget of the current Modi government.\r\n\r\nIn a statement shared with Inc42, V Ramakrishnan, CFO of TCS said, \u201cThe budget strikes the right balance between progressive initiatives and fiscal prudence, and merits an 8 out of 10. The Interim Budget is focused on providing relief to large sections of the rural economy and on job creation. Additionally, the tweaking of the direct tax code will lessen the tax burden on the middle classes and spur consumption that should benefit multiple sectors, and drive growth.\u201d\r\n\r\nWe, at Inc42, looked into the Interim Budget in detail, analysing it threadbare from the perspective of the Indian startup ecosystem, while keeping an eye on the overall performance of the government.\r\n\r\nHere\u2019s the lowdown:\r\n\r\n \tIncreasing Unemployment, Declining Manufacturing Could Haunt Startups\r\n \tIncome Tax Rebate To Benefit Ecommerce, Consumer Startups\r\n \tDefence Budget: No Defence Innovation Fund Yet\r\n \tDoes The Budget 2019 Focus On Agritech?\r\n \tSkill India: Done And Dusted?\r\n \tWhy Digital Village Mission Seems Mission Impossible\r\n \tThe National AI Programme: Will It Take Off?\r\n \tAyushman Bharat: Future Engagement With Startups?\r\n \tDid The Budget Address The Core Demands Of Startups?\r\n\r\nIncreasing Unemployment, Declining Manufacturing Could Haunt Startups\r\nThe Budget not only disappointed Indian startups by not entertaining most of their demands but also failed to address the elephant in the room \u2014 unemployment and the rising challenges in the manufacturing sector.\r\n\r\nWhile the government\u2019s own data from the National Sample Survey Office (NSSO) showed that the unemployment rate in the country is the highest in the last 45 years, investments in new projects have declined to the lowest levels since mid-2004; stalled projects, too, are at record levels.\r\n\r\n\r\n\r\n\r\n\r\nThis will have repercussions for startups as well. One of the biggest reasons behind failed Indian startups has been getting right skill set and retaining talent. While most corporates have resources to hire and provide training to new hires, startups do not have this luxury of money and time.\r\n\r\nMeanwhile,\r\nthe declining trend of investments in new projects shows that investors are wary of the Indian market and going for mostly tried and tested projects.\r\nComing to the manufacturing sector \u2014 the mother of all sectors \u2014 any downturn in it is bound to create a ripple effect in all the sectors and, thereby, on the GDP. On the other hand, even a 1% increase in the manufacturing sector can have multi-percent increment on the GDP, as it positively impacts almost each and every sector as well as startups.\r\n\r\nIn 2018, India\u2019s manufacturing sector reportedly performed better than in 2017. However, the Budget 2019 did not factor in anything to up this momentum.\r\n\r\nOn paper, the Modi government\u2019s flagship \u2018Make In India\u2019 programme aims to increase the share of the manufacturing sector in India\u2019s GDP to 25% and create 100 Mn additional jobs in manufacturing by 2022.\r\n\r\n\r\n\r\n\r\n\r\n \r\n\r\nDespite Make In India\u2019s ambitious targets and commerce and industry minister Suresh Prabhu\u2019s assurances that the manufacturing sector\u2019s contribution to the GDP will soon hit 20%, the fact of the matter is that its contribution has largely been on the downslide \u2014 from 17.39% in 2006 to 15% in 2017-end.\r\n\r\nNobel Laureate (economics) Paul Krugman, who visited India last year, said, \u201cIn Asia, India could take the lead but only if it also develops its manufacturing sector, not only the services one.\u201d\r\n\r\nHow the manufacturing sector can help Indian startups, in the long run, can be understood by observing the China equation. Besides the Chinese government support, one of biggest reasons behind the success of the Chinese startup ecosystem (as well as the Israeli startup ecosystem) is their successful manufacturing sector. Today, the leading Chinese ecommerce company Alibaba is able to supply the cheapest products to over 184 countries because of the strong Chinese manufacturing sector.\r\n\r\nFurther, it\u2019s the manufacturing sector which is the fountainhead of the innovation ecosystem. US-based leading think tank Brookings Institution in its policy-related framework research marked that manufacturing provides not only high-wage jobs but it is also the major source of commercial innovation and is essential for innovation in the service sector.\r\n\r\n\u201cIndia\u2019s lack in the manufacturing sector could work against it, as it doesn't have the jobs essential to sustain the projected growth in demography. You have to find jobs for people,\u201d Krugman said.\r\n\r\nBut, to the contrary,\r\n11 Mn jobs were lost in 2018, says the Centre for Monitoring Indian Economy (CMIE) data. The data suggests that the overall unemployment rate has increased sharply from 6.6% in November 2018 to 7.8% in January 2019.\r\nAccording to an IndiaSpend report, while jobs have increased at a rate of 0.6%, the unemployment of youth with higher education grew at the rate of 16%, showing that they have been the worst hit.\r\n\r\nThus, the Budget should have prioritised the failing Skill India programme (which we will discuss in detail), increased unemployment, and the ailing manufacturing sector. However, it missed addressing all these problems.\r\n\r\nTo the Modi government\u2019s credit, however, is the better track record of inflation and fiscal deficit. It has maintained the fiscal deficit below 3.5 as well as the inflation rate \u2014 which once used to be in double digits \u2014 at a historic low of 2.19%.\r\n\r\nThe Budget 2019 has a revised fiscal deficit target of 3.4% (of the GDP), 0.1% higher than that of 2018 target.\r\n\r\n\r\nInterim Budget 2019: Outlay \u00a0\u00a0\r\n\r\n\r\n\r\nCourtesy: IndiaBudget\r\nThe government has made some big announcements for the middle class as well as farmers. With Swiggy, Ola, Flipkart, Dunzo, Zomato, UrbanClap, etc, fast becoming an integral part of the Indian middle-class life and agritech startups enroute to changing India\u2019s traditional farming sector, benefits offered to farmers and the middle class are definitely good news for startups as well.\r\nIncome Tax Rebate To Benefit Ecommerce, Consumer Startups\r\nThe biggest announcement this Budget was the full tax rebate extended to the INR 2.5-5 Lakh annual income class. While this will cost the government around INR 18,500 Cr, the initiative will directly benefit 3 Cr people.\r\n\r\nIn a rare move, while thanking taxpayers, Goyal, a chartered accountant by degree, also said that if one takes full benefits of Section 80C of the I-T Act, one would not need to pay any taxes even if their annual earning is up to INR 6.5 Lakh.\r\n\r\nFinance minister Arun Jaitley, who is currently in New York for medical treatment, told ANI that this will boost the morale of the middle class. He said, \u201cIn 2005, we had 18% middle class, in 2015 it was 29%, in 2025, it is projected to be 44%, so, within a generation, we will a large population graduating into the middle class. Further, the purchasing power of the middle class has increased.\u201d\r\n\r\nThis rise in purchasing power will directly\/indirectly benefit digital\/online startups as well, especially fintech, ecommerce, various hyperlocal emarketplaces, and healthtech startups.\r\n\r\nAs reported by Inc42 earlier, the tax rebate for those with up to INR 5 Lakh annual income was one of the top demands of fintech startups.\r\n\r\nThe Indian economy has been facing a liquidity crunch due to banking and NBFC frauds and scams such as the Punjab National Bank, ICICI Bank, and IL&FS crisis for the last few months. These scams exposed NBFCs and other fintech companies\u2019 insecurities as well as the lack of separate regulatory boards. The Reserve Bank of India (RBI) recently took a slew of measures in this regard, cancelling as many 31 NBFCs\u2019 licenses as part of the anti-money laundering measures.\r\n\r\nCurrently, there are over 12,000 NBFCs registered in India.\r\n\r\nOn one hand, the Supreme Court\u2019s ban on Aadhaar-based eKYC (now amended for banking and telecom) made the entire KYC process costlier. On the other, NBFCs have been facing a tight liquidity crisis, too, since the IL&FS fiasco.\r\n\r\nTherefore, increasing creditworthiness and liquidity in the market were the primary demands of fintech startups.\r\n\r\nBJP MP Dr Subramanian Swamy, who\u2019s an economist and former Harvard University professor, has been advocating dropping of income tax for the common man. While welcoming the budget and the move, he said, \u201cIt is an unstructured collection of making people happy announcements.\u201d\r\nDefence Budget: No Defence Innovation Fund Yet \r\nThe defence sector has been allocated INR 3.18 Lakh Cr against last year\u2019s revised estimate of INR 2.98 Lakh Cr. Boasting about the move, Goyal said it\u2019s the first time that over INR 3 Lakh Crore has been allocated to defence. However, factoring in inflation and currency fluctuation, the defence budget actually shows a decline.\r\nIn terms of GDP, the defence budget, at 1.51% of the GDP, is the lowest in the last 50 years, since the Indo-China 1962 War.\r\nHowever, the Budget provided a gateway \u2014 by making certain exclusions for startups in the tendering process \u2014 for startups to enter the Indian defence sector. Tonbo Imaging is the first defence startup having won a contract from the Indian defence forces.\r\n\r\nLast year in August, the defence ministry had launched the Defence Startup India Challenge, inviting startups to engage with defence related projects. However, the project is running behind the schedule and startups are not happy with the prize money allocated under the programme. Some of the startups who have participated in the programme said on the condition of anonymity, the challenge, being very challenging and demanding is not profitable at all.\r\n\r\nIn the last two years, the defence minister also launched a number of initiatives to support startups working in defence areas and increase their engagement with the Indian forces, with the overall objective of making India self-reliant when it comes to meeting its national defence requirements.\r\n\r\nIn 2017, the Modi government had also announced plans to form a Defence Innovation Fund to help defence startups. However, on December 26, 2018 Dr Subhash Bhamre, minister of state for defence, informed the Lok Sabha that the Fund is not been formed yet.\r\n\r\nWhile startups were expecting updates on the Defence Innovation Fund this Budget, the startups participating in the Defence India Startup Challenge were also expecting the government to double the prize money from the existing INR 1.5 Cr to INR 3 Cr.\r\n\r\nThe government has meanwhile, also announced the Defence India Startup Challenge II, while the 1st is still in the progress.\r\nDoes The Budget 2019 Focus On Agritech?\r\nAddressing the 12 Cr poor farmers of the country, Goyal announced the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme which will provide INR 6,000 per year per farmer (to be paid in three instalments) as income support to small and marginal farmers having less than two hectares of land. In a clear election gimmick, he also announced that the scheme would be implemented retrospectively from December 2018 and the first instalment would be disbursed within two months.\r\n\r\nBesides, under the Kisan Credit Card (KCC) scheme, a benefit of 2% interest subvention has been extended to farmers pursuing animal husbandry and fisheries. In case of timely repayment of the loan, they will get an additional 3% interest subvention.\r\n\r\nThe PM KISAN, as well as KCC scheme, aim to increase the liquidity of farmers and will not only help reduce farmer suicides in the country but also serve the Centre\u2019s aim to create farm-prenuers.\r\n\r\nGoyal also announced plans to launch a national programme on artificial intelligence (AI) identifying nine priority areas. A National Artificial Intelligence portal will also be developed soon. Agriculture or agritech is one of the nine priority areas of the AI programme. This bodes well for agritech startups, who don\u2019t have access to organised data for ML and AI application as fintech, ecommerce, and healthtech startups do.\r\n\r\nThe National AI programme will be launched based on the discussion paper for the National Strategy on AI prepared by NITI Aayog, released last year.\r\nAccording to the report, AI holds the promise of driving a food revolution and meeting the increased demand for food (globally, we need to produce 50% more food and cater to an additional 2 Bn people by 2050 as compared to today).\r\nAccording to Inc42 DataLabs, in 2016, 50 Indian agritech startups raised $313 Mn. For the first time, this sector saw widespread participation by startups. Intello Labs which uses image-recognition software to monitor crops and predict farm yields, Aibono which uses agri-data science and AI to provide solutions to stabilise crop yields are some of the agritech AI startups.\r\n\r\nThe launch of the National AI programme is definitely an encouraging step and can boost the potential contribution of agritech startups in India\u2019s agriculture.\r\nSkill India: Done And Dusted?\r\nSpeaking about the ongoing skill development programmes, Goyal, in his Budget speech, said that the Aspirational Districts Programme is providing targeted development to the 115 most backward districts of the country. He added that the programme has achieved notable results with improved performance on all indicators \u2014 health and nutrition, education, agriculture and water resources, financial inclusion, and skill development.\r\n\r\nSince the launch of Startup India in 2016, despite all the hullabaloo about reskilling India, there hasn\u2019t been much focus on Skill India, India\u2019s largest skills training and certification programme.\r\n\r\nSpeaking to Inc42, a number of edtech startups said that there is an increased to reskill India to improve employability.\r\n\r\nAccording to IndiaSpend Factcheck, with less than two years for Skill India\u2019s deadline in 2020, the government has placed just 1 Mn trainees in jobs \u2014 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.\r\nAs per a report entitled \u2018Young India and Work: A Survey of Youth Aspirations\u2019 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.\r\nThe Skill India programme has so far been implemented in correlation with various ministries and their related institutions. However, human resource (HR) tech and edtech startups that provide training and placement services or act as an e-marketplace for the same have been demanding that the Skill India Mission must be implemented in PPP. This will not only improve the employability quotient of Indian youth but could also help them get better placement offers.\r\nWhy Digital Village Mission Seems Mission Impossible \r\nSpeaking at the Parliament, Goyal also announced that the government will transform 1 Lakh Indian villages into digital villages over the next five years.\r\n\r\nWhile the announcement was welcomed by all, especially tech startups, does it stand any ground?\r\n\r\nAs of now, it appears to be simply yet another election gimmick as it depends on the next government (whoever comes to power) to take it further. Assuming even if the BJP government comes back to power, will it be able to execute this mission?\r\nThe Common Service Centers (CSCs), under the Ministry of IT and Electronics, is still in the process of setting up 700 digital villages, or digi gaons which was supposed to be completed by 2018.\r\nLet\u2019s take cues from another ambitious project of the government \u2014 100 smart cities by 2022. Launched in 2015, the Smart Cities Mission is supposed to transform 100 cities into \u201csmart cities\u201d by 2022 in terms of ICT, supply chain, housing, waste, wastewater management, and mobility infrastructure.\r\n\r\nThe Centre has approved a fund of INR 98,000 Cr ($14 Bn) and aims to attract INR 8.58 Lakh Cr ($120 Bn) from private players. While dozens of tech startups have been working on the project, if it is executed properly, it was to open up loads of opportunities for IoT, cybersecurity, robotics, WTE, ICT, AI, ML, real estate, and other tech startups.\r\n\r\nHowever, it\u2019s been four years since the announcement, and not a single city has been announced as a smart city.\r\n\r\nMinister of state of the Ministry of Housing and Urban Affairs Hardeep Singh Puri said that the proposed timeline for completion of Smart City Mission is:\r\n\r\n \tRound 1 cities: 2020-21\r\n \tRound 2 cities: 2021-22\r\n \tRound 3 cities: 2021-22\r\n \tRound 4 cities: 2022-23\r\n\r\nOn the current status of the project, housing and urban development minister Janardan Sigriwal, on January 1, 2019, informed the Lok Sabha that the government has so far allotted INR 16,604 Cr \u2014 roughly a third of the promised outlay of INR 48,000 Cr. Of this, only INR 3,560 Cr \u2014 7% of the outlay \u2014 has been utilised so far.\r\n\r\n\r\nHowever, according to an IndiaSpend report, no more than 1.8% of the funds released for the Mission has been utilised since its launch.\r\n\r\nHence, it doesn\u2019t look like the Smart Cities Mission will be completed within the given timeline. We can well imagine the fate of the new Digital Village mission.\r\nThe National AI Programme: Will It Take Off?\r\nKrugman also said that with the rise of AI, India might lose its international relevance in the services sector, hence, it must do its homework to strengthen the manufacturing sector.\r\n\r\nTo stay in the AI race and, thus, in manufacturing, Goyal, in an undisputedly welcome move, \u00a0announced plans to launch the National Programme on Artificial Intelligence.\r\n\r\nHe said that nine priority areas have been identified in which Centres of Excellence (CoEs) will be established and a National Artificial Intelligence portal will also be developed soon. Healthcare, education, agriculture, smart cities, and smart mobility are among the identified priorities areas for the national AI programme.\r\n\r\nWhile this will surely boost startups working in these spaces, will the CoEs be effective if higher education is not kept an area of focus?\r\n\r\nAs mentioned earlier, funding for higher education as well as agricultural universities and research institutes has declined in this budget. CoEs are usually established at best-in-class institutes such as IITs, IIMs, and AIIMs. However, such institutes, for the past few years, have been struggling to maintain their standards with thousands of teaching posts lying vacant.\r\n\r\nMany well-known personalities such as Nobel Laureate Amartya Sen who was the vice-chancellor at Nalanda University; nuclear scientist Anil Kakodkar \u2014 the man behind Pokharan who was the chairman of Board of Council at IITB; and IITD director Raghunath Kashinath Shevgaonkar resigned from their positions citing differences with former HRD minister Smriti Irani.\r\n\r\nThe government, while badly failing to maintain the legacy of such institutes, has announced the setting up of 14 new AIIMS, 6 IITs, and 7 IIMs. The IITs and AIIMS built after 2000 have 60% faculty members\u2019 positions lying vacant.\r\n\r\nThe aim of establishing the IITs, IIMs, and AIIMS was to provide the best quality education to Indians. However, the government\u2019s focus on expanding their numbers, along with the declining funding for R&D, has brought down the quality of these institutes. Until higher education is prioritised, the national AI programme can\u2019t achieve its full potential.\r\nAyushman Bharat: Future Engagement With Startups?\r\nThe Budget put aside INR 6,400 Cr for Ayushman Bharat \u2014 the world\u2019s largest healthcare insurance programme \u2014 which aims to cover 50 Cr of the Indian population.\r\n\r\nTerming a \u201chealthy India\u201d as the ninth dimension of the government\u2019s vision, Goyal said, \u201cOur government has rolled out the Ayushman Bharat scheme. By 2030, we will work towards distress-free healthcare and a functional and comprehensive wellness system for all. Such a healthy India built with the participation of women having equal rights and concern for their safety and empowerment.\u201d\r\n\r\nWelcoming the move, Vishal Gondal, CEO and founder GOQii said, \u201cAyushmann Bharat\u2019s vision of improving the lives of 50 Cr Indians \u2014 which will potentially result in cumulative savings of INR 3,000 Cr by the poor \u2014 is a testimony that the Indian government is strengthening the nation\u2019s health ground up. We support the same philosophy that is making healthcare easily accessible to all Indians and the government\u2019s efforts are evident through an increased focus on making medicines, healthcare services, and other health-related instruments more affordable.\u201d\r\nThe scheme, in future, might see increased collaboration between the government and startups to help bridge infrastructural requirements.\r\nDid The Budget Address The Core Demands Of Startups? \r\nApart from the national AI programme and the tax rebate for the middle class (which will boost the buying power of consumers), what does the Interim Budget offer to the Indian startup ecosystem? Not much, given the fact that the Budget did not address the core concerns of startups.\r\nAngel Tax: Not A Word On The Issue\r\nAccording to Inc42\u2019s Budget Survey 2019, 25% of the startups and investors had demanded that the finance minister address the angel tax issue, which has severely hit angel investments in India over the last few years.\r\n\r\nThe angel tax issue is entirely the subject matter of the Department of Revenue, which comes under the Ministry of Finance, and the interim finance minister was expected to address the same in his Budget speech. However, there wasn\u2019t any mention of angel tax in the Budget.\r\n\r\nHere, it\u2019s worth noting that the Department for Promotion of Industry and Internal Trade (DPIIT) (previously the Department of Industrial Policy and Promotion) organised a roundtable conference on February 4 to listen to the angel tax concerns of startups.\r\n\r\nHowever, the consultation between startup ecosystem stakeholders and the DPIIT has been going on for the past couple of years. Even after the roundtable, in the absence of legislative reform, the issue is unlikely to be resolved.\r\nFund of Funds Allocation And Implementation\r\nGoyal, while touting India\u2019s startup ecosystem as the second largest in the world in his Budget speech, reduced the funds allocated to the Startup India programme from INR 28 Cr to INR 25 Cr.\r\nUnder the FFS, which is part of the Startup India programme, only 163 startups have been funded (December 31, 2018).\r\nFor startups, it wasn\u2019t just a matter of getting funding but the way the scheme is being implemented. Currently, the Fund of Funds for Startups is disbursed through the Centre\u2019s Small Industries Development Bank of India (SIDBI), which invites applications from alternative investment funds (AIFs), which in turn invest in DPIIT-recognised startups.\r\n\r\nHowever, out of 350+ SEBI-recognised AIFs, only 35 have been successful in raising funding under the FFS. As many as 12 AIFs of these 35, despite having raised funding under the FFS, haven\u2019t invested in a single startup.\r\n\r\nThe startups were expecting the government to amend the route so it would be easier for them to raise funding under FFS.\r\nNo Tax Exemption Period Extension For Startups\r\nCurrently, the Centre provides a tax holiday to startups for the first three years under Section 80-IAC of the Income Tax Act. However, considering India\u2019s inadequate infrastructure, startups have been demanding the tax holiday be extended to at least 5 years.\r\n\r\nThe demand has not been entertained in the budget.\r\n\r\nWhat does the Startup India report card in the Budget implementation 2018-19 say?\r\n\r\nThe report card of the Startup India programme 2018-19 states that the agenda for reforming the tax and regulatory structure of venture capital funds, startups, and the AIF framework in India was examined in consultation with the Indian Private Equity and Venture Capital Association (IVCA) and concerned agencies\/departments and has been circulated among the respective departments for appropriate action.\r\n\r\nSo far, the following steps have been taken regarding exemptions in \u2018SEBI\u2019s AIF Regulations, 2012\u2019:\r\n\r\n \tSEBI, vide notification dated June 1, 2018, increased the maximum investment limit by angel funds in venture capital undertakings to INR 10 Cr from INR 5 Cr.\r\n \tIt enhanced the limit of overseas investment by AIFs and VC funds to $1250 from $500.\r\n \tSEBI, in consultation with market participants, issued the \u2018Operating Guidelines for Alternative Investment Funds in IFSC\u2019 on November 26, 2018.\r\n \tThe SEBI Board has approved revamping the Institutional Trading Platform as \u2018Innovators Growth Platform.\u2019\r\n\r\nNot happy with the Budget, the IVCA reiterated that its primary demand from the government in the full Budget is GST exemption (or reduction to 5%) on management services and other expenses incurred by AIFs managed by India-domiciled asset managers. \u201cThis move will ensure more offshore funds to onshore in India and will boost overall Indian Investments via the PE\/VC route and generate more employment in India,\u201d said the IVCA.\r\n\r\nThe IVCA also demanded clarity on the applicability of capital gains tax and exemptions for investors. Further, it highlighted its recommendations on angel tax, seeking safeguard for startups from Section 56(2) (viib) and from Section 68 of the Income Tax Act 1961.\r\n\r\n\u201cWe hope to get a resolution on this irrespective of the budget. The association and the ecosystem are hopeful that its demands will be picked up in the upcoming Finance Bill post the General Election,\u201d the IVCA added.\r\nIs Startup India A Flagship Project? The Budget Does Not Reflect So\r\nWhile some states \u2014 \u00a0Kerala, Andhra Pradesh, Goa and Rajasthan \u2014 had already released startup oriented policies, India\u2019s startup ecosystem got a push only after the Modi government announced its Startup India policy in 2016. The policy brought in a series of measures such as recognising business as startups, minimising norms, the formation of incubation centres, tax exemption under Section 80-IAC, and more.\r\n\r\nWith not a single flagship project running on schedule, the interim finance minister, in an unusual move, made a series of new announcements, which appeared to be an attempted cover-up of the government\u2019s failure in implementing these schemes.\r\n\r\nFurther, barring few projects like Smart Cities, the Budget estimates for the major flagship schemes have either been reduced or not mentioned in the outlay.\r\n\r\nThis includes Startup India, Skill India, Clean Ganga, Clean India, and many other projects. The Budget has clearly shifted attention away from the very core projects the government wanted to encash on. While the DPIIT and the CBDT are still looking into the angel tax exemption issue, here are the other demands and problems that startups wanted the Interim Budget to address:\r\n\r\n \tCreation of a Medical Innovation fund to support medtech and epharma startups\r\n \tCreation of a Defence Innovation Fund to support defence startups\r\n \tReduction in GST from 18% to 5% for edtech startups\r\n \tReduction in GST on EV components\r\n \tExtension of Section 80-IAC beyond the current three years\r\n \tAutomation of the route to Section 80-IAC as well as angel tax exemption\r\n \tFDI in epharma like ecommerce\r\n \tA tax breather (deferring TCS) should be given to ecommerce companies\r\n \tThe Government eMarketplace (GeM) should be more open and incorporative for startups\r\n \tSimplification of TDS, repayments in online lending\r\n \tReskill India to improve employability\r\n \tIntroduce an epharma policy\r\n\r\nThe top demands which were met are:\r\n\r\n \tThe tax rebate to the middle class in the INR 2.5 Lakh to INR 5 Lakh income category, which will bring liquidity back in the market\r\n \tReduction in import duty on EV components\r\n \tNational AI Programme and the creation of an AI portal\r\n\r\nClearly, the Modi government hasn\u2019t given apt attention to its pet project Startup India, which it often brags about. The PM has even said he hopes that startups will be the backbone of employment in India.\r\n\r\nOf course, the reforms have been slower than what the Indian startup ecosystem had expected from the Modi government. However, with a host policy initiatives and more drafts in process, by and large, it has been on the track.\r\n\r\nAnd, the reforms must continue and should remain on track, irrespective of the results of General Election 2019.