Budget 2024: What startup entrepreneurs expect from FM Sitharaman's interim Budget

Budget 2024: From job seekers to job providers, Indians are shifting towards entrepreneurship. With the new age of tech-driven businesses monikered as startups, young minds come together and manifest how creativity, innovation, and hard work can transform the way they work across various industries in the country. Startups are buzzing with ideas and energy, reflecting the optimistic outlook of the nation.

India has emerged as the third largest ecosystem for startups globally with more than 1,16,679 DPIIT-recognized ventures across the country, according to data available on the Startup India portal. Since the announcement of the Startup India Initiative in 2016 multiple schemes and initiatives have been introduced to boost the growth of India’s startup ecosystem. 

However, startup funding in India has declined to a five-year low figure in 2023 — $7 billion as compared to $25 billion received in the previous year, a nearly 73% decline from funding recorded in 2022 amid a worsening global macroeconomic environment tossed by geopolitical tensions.

India, which was ranked 4th in 2022 and 2021 among the highest-funded geographies globally, is now down to fifth place in 2023. Fintech, retail, enterprise applications, environment tech, and space tech have been the top five funded sectors this year. There are only two companies that entered the Indian Unicorn Club in 2023 — Incred and Zepto.

Startup Expectations from Budget 2024

Finance Minister Nirmala Sitharaman will present the Union Budget 2024 on February 1 next year. It will be an interim Budget as the elections for the Lok Sabha are due early next year. The full Budget for FY25 will be presented after the formation of the new government. This will be the sixth Budget of FM Sitharaman, who presented her first full Budget in July 2019.

Avinash G Singh, Executive Vice President of Investment Research and Advisory at Aranca said the Indian startup community will be looking for directions that could boost the ecosystem, especially concerning tax policies related to carry-forward losses, employee stock options, etc.

“These were some of the misses from the previous budget but are key to a healthy startup industry. In addition, any indication of setting up dedicated startup funds for new-age industries such as electric vehicles and renewable energy, over and above the existing Startup India Seed Fund Scheme (SISFS), could positively impact the sentiment,” Singh told LiveMint. 

India's need for rapid growth in 2023 and beyond will be mostly fueled by considerable advancements in several important areas, with the expansion of infrastructure serving as a vital catalyst, said Pradeep Misra, CMD of Rudrabhishek Enterprises Limited. 

According to Misra, India is anticipated to undertake a massive investment push between the fiscal years 2024 and 2030 to transform its infrastructure landscape. “We expect that sectors like roads, power, and ports will continue to be major contributors to this transformation.”

The tech industry expects incentives for research and development (R&D) initiatives, incentives for tech-driven solutions, cybersecurity support, and measures to bridge the digital divide would be pivotal for startups navigating the evolving business landscape, said Kiran Rudrappa-CEO & Co-Founder, Posspole. 

BeGig founder Shilpa Jain believes the startup and technology community hopes for policies that encourage a thriving environment for freelancers and white-collar gig workers. 

“Expectations are around certain tax incentives and easier compliance procedures to empower freelancers, helping them to work with international clients smoothly and enable them to contribute to the digital economy. Another hope is for the budget to address challenges related to healthcare for gig workers, ensuring their well-being. We are hoping for a forward-looking budget that acknowledges the integral role of freelancers,” Jain said. 

As one of the key players in the drone manufacturing industry, Scandron India Pvt Ltd's expectations for Budget 2024-25 revolve around fostering innovation. “We anticipate targeted incentives for R&D, tax breaks on technology imports, and streamlined regulations to propel the growth of the nascent drone ecosystem,” said Arjun Naik, the company's founder. 

He added, “A supportive fiscal environment will empower startups to invest boldly in cutting-edge technologies, driving job creation and global competitiveness. It will not only fuel economic growth but also position our nation at the forefront of the rapidly evolving drone industry.”

Mahankali Srinivas Rao (MSR), CEO of T-Hub said that Indian startups seek a transformative approach fostering a growth-friendly ecosystem. 

“Strategic recalibration of regulations, simplified compliance, and judicious adjustment in capital gains taxation is key to unlocking crucial funding. Seed funding, especially in AI, healthcare, and cleantech, can act as catalysts for innovation, propelling our nation forward,” Rao said. 

“Tax breaks and incentives are the lifeblood of Indian startups. Extending the current tax holiday and permitting a more extended period for carrying forward losses would offer much-needed breathing space,” he added. 

“This will be the first budget after the Digital Personal Data Protection Act (DPDP) became effective in 2023, so hopefully, it will continue to make data protection a top priority in compliance with global data privacy and cybersecurity regulations,” said Arun Mamgai, Lead Cybersecurity, Data Science Specialist and Startup Mentor.

He said that the budget should include supportive tax policies for Artificial Intelligence (AI), Cybersecurity, and IoT (Internet of Things), making India a global hub for emerging technologies and providing the tech sector an opportunity to become an international leader in these initiatives. 

The budget should include comprehensive incentives for research and development (R&D) that will bring strong momentum in AI and Cybersecurity, resulting in viable job growth, Mamgai said, adding that the start-up ecosystem is expecting policies that will foster the innovation and transformation needed to position India as a global champion not only in IT service but also in global product development.

Pool of initiatives for startups in Budget 2023

The Government of India has taken a series of steps to promote startups in India the Fund of Funds for Startups (FFS) scheme, Startup India Seed Fund Scheme (SISFS), and Credit Guarantee Scheme for Startups (CGSS) were implemented under the Startup India initiative to provide capital at various stages of the business cycle of a startup.

In the Budget of 2023, the central government has announced multiple things like tax concessions for startups, custom duty exemptions for EV-related capital goods and machinery, the Drone Shakti Program, etc.

FM Sitharaman, while presenting the Budget 2023-24, extended the period of incorporation for income tax benefits to eligible start-ups till March 31, 2024. She also announced the benefit of carry-forward of losses from 7 years to 10 years.

In addition, the government promoted agriculture-based start-ups by setting up the Agriculture Accelerator Fund to bring affordable solutions to farmers’ challenges. The government was even able to digitalize about 63 primary agricultural credit societies and established cooperative models for the development of small and marginal farmers' economies.

The government also announced to establish the centers of excellence for artificial intelligence in major universities to facilitate 'Make AI for India' and 'Make AI work for India. Besides this, the Centre promised to set up a National Data Governance Policy to help academia and startups with anonymized data.

The revised credit guarantee scheme also came into effect on April 1, 2023, with the corpus being infused with ₹9000 crore which allowed MSMEs to receive an additional ₹2 lakh crore in collateral credit.