Union Finance Minister Nirmala Sitharaman is scheduled to unveil Union Budget 2024 on Thursday, February 1, at 11 am.
On January 24, Sitharaman participated in the ‘Halwa Ceremony’, a tradition observed before the annual Budget presentation. The ceremony marks the commencement of a ‘lock-in’ period for officials before the initiation of the printing process for various Budget-related documents.
Ahead of the Budget session of Parliament, Prime Minister Narendra Modi on Wednesday said that the session would see the presentation of an interim Budget, as is customary in an election year.
With the Lok Sabha elections just around the corner, the interim Budget, which will be Sitharaman’s sixth presentation in the Lok Sabha and first in the new Parliament building, has garnered a lot of interest from industry leaders across the entire business fraternity.
Key players from the Indian startup ecosystem are hopeful that the interim Budget 2024 will bring some respite to Indian startups as 2023 was a challenging year for the ecosystem. Only two unicorns emerged during the year and the extent of layoffs by startups stood at an all-time high. Venture funding into Indian startups also declined by 53% in 2023.
Startups, entrepreneurs, investors, and other stakeholders now hope that Budget 2024 will boost the current environment for investments in startups and emerging businesses through tax reforms.
Let’s take a look at some of the expectations from the Indian startup ecosystem.
VC and PE investors seek clarity
As the startup funding winter comes to a head, both companies and investors are bracing for some tough times ahead. Apart from uniform taxation across the ecosystem, venture capital (VC) and private equity (PE) players hope the interim Budget will bring some clarity to recent circulars issued by regulatory bodies.
Startups have had to deal with challenges in raising equity rounds in recent times. According to a report by market research and data platform Tracxn, 2023 saw the lowest funding raised by startups in the last five years, with a 72% decline year-on-year.
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VC and PE demands for Budget 2024
” align=”center”> VC and PE demands for Budget 2024
On the other hand, market regulator SEBI has been pushing for regulatory compliance and transparency for Alternative Investment Funds (AIFs), which form the basis of private investment vehicles in India.
Industry body Indian Venture and Alternate Capital Association (IVCA) says that it anticipates potential rule changes and clarification on circulars to address concerns of the industry.
EV sector pins hope on FAME III and tax breaks
The Indian government has introduced several policies to encourage the adoption of alternative mobility solutions, particularly ones that rely on clean energy such as electricity.
The first and the second installations of the government’s Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policies have not only helped increase the adoption of electric two-wheelers for personal mobility but also greatly encouraged their deployment for public transportation and commercial operations.
With the FAME II scheme expiring on March 31, 2024, the industry has pinned its hopes on a revival scheme of sorts that will continue to boost the sector and make it more attractive to external investment.
The biggest ask the industry has from the revised scheme is the continuation of existing purchase subsidies for two-wheelers, and the implementation of subsidies for four-wheelers.
The EV industry is also seeking incentives for charging infrastructure, including subsidies in the form of reduced rates for land or space allocation to set up charging stations, operational support to alleviate ongoing maintenance costs, potential tax incentives, public-private partnerships, cheaper electricity, and allocating special zones on highways for charging stations, among others, to further accelerate the widespread development and accessibility of EV charging networks.
Edtech sector seeks tax breaks, govt schemes, and funds
India’s edtech sector has been in a state of turbulence for some time now, marked by significant layoffs, liquidity crisis, and funding crunch.
Edtech firms are fervently hoping that Finance Minister Nirmala Sitharaman’s interim Budget for 2024 will offer some relief. They anticipate various measures such as tax exemptions, reduced GST rates, improved digital infrastructure, and increased fund allocation to fuel the sector’s growth.
The education sector received a significant boost in Budget 2023, with a total allocation of Rs 1,12,899
crore—an 8% increase from the previous year’s outlay. Of this, Rs 68,804 crore was designated for school education and literacy, while Rs 44,094 crore was earmarked for higher education.
Women want tax cuts, emphasis on mental health
In last year’s Budget, the government allocated Rs 25,448.75 crore to the Ministry of Women and Child Development—an increase of Rs 267 crore from the previous year’s Budget allocation. Additionally, Finance Minister Nirmala Sitharaman also proposed the Mahila Samman Saving Certificate, offering a fixed interest rate of 7.5% for two years.
As women take charge in both entrepreneurship and the workforce, women leaders and professionals expect tax cuts, more focus on women’s healthcare, mental health, upskilling, and the need for shelter homes from the finance minister this Budget.
Additionally, women entrepreneurs are also expecting an increase in gender budget outlay, funding and opportunities, additional savings schemes for women, measures to boost women-led innovation, as well as women-centric industrial policy.
Technology, research, investment top demands for agritech
Last year’s Union Budget made strides in addressing key reforms for the agri sector—right from increasing farmer credits and green initiatives to precision farming. Financial support for various agricultural verticals including fisheries and animal husbandry, along with increased focus on artificial intelligence-led processes, also emerged as major themes.
‘Green growth’ was one of the seven priorities enlisted in Budget 2023. This year, the focus remains on digitising the agriculture sector with special emphasis on innovation, additional financial assistance for agritech startups, and data privacy and security.
Climate-tech sector wants subsidies, tax rebates on imports
Green growth was one of the ‘Saptarishi’, or seven guiding principles, of Budget 2023 which Finance Minister Sitharaman professed would direct India through ‘Amrit Kaal’. It focused on areas such as fuel, energy, mobility, equipment, and power usage, and was hopeful of providing “large-scale green job opportunities”.
While it was a step in the right direction—the biggest being the energy transition—it failed to address several aspects of climate change, including building resilience among vulnerable populations in India, which are the most impacted by extreme climate change events such as floods, heatwaves, cyclones, etc.
Anticipated to be a vote-on-account due to the impending general elections later this year, Budget 2024 is eagerly awaited by the climate-tech industry, which is hoping for government support and incentives.
MSMEs want access to credit, PLI schemes, incentives
Policies for streamlining business operations, PLI schemes, incentives, and credit lines, among many others—Indian MSMEs have high expectations from the Budget 2024.
With the government’s focus on modernisation, digitalisation, and infra-investments, the Union Budget should include incentives, subsidies, and grants for MSMEs, say experts.
MSMEs are also expecting a tax waiver in their favour in the Budget.
Mandeep Arora, Managing Director and Co-founder of Delhi-based UBON—a mobile accessory brand—says businesses highly anticipate announcements regarding tax benefits, reduced tax rates, and an extension of the employee stock ownership plan tax reforms for startups.
Dinesh Gulati, COO of IndiaMART, believes that digitalisation is critical to integrating unregistered MSMEs, aided by portals like UDYAM, eShram, and ASEEM portals.
Gaming sector seeks more incentives, tax relief for esports
The government hiking the GST tax slab for real money gaming firms from 18% to 28% on total winnings came as a body blow to the gaming industry last year. Several companies, including prominent players like MPL, had to resort to layoffs to cope with the change.
On the other hand, esports—a smaller chunk of the gaming industry—saw significant growth. The segment grew to nearly $3.1 billion in FY23, as per a report by Lumikai.
While clear taxation was part of the wishlist for the sector last year, gaming companies hope this year’s Budget will offer some tax cuts. The industry also seeks greater recognition of esports, and hopes that the Budget will offer a distinction between real-money gaming firms and non-real-money gaming firms.
The esports sector is also hoping for a dedicated allocation of funds, as per Lokesh Suji, Director of the Esports Federation of India (ESFI) and Vice President of the Asian Esports Federation.
Hospitality industry expects dedicated ministry and tax incentives
Currently pegged at $24.61 billion, the Indian hospitality sector is expected to reach a whopping $31.01 billion by 2029, recording a CAGR of 4.73% in the forecast period.
Additionally, with the recent series of events—the promotion of Lakshadweep, and the inauguration of Ayodhya Ram Mandir, the country’s hospitality sector is sure to benefit.
“The Union Budget 2023 provided a significant boost to tourism through its multifaceted mission mode…It is important that the momentum is maintained in the upcoming interim budget, by announcing policies that will support the demonstrated resilience of the sector and foster the expansion of hotels to bridge the huge gap between the supply of rooms and their corresponding demand,” says Siddhant Salgaonkar, Director of Sales at Hilton Goa.
While no major declarations are expected from the interim Budget, stakeholders await some of the key announcements and policy measures such as a dedicated ministry, industry status, tax incentives, and the promotion of eco-friendly and sustainable practices to boost the tourism and hospitality sector ahead of Budget 2024.
Edited by Kanishk Singh
