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India’s technology, GCC (global capability centers) and start-up landscape continues its growth trajectory to become one of the leading global hubs for innovation and a digital powerhouse for the world. The Government’s Budget is focused on creating a supportive environment for the tech sector and boosting investor confidence, which is directionally very positive.
With macro-economic headwinds, AI disruption and the slowing growth of Indian tech players, the tech sector is at a pivotal juncture today.
According to the industry, the tech sector contributes over USD 250 billion in revenues and employs over 5 million people, with talent and skilling as key growth drivers. The economic survey highlighted the growth seen in GCCs, generating USD 46 billion in 2023 and projected to reach USD 121 billion by 2030, further emphasising the importance of talent and skilling.
The budget squarely addresses the need for job creation and skilling, which is much needed and a progressive step. It also highlights the Government’s focus on building digital public infrastructure (DPI) at scale for better governance and public benefit.
The Budget also mentions about focus on innovation, R&D and plan to operationalise the Anusandhan National Research Fund for basic research and prototype development. Further, to increase private sector-driven research and innovation at commercial scale with a financing pool of INR 1 lakh crore, in line with the announcement in the interim budget.
There have been a series of positive announcements that will boost the technology sector, creating new avenues for start-ups and tech businesses to thrive.
Firstly, continued focus on tech adoption to strengthen country’s digital public infrastructure (DPI) will further drive digitalisation and empowers the economy. The call for private sector scale-up in DPI applications promises a surge in productivity and innovation, offering a significant lift to technology start-ups and tech firms.
For example, India’s DPI initiative in agriculture is set to be a cornerstone for the sector’s transformation. The government’s 3-year mission to digitise 6 crore farmers and their lands, alongside a comprehensive Kharif crop survey and Kisan Credit Card expansion, will not only enhance farming efficiency but also be a catalyst for AgriTech start-ups, paving way for groundbreaking solutions in farming, driven by data accessibility and bolstered by government support.
Secondly, the launch of INR 1,000 Cr venture capital fund aimed to boost the space economy represents a pivotal opportunity for spacetech start-ups. This strategic investment, aligned with the government’s prioritisation of innovation, research and development as one of the nine focus areas, will provide the necessary upthrust to spacetech start-ups, enabling them to scale and commercialise their innovation that requires a lot of capital. The segment has witnessed traction with space start-ups increasing from 1 in 2014 to nearly 200 in 2024.
The Economic Survey covers the potential impact of Gen AI on job disruption especially BPO sector and calls for a mindful implementation of AI along with job creation.
The Government’s focus on education and skilling initiatives with its five dedicated schemes, is a transformative move for India’s youth. With a Rs 2 lakh crore allocation, these initiatives aim to skill and create opportunities for 4.1 crore young individuals over a period of five years. For the tech industry, amidst AI advancements, these schemes are crucial for developing new-age skills like AI and cloud computing, ensuring the Indian tech workforce remains at the forefront of global innovation.
Fourthly, the government’s proposal to waive customs duties on 25 critical minerals aims to empower essential sectors such as space, defence, telecommunications, and high-tech electronics. This exemption is designed to stimulate the mineral processing industry, ensuring a steady supply for essential sectors, and enhancing India’s domestic manufacturing depth and competitive edge in exports. Furthermore, increased BCD (basic customs duty) on Printed Circuit Board Assembly (PCBA) for telecom equipment while reducing BCD on mobile phones, accessories, and chargers can be seen as a positive step towards encouraging domestic manufacturing.
Lastly, the abolition of the angel tax is a pivotal move for India’s thriving start-up ecosystem, currently the third largest globally. This elimination removes a bottleneck, paving the way for a surge in startups in the coming years. It will further boost funding opportunities, rejuvenate investor confidence, and attract more investors.
In addition, proposal to repeal 2% equalisation levy, effective from 1 August 2024 will simplify the tax landscape, enhancing ease of doing business in India.
Other key enablers, such as allocation of INR 551 Cr towards “India AI mission”, efforts in data governance and data management by utilisation of sector databases and tech tools under Digital India Mission and establishment of integrated technology platform for Insolvency & Bankruptcy Code (IBC) ecosystem are some of the other good moves.
Direct overseas listing is a miss. This could have provided an alternative for Indian start-ups to tap overseas capital markets especially hi-tech and DeepTech start-ups. Also, one would have liked mention around governance and regulations around AI, cyber focus, etc. which I am sure would be covered soon.
Overall, the budget sets out a robust platform and pathway for the tech sector and provides strong impetus to make India digital, tech, AI and electronics powerhouse of the world.