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Budget 2024 – Empowering Startups and MSMEs, and Doubling Down on DPIs and R&D

This 2024 Budget coming post-election has aroused the most curiosity since the budget of 2014. It is for two reasons that this 2024 Budget is significant as we work towards a Product Nation: Reason 1 is for this budget’s Innovation and related public spending on private innovation and Reason 2 is for the next-generation reforms to create a simpler regulatory environment. It is heartening to note that both items are priority areas.

The continuity of the interim budget announcement of 1 lakh crore for private R&D funding is encouraging enough for the startup ecosystem. Under the Vishvamitra initiative, iSPIRT has been pursuing funding at scale for private sector-led R&D and its commercialization. The announcements of funding research in highly sensitive strategic areas such as Small Modular Nuclear Reactors and setting up a 1000 crore venture capital fund for the Space economy have been on our list of initiatives to advocate for and it is heartening to see the Government address R&D investments in geopolitically sensitive areas. 

The Finance Minister announced, “We will set up a mechanism for spurring private sector-driven research and innovation at commercial scale with a financing pool of 1 lakh crore.” What and how this mechanism will be set up will be critical for enabling R&D in the country to achieve Viksit Bharat 2047.

Among iSPIRT’s top  initiatives is the Stay-in-India checklist, and the request to remove the “Angel Tax” for all classes of investors. The removal of angel tax is the biggest highlight of this budget for the startup ecosystem. The announcement comes after decades of struggle and persuasion. Finally the government has recognised the role of startups in generating employment and has acted in a positive direction. 

There is a huge amount of work pending to reform Ease-of-Doing Business (EoDB) if India is to achieve the set objective of Viksit Bharat 2047. The Finance Minister stating an  intent to “formulate an Economic Policy Framework” to set the “scope of the next generation of reforms for facilitating employment opportunities and sustaining high growth” perhaps speaks about the government’s thinking on it.  

The government’s intention to involve states in ease of doing business (EoDB) efforts is also a very welcome step. We hope the next moves are swift and the government seriously attempts to at least be in the top 10 EoDB destinations globally. This is much needed for MSMEs, Startups, and even to attract FDI in GCCs. The economic survey tabled yesterday also aligns with this thought process. 

“We have successfully used technology for improving productivity and bridging inequality in our economy during the past 10 years” said the budget speech. Public investment in Digital Public Infrastructure (DPI) coupled with innovations by the private sector has been a well-accepted norm now. The Government is serious about using the DPI approach in multiple areas, from agriculture to education, etc. The increased penetration of DPI will eventually help digitalization and penetration of software products in the economy. 

The budget recognising MSME credit as one big area requiring attention has also called for several actions in this direction. One important step is involving PSU Banks to build their in-house capability to assess MSMEs for credit using an MSME’s digital footprint, instead of relying on external assessment. This will encourage banks to develop cash flow based lending on lines of another initiative of iSPIRT – the Open Credit Enablement Network (OCEN) that focuses on information based collateral lending rather than asset based collateral lending which in turn could help in developing a new credit assessment model that evaluates the digital footprints of MSMEs in the economy. 

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Interim Budget 2024 – DPI’s the new factor of productivity

This being an interim budget, much was not expected as far as new announcements and taxation changes. However, for iSPIRT and the Product ecosystem of the country, it is heartening to know that some of our initiatives and thoughts as a ‘think-tank’ have become central to thinking of Government at the leadership level. The following are important to note

The Finance Minister mentioned that “DPI (digital public infrastructure), a new factor of production in the 21st century, is instrumental in the formalization of the economy”. She also mentioned the G-20 successes. ISPIRT pioneered the concept of DPI and played a vital role in rolling out many DPIs and covering the DPI advocacy as a knowledge partner to the Digital Economy Working Group. 

The second announcement that can hugely impact product nation-building is the funding of Research. FM announced that, “A corpus of rupees one lakh crore will be established with a fifty-year interest-free loan. The corpus will provide long-term financing or refinancing with long tenors and low or nil interest rates. This will encourage the private sector to scale up research and innovation significantly in sunrise domains.” Also, the thought of generating employment and empowering youth was central to this announcement. We hope that post-election a robust mechanism can be developed to implement this and capitalize on nation-building. This announcement is also important from iSPIRT’s thought process where a continuous push under its “Vishwamitra” initiative is being out on funding R&D in multiple ways at scale. 

Also notable is,  a new scheme for deep-tech technologies for defence aiming at expediting ‘Aatma-nirbharta’ is on the anvil. 

Although nothing new has been announced, Start-ups are central to the Government’s thinking for economic development. 

Overall it is a futuristic thinking budget speech with an emphasis on deep-tech, research funding, Capital inflows and startups along with capex and infrastructure. 

Though there was a mention of ‘Reform, Perform, and Transform’ as a guiding principle, the budget did not touch upon any specific reform or intent on Ease of Doing business. We wish this becomes an important agenda item along with funding research for our businesses to succeed in global competition. 

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iSPIRT’s response to Union Budget 2023

Budget 2023 – Digital Public Infrastructure (DPI) the ‘Mantra’ for New India

iSPIRT Foundation, a technology think-and-do tank, believes that India’s hard problems can be solved only by leveraging public technology for private innovation. iSPIRT as a think tank pioneered the Digital Public infrastructure (DPIs)

India is at the cusp of what could be the most exciting quarter century of its post-independence existence, referred to as ‘Amrit Kaal’ by the Economic Survey yesterday and today in the Budget speech. The Economic Survey also mentioned that GDP could be boosted by 1% by Digital Public Infrastructure (DPIs), where India is stealing a March on the world for sure. 

The second testimony to the important contribution of DPIs to the economy comes in the budget speech today when the finance minister stated, “India’s rising global profile is because of several accomplishments: unique world class digital public infrastructure, e.g., Aadhaar, Co-Win and UPI” in the forefront. 

Development of DPIs, Stay-in-India Checklist (for Ease of Doing business of Startups), and a ‘jugalbandi’ between public technology and private innovation, through techno-legal regulations, are central to iSPIRT’s work in an attempt to build Product Nation. 

The union budget 2023, brings in cheer to see attempts on the following:

  • Digital Public Infrastructure: The resolve to deepen the DPI and the belief in their role in economic growth. India Stack to build the DPIs has become central to the thought process. Taking the queue ahead the budget 2023 announced the development of DPI for Agriculture, which will be an open source, OpenAPI digital public good, to build inclusive farmer-centric solutions, credit & insurance, farm inputs market intelligence. An Agriculture Accelerator Fund has been announced to promote Agritech start-ups.
  1. Vigyan Infrastructure: efforts to boost R&D, though limited to some sectors right now. Notable among these are – It encourages private sector R&D teams for encouraging collaborative research and innovation in select ICMR labs in the PPP model
  2. One hundred labs for developing applications using 5G services will be set up in engineering institutions. 
  3. Center of Excellence for AI for “Make AI in India and Make AI work for India
  • MSMEs funding & growth is part of the budget thought process, which may lead to the use of another DPI called Open Credit Enablement Networks (OCEN) for enabling MSME funding.
  • The importance of Ease of doing business is reflected in some announcements like using PAN as a Common digital identifier and entity DigiLocker for MSMEs.
  • Wanting to keep the startup revolution going is reflected in the intent to use Startups to build technology in multiple sectors and also use the policy for a new India.

However, beneath all the euphoria, some chronic issues remained to be addressed. The disappointment is on the Stay-in-India checklist (a list of Ease of doing business issues for Startups) to stop startups from slipping from India, which has not been addressed. The checklist is being continuously pursued by iSPIRT and is much needed to provide a competitive edge for India to refrain startups from leaving her jurisdiction.  

Overall it’s heartening to see the vision statement in budget, “Our vision for the Amrit Kaal includes technology-driven and knowledge-based economy”.   

About iSPIRT Foundation – We are a non-profit think-and-do tank that builds public goods for Indian product startups to thrive and grow. iSPIRT aims to do for Indian startups what DARPA or Stanford did in Silicon Valley. iSPIRT builds four types of public goods – technology building blocks (aka India stack), startup-friendly policies, market access programs like M&A Connect and Playbooks that codify scarce tacit knowledge for product entrepreneurs of India.

For more, visit www.ispirt.in.For further queries, reach out to Email:  [email protected] or [email protected].

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iSPIRT Foundation’s Response to Union Budget 2022

Union Budget 2022 – Imprints of using Digital public infra with Private innovation

iSPIRT Foundation, a technology think-and-do tank, believes that India’s hard problems can be solved only by leveraging public technology for private innovation through open APIs. 

This “innovation architecture” is now going mainstream. The Union Budget 2022 mentions five efforts that iSPIRT has been intimately involved in:

  • India Stack – Promoting digital economy & fintech, technology-enabled development, energy transition, and climate action.
  • Health Stack – An open platform for the National Digital Health Ecosystem will be rolled out. It will consist of digital registries of health providers and health facilities, unique health identity, consent framework, and universal access to health facilities.
  • Digital Sky – Use of ‘Kisan Drones’ will be promoted for crop assessment, digitisation of land records, spraying of insecticides and nutrients.
  • Digi-Yatra & Logistics Stack – Multimodal Movement of Goods and People. The data exchange among all mode operators will be brought on the Unified Logistics Interface Platform (ULIP), designed for Application Programming Interface (API). 
  • DESH (Digital Ecosystem for Skilling and Livelihood) Stack – This aims to empower citizens to skill, re-skill or upskill through online training. It will also provide API-based trusted skill credentials, payment and discovery layers to find relevant jobs and entrepreneurial opportunities. 

This embrace of the new innovation architecture is a seminal moment for our economy and society. However, more could have been done.

Some low-hanging opportunities missed are:

  1. A few positive announcements have been made for the funding ecosystem for Indian startups (such as capping the surcharge on long term capital gains and an expert committee to suggest measures to boost venture capital and private equity investment in startups). While these are in line with iSPIRT’s ‘Stay-in-India’ checklist effort, immediate actions on some of these (as well as other) issues in the checklist will help further. 
  2. Ease of Doing Business is mentioned in the Budget speech, but no specific actions are announced. 
  3. 5G is a big opportunity. India can leverage this to become a telecom equipment provider in Radio Access Network (RAN). iSPIRT’s SARANG effort is focused on this. There should have been specific capital allocations and Design Linked Incentives (DLI) for OpenRAN as a strategic area in Mission mode.

Overall, the Budget is well-balanced and ushers in new thinking about innovation in emerging sectors that are strategic to the country.

Sharad Sharma, Co-founder & Volunteer – “In the coming years, India needs to usher in a product economy in Defence, Electronics, BioPharma, ClimateTech (including EVs), FinTech, HealthTech and Software. This Budget sets the stage for this new innings by having a focus on sunrise industries.” 

Sudhir Singh, Fellow – Policy Initiatives – “Since the announcement of National Policy on Software Product (NPSP), no Budget has been able to consider making it active and announce measures, e.g. Digital Product Development fund could help bolster “Digital India” and other strategic measures could help galvanise a Software product Industry of India.” 

Sanjay Khan Nagra, Member – Donor Council & Volunteer – “Some of the measures announced by the FM for startups (tax parity for unlisted and listed securities, extension of concessional tax regime for startups and manufacturing startups, setting-up a committee for encouraging VC/PE investments in startups, etc) and digital assets/blockchain ecosystem are commendable and in line with long-standing industry demands. We hope the momentum continues with the pragmatic implementation of these policy measures and further regulatory actions building on top of these measures.”

About iSPIRT Foundation – We are a non-profit think-and-do tank that builds public goods for Indian product startups to thrive and grow. iSPIRT aims to do for Indian startups what DARPA or Stanford did in Silicon Valley.

iSPIRT builds four types of public goods – technology building blocks (aka India stack), startup-friendly policies, market access programs like M&A Connect and Playbooks that codify scarce tacit knowledge for product entrepreneurs of India. For more visit: www.ispirt.in

For further queries, reach out to Sudhir Singh (+91) 96505 76567, Email us:  [email protected] or [email protected]