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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.