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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]

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iSPIRT’s Official Response to Union Budget 2021

Boost for HealthStack, but no gains for Industry

The Pandemic had decided much of the flow of financial planning in a country like India. The emphasis on Atma Nirbhar Bharat right at the outset in PART A of speech is on expected lines in a changed scenario post pandemic. Health being given importance forming the first pillar of six pillars was also expected based on ongoing developments.

For decades, India has underinvested (both in public and private spend) in the overall health of the population, and it took a global pandemic to dedicate a new Pillar of the budget to improving health outcomes and increase funding by 130%. It is heartening to see a substantial budget allocation of 64,000 Crore towards the Aatmanirbhar Swasth Yojana to improve primary, secondary and tertiary care. With the National Health Authority ​getting veteran RS Sharma (former Chairperson of TRAI and UIDAI) as its new CEO, this scheme could be implemented in a digital-first manner taking advantage of the advanced architecture of the National Digital Health Mission.

At iSPIRT we are pleased to see this development, and look forward to a year of accelerated efforts to establish key public digital infrastructure that could improve healthcare.

It was also encouraging to see Innovation and R&D mentioned as one of the pillars; this is a sign the Government is keen on supporting an innovation driven economy and the Indian products eco-system. The National Research Foundation outlay of 50,000 crores over 5 years is applicable across all sectors. Production linked incentive (PLI) schemes were announced for 13 sectors. This is a welcome move to bring in a thinking of promoting Indian Product Champions. However, the details of structure and which sectors and playgrounds the Government is attempting to promote will determine the success in the global landscape.

At iSPIRT we have been advocating development of niche playgrounds in sectors where India has a competitive advantage such as Software products in all sectors including defense, telecom etc. Whether the outlay of 1.97 lakh crores, over 5 years starting FY 2021-22 will be enough is to be tested.

The Continued emphasis on digital payment promotion with a new proposal of 1,500 crores and not losing sight of startups movement is heartening for the Software product industry. Improving norms to formation of a 1 person company will encourage innovation, entrepreneurship and startups. The Government seems to also be inclined to use technology to improve compliance via faceless assessment and a reduced limit on reopening of assessment limits, which are also efforts in a positive direction.

The biggest missed opportunity was around support to MSMEs – which are the key to driving scalable innovation. The MSME sector continues to need life support post the pandemic. While the Government slotted in a 2X budget estimate for MSMEs, it is not clear what this will go towards or that it will help the sector at scale. What remains to be addressed is critical changes that could MSMEs, ease frictions to accelerate growth.

We wanted to see more action on Ease of doing business, especially around removing bottlenecks for tech companies across sectors. In a digital economy, the small business sector is the lifeblood of future growth, and the government will need to think hard about the true means of galvanising this sector.

About iSPIRT Foundation

We are a non-profit think tank that builds public goods for Indian product startup 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. visit www.ispirt.in

For further queries, reach out to Sudhir Singh​, email: ​[email protected] Or ​Karthik KS​, email: ​[email protected]

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Reactions from #iSPIRT to the Union Budget presentation

iSPIRT is happy to note the Union Finance Minister, Mr. Arun Jaitley’s thrust in the direction of boosting the digital infrastructure in the country with specific reference to the Aadhar.

Aadhar powered by India Stack will allow people to offer presence less, cashless paperless service delivery to millions. Also digital literacy will also provide a big impetus in the rural areas.

The second initiative of iSPIRT which has been positively impacted by the Union budget is the ease of doing business in India and therefore the incentive for companies to Stay-In-India through the capital gains incentives where there will be no capital gains tax applicable if the funds so received are invested in a notified fund of funds by individuals in specific start-ups. The other major step is the decision to tax the Royalty Income from Patents developed and filed in India at only 10%, this we believe will certainly encourage companies to file more IPR in the country.

That said, we are disappointed with no attention being given to easing taxation norms of software companies where there is significant friction, the confusion on “goods” verses “service” tax on online downloads, TDS on sale of Software products and competition from foreign selling B2C products without any tax in India.

iSPIRT continues to work closely with the Government of India to enable the software product companies and start-ups to make the next leap with incentives from the Government. The Union Budget just presented is semi-sweet with specific sops being given to the start-up community in continuation of earlier policy announcements made by the Prime Minister Mr. Narendra Modi. There is a lot more that could be done to incentivize innovation and specifically ease the TDS conundrum which start-up and product companies find themselves adversely caught in.

Here are some specific comments from the iSPIRT team:

According to Mohandas Pai, Advisor, iSPIRT, “The Government continues to incentivize the start-up ecosystem as we have seen in the recent budget pronouncement. I am glad that the Government clearly recognizes that start-ups can be powerful problem solvers for the myriad issues facing the country and in turn generate employment as well. The Government’s decision to allow for 100% deduction of profits for 3 out of 5 years between April 2016 and March 2019 is certainly a welcome step that will boost start-ups.”

“While there are no major sops announced for the software product industry, the Government must understand that incentives to this segment of the industry will result in an exponential leap in exports and place India in an unshakable position on the world software product stage. That said, the decision to tax the Royalty Income from Patents developed and filed in India at only 10%  is a good move by the Government and will certainly encourage companies to develop and file more IPR in the country ,“ says Vishnu Dusad, Co-Founder & Governing Council member of iSPIRT & MD, Nucleus Software Exports Ltd.

Sharad Sharma Co-Founder & Governing Council member of iSPIRT says, “Start-ups in the country will certainly benefit from the budget announcement of amending the Companies Act to announce easier and swifter registration of companies. Another positive announcement from the budget speech by Mr. Arun Jaitley has been the focus on Aadhar for subsidy delivery. The Aadhar powered India stack from authentication to exection, coupled with the open API policy in India, can certainly transform the way in which digitally focused companies can reach the masses quicker and more effectively.”

Says Jay Pullur, Governing Council member of iSPIRT & CEO & Founder of Pramati Technologies.“The Government through the Union Budget has done well to do away with capital gains taxation if the funds so received are invested in a notified fund of funds or in specific start-ups. Of course, a lot more can be done to ease working norms for the software industry by looking into issues like dividends from overseas subsidiaries and a clearer and unambiguous definition of digital goods and digital services from a taxation point of view.”

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Budget reaffirms Government’s desire to Transform India into a Product Nation

We are delighted that the Finance Minister singled out the Software Product Industry for mention in his budget speech today. This is momentous… the identity we have been so seeking especially in the corridors of power was finally articulated this morning in the highest legislative body of the land – the Indian Parliament.

We’d like to highlight four things.

  • First, the thumping endorsement that came from the Hon’ble Minister of IT and Communications Shri Ravi Shankar Prasad during his visit to Bangalore (July 1, 2014) where he spent a couple of hours with iSPIRT and the Software Product Industry and minced no words in lending the Government’s support to the Software Product Industry cannot be underplayed (link to video).
  • Second, the specific text of Section 62 of the budget speech (just 10 days after Mr. Ravi Shankar Prasad’s supportive visit) that focuses on digital India and the “imminent need to bridge the divide between digital “haves” and “have-nots” is noteworthy. The key highlight, of course is the statement about the “special focus on software product startups”.
  • Third, Section 103 of the budget speech which states: “In order to create a conducive eco-system for venture capital in the MSME sector it is proposed to establish a Rs. 10,000 crore fund to act as a catalyst to attract private capital by way of providing equity, quasi equity, soft loans and other risk capital for start-up companies”. Another boost by the Government for start-ups. Clearly the Government has its priorities straight.
  • Fourth, the taxation issue. Though there was no mention and we were certainly hoping to get a resolution to our issues of dual taxation (VAT and Service Tax) on software products as well as the issue of TDS deduction on software product payments, there is an intent to simplify and rationalise the tax regime with the proposal to set up an industry-CBDT/CBEC interaction committee that will look into industry specific issues and work to resolve them. We will of course take our issues to this proposed committee and remain hopeful that our issues will be addressed.

Meanwhile, various iSPIRT volunteers have shared their views on the budget with the media and these reactions are summarized here. Please spread the word about this to everybody in the software product industry.

Though we could have hoped for more, I think the consistent policy advocacy in recent past and the hard work put in by various spirited iSPIRT members have brought us to where we are today. The stage is now for ours to play on. Let’s make it happen.

A big thank you for being part of this movement,

iSPIRT Team