What do startups in various sectors expect from Union Budget 2021?

Finance Minister Nirmala Sitharaman will present Union Budget on February 1 for FY 2021-22. The Budget 2021-22 hold more significance owing to the Covid-19 pandemic. Thus, it might shed some light on how the government will allocate funds to revive the economy. Further, the government’s Atmanirbhar Bharat Abhiyan may get more incentives as it aims to upscale the manufacturing sector.

The upcoming budget will also boost infrastructure spending, providing a way-in to FDIS. Aimed at reviving demand in the economy the Budget 2021 may focus to make investments effective. Many industry leaders also expect the budget to improve the MSME and Startup economy. With liberal tax reforms, dedicated grants and simpler GST norms, many startups and SMEs have been eyeing updates on Budget 2021.

The Union Budget 2021, for Nirmala Sitharaman, is a test of resilience. To take the country out of one the worst crisis since independence, she has the responsibility of putting the country back on a track. Here’s what industry leaders have pointed out.

Retail, FMCG and Plant-based/Vegan industry

Sagar N Mehta, Founder & Partner, Vegandukan, states,

New-age companies and startups working on sustainability and welfare of human health, plant-based protein, should be given special recognition in taxation if we are looking at healthier and more competitive India in a decade to come.

There is a dire need for stimulus packages post the economic recession, brought about by the pandemic; to increase the customer demand of FMCG products including vegan food products. Additionally, the reduction in income tax will prove beneficial for the taxpayer consumer base which in turn will lead to improved sales in the retail market. We expect that the current budget will bring forward a ray of hope for the entire retail sector in terms of tax reforms, job creation and the development of a strong supply chain. We also expect the greater allocation of funds for food processing policies and tax incentives for agricultural and food item exports.

Healthcare industry

Shabnum Khan, Founder, 750AD Healthcare states,

We anticipate that the Government of India shall tap into the public-private partnership model to provide the much-needed support and revamping in the primary healthcare infrastructure in the country. Along with this, we also expect that with a large amount of medical data being made available online, funds must be dedicated towards data protection and developing a secure infrastructure to prevent the misuse of this very crucial data available on the databases of several private and government hospitals.

Additionally, we hope that Covid-19 vaccines will be made available free of cost to the citizens of the country, especially those below the poverty line. To add to this, India to develop as a promising market for generic drugs, it is important the Budget 2021 outlines the need for conducive policies around this industry. We are expecting that the government will streamline regulations for pharmacies purchasing medications from GST paid channels.

Anuradha Prasad, Founder & CEO, India Leaders for Social Sector

I think this budget will be like no other. It comes at a time when the country has been fighting a pandemic. As a social sector organisation, we would want to see how this budget supports and further strengthens the social sector. The sector has been at the forefront throughout last year, helping the most vulnerable communities cope with an unprecedented situation. We would definitely want to see what the government has in mind for the social stock exchange and measures to incentivise funding to the social sector. Non-profits have operated under extremely difficult circumstances and still delivered. The Government should definitely think of ways to ensure the sector is more resilient going forward.

This year's budget will be announced amidst unprecedented circumstances. India in the aftermath of COVID - 19, no sector was spared from instability it brought along with it, having said that; this was also the year when the social sector was leading from the front in the time of this humanitarian crisis, with this context in mind this year's budget should have substantial provisions for providing support and acceleration to the sector along with

1) Clarity on the Social Stock Exchange- Is it only for profit-making social enterprises or for nonprofits as well? How can organizations list themselves on the exchange? What would be the mechanisms of financial exchange?

2) Some financial stimulus to the sector in the form of incentivizing CSR and Individual donations through tax benefits would be a welcome step and would immensely help the sector,

3) FCRA amendments came as a sudden shock for the sector in the middle of the pandemic. To prevent such future shocks, the government could form a permanent committee comprising of representatives from the civil society and the government, enabling smooth coordination between the samaj and sarkar.

Retail and Gems & Jewellery industry

Pankaj Khanna, MD & Founder, Gem Selections, Khanna Gems Pvt. Ltd states,

Thankfully the Indian economy is stabilizing itself after a major recession in 2020 and the aggregate demand is increasing. With the support of the government of India and RBI, we expect major trader reforms in the current Budget 2021. However, there is a contraction of the gems and jewellery industry in the area of exports and tourist buying. Our tariffs and duties must be in-line with the international tariff systems and duties. This will help us compete well with the neighbouring countries.

With reduced tariffs and duties, we can surely become the global leaders in production and trading in gold, diamond, and other commodities in the coming years. Hence with the opening of trade and export this year, we are hopeful that the gems industry will see a boom. Also, with new tax laws, we hope that there will be ease for the traders across the country.

eCommerce industry

Vaibhav Lall, Founder, Khojdeal states,

The e-commerce retail logistics industry has grown at a brisk rate over the past few years. Amplified demand for same-day deliveries and the rise of new business models like omnichannel retailing & last-mile delivery through local retailers are shaping the ways the e-commerce retail supply chain functions. Some of the issues that confront the sector include high-cost pressures, high returns and inadequate physical infrastructure, especially in Tier II, III and IV cities. Budget 2021 should address these issues to ensure seamless supply and delivery.

Startup, MSMEs, and Tech industry

Kunal Kislay, Co-Founder, Integration Wizards Solution IRIS tech states,

The budget 2020-21 needs to focus on building a strong IT infrastructure. With the right policy push and resources, the budget can be a real game-changer for the Indian technology sector. We expect the tax filing cycle to increase and GST rebates. We hope that the Government will come up with schemes to help boost innovation and the economy. The upcoming budget should focus on the integration of innovation across multiple sectors like manufacturing, retail, healthcare, etc.

2020 has been a tough year for MSMEs. While some succumbed under the pressure, many strived to make ends meet under heavy cash/resource crunch. To encourage MSMEs, the government should take cognizance of the high GST on professional services, and work towards decreasing it. Besides, since most MSMEs are either sole proprietorship or partnerships, taxes must be reduced on such businesses. A concessional fee for small service providers can be proposed. Due to a dramatic decline in public sector banks’ share in facilitating finances to the MSME sector, small businesses are often unable to get loans on time. This is another issue that we hope the forthcoming budget will resolve. Strengthening this sector must be the priority of the budget.

Puneet Gupta, Founder and CEO at AstroTalk

The Indian government has taken steps in favour of young startups & MSMEs before and we expect the same from the budget, this year. The centre needs to encourage entrepreneurship, as this is the best way to generate more jobs & progress economically. Startup friendly policies should be made to easily register a business & provide relaxation in taxes till it reaches minimum revenue. Make a provision for a collateral-free loan and remove major roadblocks from foreign investments in India. Once the startup culture flourishes, the country would start progressing for good.

Construction/Infrastructure Industry

Subhal Garg, Director- Finance & Strategy, E5 Infrastructure Pvt. Ltd states,

The construction industry is the second largest employer in India after agriculture. It is also the largest consumer of steel, cement and other key industries. We are expecting a higher allocation of work under the EPC model, facilitate liquidity for HAM, BOT projects from the government; rationalize the pricing of key input materials, any abnormal increase will adversely hit the infrastructure goal.

The announcement around special incentives and weighted deduction under income tax so that construction companies start spending into Research & Development with an objective to fast execution and reduce environmental impact. GST on rental income is 18%. Once the assets become operational under SPV it has no/almost negligible input tax credit whereas he is charging and depositing full 18%. The Budget 2021 should also introduce an option of a composite scheme under GST for rent/annuity yielding SPV.

Education

Ankit Arora, Founding Director, Saarthi Education states,

Even though the absolute amount of expenditure on education has increased over the past few years, it has reduced in terms of percentage of GDP. It's important to see this metric as a percentage of the overall GDP as it shows how much/many resources is a country is ready to put into its future, its children's education. We need to invest heavily in our children's education so that we can yield the "returns" in 2030. Then, India can become the house to the largest working force in the world. Failure to do so might lead to catastrophic results when our people who will be entering the workforce will not be employable.

As the NEP 2020 suggested, the target for Education expenditure is to reach 6% of the GDP. This might not be possible all of a sudden in just one year. However, the government can show its intent by moving in this direction of increased expenditure. With COVID 19 and the economic debacle it caused, the government might find it difficult to do so. But only in these times, we have to adhere to a long term vision (which the NEP has set for us) and not take myopic decisions.

Children have suffered a lot of losses in their education in the last year. Failure to infuse more money into the sector will lead to further losses. Losses which we might not be able to recover for a very long time.

The added expenditure can be used to hire more teachers wherever there is a teacher capacity issue. They can also build a government school's capacity to conduct remote learning. Further, they can also build a cadre of parent volunteers (just like Asha Workers) who can mobilise the community and learning at home.

Auto, Pre-owned cars industry

Jatin Ahuja, Founder & MD-- Big Boy Toyz

While the rest of the automobile sector was financially and economically impacted due to the coronavirus pandemic, the pre-owned luxury car market grew at an unusual pace. The sales recorded a strong sequential recovery post the lockdown months as the urban demand and people’s sentiments had a positive influence.

Tier-2 and -3 cities also came forward as prospective clients as the festival season picked-up. Going forward, we expect to have continuous government support to sustain the recovery that we have made. Increasing the spending capacity of consumers will help us to regain the lost momentum. Also, initiatives to promote the phygital experience (physical + digital) will be appreciated as this is the new normal now. Lower taxes, simplified and GST filing must be the motto of this budget 2021. Companies, OEMs, and individuals are expecting the budget to be long-term friendly rather than focusing on just survival.

With her statement that this budget shall be ‘unlike anything in the past 100 years’, Sitharaman has raised our expectations. Many leaders in the industry have considered it as a good sign. Yet, the minister will have to remedy some pain points.