The proposal to provide fiscal support to digital public infrastructure in Budget 2023 will play an instrumental role in charting India’s growth story of becoming a $5 trillion economy by 2025.

The Union Budget FY24 has provided the much-needed impetus to the nation’s vibrant start-up ecosystem, which is fundamental to the country’s socio-economic development. Largely, the budget is future-ready, bottoms up, and inclusive in the true sense of terms. For instance, to encourage innovation and research by the country’s start-ups and academia, the establishment of a national data governance policy has been proposed. This measure will facilitate access to anonymized data.

Today, our country is the third largest ecosystem for start-ups worldwide, and it ranks at the second position in terms of innovation quality among other middle-income countries. Also, the extension of the incorporation for income tax benefits to start-ups from 31st March 2023 to 31st March 2024 has also been an appreciable move. The Government has also proposed to deliver the benefit of carrying forward losses on any alteration of shareholding of start-ups from seven years of incorporation to ten years.

Another impressive move has been the reduction of the voluminous 39,000 compliances that MSMEs needed to follow through and the decriminalization of 3,400 legal provisions. Such measures will indeed go a long way in boosting the ease of doing business in the country, which will further propel economic growth. Also, measures suggested in the economic survey, such as capital gains tax regimes similar to those of Singapore and the UAE and capital flow procedures akin to those in countries like the US and Singapore, will accelerate the reverse-flipping of start-ups back to Indian shores. This is expected to catapult indigenous entrepreneurial development, which is crucial for the advancement of the economy.

The economic survey has also recommended measures such as the simplification of employee stock option (ESOP) taxes and easing of procedures for capital flows with lesser restraints on the inflow and outflow of capital. Practicable government policy measures, demographic deciders, a favourable regulatory environment, and product innovations have amplified the number of start-ups coming up in the country – from 452 in 2016 to 84,012 in 2022. It is also interesting to note that around 48 percent of our start-ups are based out of tier 2 & 3 cities.

Start-ups’ role in the nation’s economic development can be gauged from the mammoth employment opportunities that they create. The number of jobs created by these start-ups increased by 64% in 2022 to 269,000, over the average number of new employment opportunities generated in the last three years. The Economic Survey reiterated that start-ups are the ‘spine of new India,’ as they encourage the youth to become employment builders rather than employment seekers.

These start-ups are resolving myriad local problems at scale, which larger organizations often find challenging to do. Most of these have been in domains such as healthcare, education, agriculture, and financial services. This is a true testament to India’s unfaltering MSME potential. In order to further boost investments in the start-up segment, the Government should bring in tax equivalence between listed and unlisted shares. Presently, the gains on listed shares are considered long-term if held for more than 12 months and are taxed at a lesser rate of 11.96%. Short-term capital gains for listed shares are taxed at 15%.

The Finance Minister has done a laudable job by presenting a budget that is highly consistent and steered majorly by capex. The sharp increase in capex, to Rs 10 lakh crore, will ensure a cyclical recovery of the economy. Capex expenditure is great because it has a far higher multiplier effect: every rupee spent on capex has a multiplier of Rs 3 as opposed to just about Rs 0.9 for revenue spending. Largely, this is a reformist and futuristic Budget as it simplifies the tax regime and puts more money in the hands of the common man, thanks to direct tax revisions that will boost purchasing power and drive investments from the middle class.

India has outgrown the global average in terms of digital adoption, giving a boost to the continuing financial inclusion efforts of the Government, enabled by digital services such as the PM Jan Dhan Yojana, India Stack, and UPI. As per the Global FinTech Adoption Index, India has accomplished 87% fintech adoption, compared to the world average of 64%, which is truly a great achievement. Digital payments, too, are seeing a disruptive adoption rate, which is 91% in value terms. The proposal to provide fiscal support to digital public infrastructure will play an instrumental role in charting India’s growth story of becoming a $5 trillion economy by 2025. The budget has been truly exceptional as it is meticulous, growth-oriented, comprehensive, and workable.

https://www.financialexpress.com/economy/fiscal-support-to-digital-infrastructure-to-aid-indias-growth-story-of-becoming-a-5-trillion-economy-by-2025/2971237/