Budget 2023: Start-ups and the center-aided early-stage innovation fund require policies that reflect an optimistic future
- ByStartupStory | January 21, 2023
Indian start-ups are rewriting the laws of the game and are set to serve as the foundation of the New India, which will be celebrated in India on 16 January 2023 as National Start-up Day and the spirit of the start-up ecosystem.
Our start-up ecosystem is currently the third largest in the world, and new-age entrepreneurs are driving the movement by offering innovation and tech-based solutions to address the problems that the nation is currently facing at the grassroots level. In India’s current decade, or “techade,” startups are not only providing breakthroughs, but they are also developing into significant job producers.
The current administration has been active in recognising efforts and supporting the new-age entrepreneurs to become an important contributor to the country’s aim to become a $ 5 trillion economy by 2025 in order to further infuse this culture into India. In order to encourage business owners to take their innovation strategies abroad, the Hon. Prime Minister additionally created the agenda “Innovate for India, innovate from India.”
Governments throughout the world have implemented a number of programmes to support startup culture since these businesses not only deliver a variety of game-changing ideas but also play a vital role in the creation of jobs for the country. To encourage entrepreneurship and give start-ups easy access to capital, incubator programmes, federally funded R&D activities, etc., leading nations like the United States launched the “Start-up America” initiative. The goal was to position the United States as a leading start-up ecosystem around the world. Similar to the United States, China has at least 1,500 incubators operating under its 27-year-old Torch Programme, which offers high-tech companies policy, finance, and advisory services.
Budget 2023 is one of the most anticipated because it is the last comprehensive budget for the Modi Government 2.0. The Hon’ble Finance Minister will now be expected to establish robust support policies for start-ups and sketch out India’s growth path in a context where the world is on the verge of a potential recession after a strong post-Covid recovery. The fact that Indian start-ups and investors are shifting their attention from growth at all costs to profitability adds further significance. As a result, the start-up industry is looking for a slew of changes and support to strengthen their position and obtain a level playing field in the organised Indian markets.
Given the foregoing context, it is crucial for the government to implement legislation and provide low-cost, risk-free finance to the start-up ecosystem in order to position India as an innovation-based economy. To encourage Indian start-ups to continue their path-breaking innovation, the Hon. The Finance Minister is anticipated to introduce special financial opportunities and support as part of the Budget 2023.
One of the appealing options the government could consider is to announce Innovation Bonds, Early-stage Innovation Bonds, and Impact Investment Bonds, which are similar to the current NHAI and REC bonds and enjoy a tax-free status (i.e., interest income is tax free in the hands of the investor), to fund businesses that specialize in solutions for underserved communities. With this, the government might look at offering low-cost investment and support to initiatives and early-stage businesses who have trouble getting funding, especially those without the required assets or cash flow for conventional bank funding.
What would these Innovation Bonds entail for the government and the startup ecosystem?
1. Directing public funds toward innovative endeavours and facilitating simple access to start-ups engaged in early-stage innovation
2. Encouraging participation in R&D and innovation from modern start-ups and entrepreneurs
3. Reducing the immediate financial load placed on the government’s coffers by the financing and assistance of startup initiatives and incubators
4. For the general public, a fixed rate of interest with reduced risk and tax advantages
5. Providing India with a strategic chance to become a global innovation powerhouse and, as a result, making it the ideal location for outsourcing R&D and manufacturing
6. The startup ecosystem is a crucial pillar for India’s aspirations for prosperity, and the government should prioritize policies that make it simple for early-stage start-ups to obtain capital in order for them to grow into big contributors to India’s GDP and a major global innovation hub.
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