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Budget 2022: Here’s what India's start-up ecosystem expects

Budget 2022: Here’s what India's start-up ecosystem expects

From tax breaks to policies that strengthen innovation, India's start-up ecosystem has a slew of suggestions for the government to unleash India's entrepreneurial ambitions.

India has produced 42 unicorns in a single calendar which, in turn, drive job creation, spur entrepreneurship and revitalise the digital ecosystem India has produced 42 unicorns in a single calendar which, in turn, drive job creation, spur entrepreneurship and revitalise the digital ecosystem

India’s start-up ecosystem reached inflexion point in the year 2021 as it became the third largest globally with food unicorn Zomato and online beauty retailer Nykaa hitting the bourses with their blockbuster IPOs among other brands. Market analysts believe that 2021 will be remembered as the beginning of the end of the dominance of traditional business houses at the exchanges.  
 
India has produced 42 unicorns in a single calendar which, in turn, drive job creation, spur entrepreneurship and revitalise the digital ecosystem. “We hope Budget 2022 continues to deliver on the government’s vision under Startup India to strengthen innovation, spur entrepreneurship and revitalise the digital ecosystem,” Ashish Nayyar, Co-Head of credit intelligence company OakNorth India said.
 
Despite putting up such a grand show in 2021, the Indian start-up ecosystem is facing challenges like lack of a compelling revenue base and need to accelerate their digital transformation with technology and platforms, according to Sanjay Shah, Chief Operating Officer of Wadhwani Foundation- India/SEA.
 
Wadhwani further explains that because of these challenges, the government should look at helping start-ups with policies and support mechanisms. These policies and support mechanisms should be aimed at domestic capital participation, favourable investment climate in Tier-2 and Tier-3 cities and incentives for setting up incubators in every state.
 
Besides this, he also advocated tax exemptions in foreign direct investments and a high focus on start-up infrastructure development. “Hence, in 2022, the government should look at assisting startups through policies and support mechanisms towards domestic capital participation, favourable investment climate in Tier 2 and Tier 3 cities, incentives to set up incubators in every state, tax exemptions in foreign direct investments, and a high focus on startup infrastructure development. This will also help in the globalisation of Indian start-ups as ~42 per cent of them are planning to go global in 2022,” Wadhwani explains.

Apart from this, startups are also looking forward to tap into the rising talent pool in tech and that the government should reconsider ESOP tax for startup employees. “Indian startups have played a vital role in the growth of the economy. While the pandemic forced us into a reset, technology brought about an accelerated transformation in almost all the sectors,” says co-founder of Newton School Siddharth Maheshwari. 
 
“Currently, the period of holding for unlisted shares is defined as 24 months, while for listed securities it is 12 months. From the upcoming budget 2022-23, my first expectation would be to change the definition of short-term capital gain for unlisted shares, making it at par with listed shares. Secondly, I am hoping for an easing of compliances with regard to small and mid-size Indian software companies operating in the US. Lastly, hoping for ESOP tax for startup employees to be reconsidered,” says CEO of iZooto Neel Kothari. 
 
Also read: Budget 2022-23: CII recommends fiscal target of 6.8% of GDP, raising public healthcare investment

Also read: Budget 2022: Govt could ease compliance norms for start-ups, says Piyush Goyal