Budget 2023 shows continuity in supporting tech startups beyond big cities

The Government proposes to set up an agriculture accelerator fund “to encourage agri startups by young entrepreneurs in rural areas Images: Shutterstock

India’s Minister of Finance Nirmala Sitharaman on February 1 made several proposals in her Budget for the fiscal year 2023-24, starting April 1, which signal continuity in the government’s push to support technology-led entrepreneurship.

Ahead of the 2024 general elections, some proposals also specifically focus on boosting tech startup activity beyond the larger cities—in rural India. For example, the minister proposed to set up an agriculture accelerator fund “to encourage agri startups by young entrepreneurs in rural areas”.

“The fund will aim at bringing innovative and affordable solutions for challenges faced by farmers. It will also bring in modern technologies to transform agricultural practices, increase productivity and profitability,” she said in her Budget speech in Parliament. She didn’t immediately provide details on how much money will be spent in setting up this fund. The government will also expand digital public infrastructure for agriculture as an open-source, open-standard and inter-operable public good, Sitharaman added.

The aim is to bring “inclusive, farmer-centric solutions” through information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of the agri-tech industry and startups.

In other technology-related proposals, Sitharaman said the government will fund the establishment of three centres of excellence in artificial intelligence (AI), and 100 labs in the area of 5G wireless in engineering colleges across the country. And she reiterated that the government will set up a national data governance policy that will provide anonymised data to encourage startups. The government’s work on this policy was announced last year by the Ministry of Electronics and Information Technology.

“We foresee the Budget will yield significant benefits in job creation and in enhancing the country’s technological and competitive manufacturing capabilities, which are among the key drivers of India’s $5 trillion economy goal,” said Arun Kumar, managing partner at Celesta Capital, a US-based venture capital firm, said in an email. 

Also read: Agriculture in Budget 2023: An accelerator fund for startups and a focus on digital public infrastructure

Indian tech startups will benefit from the government-initiated investments in centres of excellence in AI, establishment of labs for 5G development, increase of investment in research in priority areas, and a keen focus on green growth and energy transition, Kumar said. The agriculture accelerator fund will encourage agri-tech startups by entrepreneurs in rural areas to advance innovative solutions for farmers based on technologies like AI, machine learning, Internet of Things, and extended reality, he added.

On the tax front, the minister proposed to extend the date of incorporation for income tax benefits to startups from for one more year to March 31, 2024. And businesses can now get the benefit of carry-forward of losses on change of shareholding of startups from seven years of incorporation to 10 years.

“The Budget builds upon the progress made on the legislative and business front, to further ease compliance requirements,” said Abhishek Malhotra, managing partner of TMT Law Practice, in an email. The Centre has long intended for the usage of anonymised datasets for the benefit of MSMEs and startups, and will introduce the National Data Governance Policy in the coming year, to govern such data collection, distribution protocols, he pointed out.

Added to this, improvements towards simplifying the know-your-customer processes will adopt a risk-based approach rather than a one-size-fits-all approach, to cater to startups, smaller industry players, and allow entrepreneurs to focus on R&D and their products, he added.

Also read: Budget 2023: Economic Survey projects decade of sustained growth

On the energy transition front, as part of India’s carbon emission reduction efforts, manufacturers in the electric vehicle (EV) sector will benefit from the additional measures introduced in the Budget. The Budget also includes proposals to fund more biogas projects, energy storage and pumped storage technologies and clean hydrogen; India’s national hydrogen mission plan was announced last month.

The pro-EV Budget focuses on much-needed initiatives, Kalyan C Korimerla, managing director and co-promoter of Etrio Automobiles, said in an email. These include customs duty reduction from 21 percent to 13 percent on lithium batteries and an extension of the subsidies on EV batteries for one more year.

Rahul Garg, founder and CEO of Moglix, a manufacturing procurement marketplace, adds: “Overall, this Budget continued focusing on promoting exports, boosting domestic manufacturing, enhancing domestic value addition, encouraging green energy and mobility, streamlining the supply chain, and providing economic support to MSMEs across the country.”