Union Budget 2020: Pre Budget Quotes from Startup Community

The Union Budget 2020 is all set to be announced on 1 February 2020. Finance Minister Nirmala Sitharaman is set to deliver her second budget speech in New Delhi. The Union Budget is the most extensive account of the government's finances, in which revenues from all sources and expenses of all activities undertaken are aggregated. It comprises the revenue and capital budget. It also contains estimates for the next fiscal.

India’s economic growth has been sluggish over the last few years and the impact has been concerning. Despite India being the third largest startup nation in the world, many ideas crumble before they flourish owing to lack of supporting infrastructure, funding, profitability, skill gaps and ecosystem hurdles. Demolishing angel tax and reducing corporate tax were commendable initiatives in reviving start-up sentiments, however, a lot more needs to be done to empower them further.

From a startup ecosystem perspective, there is a need to promote priority lending and improve contract enforcement to aid ease of doing business. As per World Bank reports, solving commercial dispute in India takes 1,445 days, which is almost three times more than the average seen by the Organisation for Economic Co-operation and Development. Further, starting or closing a business is still a cumbersome process in our country.

Let's hear from some startup leader regarding what they feel about this Union Budget and what more they expect from it.

Expectation for MSMEs

MSME’s have always been looked as the backbone of any economy and are a very important part of the entire ecosystem in terms of all aspects including job creation, acting as suppliers and promoting the spirit of entrepreneurship.

With more than 28 % contribution in GDP, 40% of exports and 45 % of manufacturing output, the importance of our 63.38 million MSME’s is self explanatory.

Whilst issues like increased access to credit, more budgetary allocation, creating a “Fund of Funds” (in the lines of suggestion given by former SEBI chairman U K Sinha headed committee on MSME), Extension of interest subvention scheme etc will help the MSME’s in the country.

Expectation for Real Estate

Commonfloor analyzed builder sentiment on the upcoming Union Budget 2020 from over 300 builders across India. Infographic given below has some insightful views and expectations from real estate builders.

In the infographic you will find the builders views on :

• Top solutions expected from Budget 2020
• Factors that boosted real estate demand this year
• Factors affecting home buyers sentiment
• Expected reforms to help boost FDI in real estate

Key takeaways for Real Estate

• Builders in Bangalore and Delhi are the most concerned about the liquidity of NBFC credit and are looking forward to increased support to the NBFCs in the Union Budget 2020.
• Also, Builders say that government policies like higher GST on under-construction projects and the absence of single window clearances among others are some of the factors affecting homebuyers’ sentiments which can continue into this year as well if not addressed in the upcoming Union Budget.

Also read - Top real estate startups in India

Mr. Tanuj Choudhry, Chief Business Officer, HomeLane

From the sector perspective, government has introduced many policy level interventions in the past 2-3 years to boost the real estate sector which has a direct impact on the home designing segment. However, revival requires much more effort.
There is a need to reconsider the personal tax bracket to give more liquidity to consumers, as well as better benefits under section 80C to encourage investment in real estate and home interiors segment. Furthermore, the Home interiors segment falls under 18% GST slab and we propose the government to consider this segment under 12% GST slab since interiors is no longer a 'good to have' item anymore. This will further increase savings for the end consumers.

Likewise, paper is crucial for making products like laminates and import duties on paper and other input materials is a concern for the home design and décor segment. To encourage ‘Make-in-India’ adoption there is a need to contain the cost of getting quality materials from the Indian manufacturers. Until then the import duties should be re-considered.

The home decor and interiors industry in India is poised to grow and it has moved from being the sole preserve of the rich. The concept of interior designing has made rapid inroads into the booming urban Indian middle class over the last five years. This has also coincided with the share of organized retail in this space doubling from 5% to 10% in the same period. For a $20BN market with an 8% CAGR, this is significant even as these are still early days. This sector has much to do, and a lot to grow.

Expectations for Edtech sector

Mr. Achin Bhattacharyya, Founder and CEO, Notebook

India may not be able to reap her rightfully due demographic dividend unless serious blue sky thinking and implementation is done to boost the quality of education which will make our youth more employable and in turn not only contribute in achieving our economic ambitions but also to sustain it.

GST reduction on online courses

In a country as huge as ours, on the ground resource crunch in terms of providing quality education to each and every child is a huge challenge.
The only way to nurture this force of billion dreams is centralized content creation and efficient cloud based online distribution of the same, current 18% GST rate on online education needs to be seriously reconsidered keeping in mind the socio economic benefits of providing quality education to the masses and filling up the gap in terms of PTR (Pupil teacher ratio) and quality (as highlighted in PISA and ASER surveys in the past).

Large scale PPP project

It is high time that the infrastructures of state machinery and the innovation and
entrepreneurial zeal of the private sector join hands to deliver the goods. Thus mass scale digitalization and on the ground implementation through smart classes is the need of the hour.
Age old chalk and talk pedagogy need to be replaced by engaging digital content and serious budgetary allocation for the same needs to be made.

Focus on Research

In order to create a knowledge economy, it is very important to focus on research.
As per WIPO (World Intellectual Property Organization) China made as many as 13.38 lac patent applications, with just 10% being made by non-resident Chinese, the USA made 6.05 Lac patent applications, while India made a mere 45K, of which non-resident Indians contributed over 70%. Thus Budget 2020 should adequately provide for research allocations.

Also Read - Top edtech startups in India

Mr. Vivek Jain, CBO - Shiksha.com, Naukri FastForward

"Education expenditure as % of GDP has been around 3%. We are hoping education expenditure around 5% of GDP.
If the government's aim to become the education hub of the world is to be achieved, we will need more investment in education. We have seen investment in building top tier institutions like IITs, NITs, IIITs, AIIMS. Also, more seats for MBBS have been announced as well.

In addition, we have seen more approvals for distance education/online courses. We look forward to specific initiatives to promote research, incentives for more collaboration between academia and industry, and investment in new-age trending technologies like Artificial Intelligence, Cloud Computing, IoT.”

Mr. Manit Parikh, Country Head India, ELSA Corp (English Language Speech Assistant Corporation)

It is reported that India has 250 million youth in the age group 13-23 out of which 90 million of them are in secondary & higher secondary schools and 140 million in colleges. This itself highlights that there is a need to make them more job ready. I hope the government announces some initiatives in this Budget to introduce English language to citizens especially those residing in Tier II, III ,IV regions and beyond. I also hope that more initiatives are proposed to create employment opportunities along with better language skills.

Expectation for E-Commerce and Internet Startups

Mr. Vishal Saurav, Founder and CEO of Xboom Utilities Pvt. Ltd.

India is at such a crossroad now that it can no longer keep the issue of women’s safety untended. With the rising numbers of crime against women, addressing the issue of women’s safety and security and allocating a portion of the budget in this regard is what we and other e-commerce startups like us who are working in the safety and security sector are expecting.

Lowering the GST rate on women safety products from 18% to 5% would be one way to go about it. We also expect few women safety products also get exempted from the tax altogether as safety these days is not a luxury but a necessity. The import and export duty should get a revision so that trading in international markets gets a boost. The transportation charges in the railway should see a decline too as these will cut costs and make those safety products more affordable.

To promote production in India, the women safety product manufacturers should be getting special benefits from the budget so that products become more affordable to the mass.

Mr. Sheshgiri Kamath, Co-founder & CEO Kapture CRM

The tax cuts implemented by the finance minister, combined with the new fiscal boost that was announced recently are sending the right signals to the markets about the government's intent to address the economic concerns. We expect to see a cutting edge impactful budget this time around which focuses on landmark reforms.

With the recently announced RBI eKYC and other digital measures, the internet economy is going to witness some key reforms. 2020 should be an interesting year for consumer internet startups.

Mr. Ashish Bhatia, Founder & MD, India Accelerator

The startups are hoping that the budget will announce initiatives that could pull more foreign capital and boost growth. The reduction in GST charges will encourage more foreign investors to invest in Indian startups. Currently, the tax rate of long-term capital gains is 28.5% as compared to the same for listed equities to be 10%. This creates a significant tax burden on founders and employees of startups, as well as domestic angel and institutional investors.

Further, the relaxation of personal income tax rates will act as a booster shot. It will certainly help the startup companies and the Millenials to improve further and ease doing business.

Mr. Rajan Sharma, Founder & CEO, excess2sell.com

At the outset, we would like to commend the Government for the several initiatives it has so far taken to encourage and develop the Startup ecosystem. As a three-year-old startup, Excess2sell.com’s phenomenal growth can be attributed to the Govt.’s efforts in consolidating GST with technology, ease of doing business, taxation on startups and various policy initiatives. It has allowed and encouraged first-generation entrepreneurs like us to take risks and be part of a developing ecosystem for Indians who always wanted to do something on their own.

We look forward to Union Budget 2020 with more focus on reforms, ease of doing business, system cleansing and easing up liquidity for honest tax-payers to spend. With the kind of thrust on technology build-up, easy tax policies and overall opportunities, our enterprise which focuses on the B2B segment is poised to grow at an even faster rate.

Mr. Vineet Rajan, Co-founder and CMO, ScoutMyTrip

There's talk that the government will create a Fund of Funds specially targeted towards SME clusters. While there is one for startups as well, there is still ambiguity in terms of how startups can really gain from it and actively seek for investment. So we would be closely watching not just how much allocation is made towards the FoF but also if any processes are simpler and more accessible.

Expectation for Electric Vehicle

Mr. Sohinder Gill, Director General, Society of Manufacturers Of Electric Vehicles (SMEV)

For a nascent and disruptive industry like EV that is heavily dependent on the government policies, there needs to be one voice from the policymakers. The EV policy needs to be clear, supportive and long term.

We strongly believe that in the short to medium run, both the EV and IC sectors can grow and complement each other and policy statements should not give jitters to either of them. We hope there are announcements in the budget that give confidence to the EV industry and bring cheers to its users. Well thought through ‘Make in India’ policy backed up by logical import tariffs, accelerated infrastructure support, securing rare earth materials, the lithium cobalt minerals and priming up the science and research are some areas that need increased focus and support from the government.

The industry and the government needs to draw and implement firm plans for re-skilling the workforce. Moreover, the Science & Technology institutes under the umbrella of the government have to be pushed to do some deep research into the alternative energy to fuel spectrum needs of the automotive sector. There is a strong possibility of India playing a significant role in the global EV market with its “value for money” two, three and four-wheelers, provided we quickly reach a good scale in the domestic market.

We should make concerted efforts to remove the kinks that have inadvertently cropped up in Fame 2. The policy should be completely redrafted, if needed, so that substantial investments both from within and outside India can flow into the EV sector to push the exponential growth that everyone has been expecting for some years.

Mr. Amit Jain, Founder and CEO of Ashika Wealth Advisors

In our view, to generate employment, govt should increase fund allocation to new age startups through Niti Ayog. Also, startups should have some tax incentives proportionate to their employment generation in the Indian Economy. Investment in the equity market should always be from long term point of view, so to encourage long term investment in the stock market we should have three slabs for capital gains, which are as below-
Short term Capital gain                 < 1 Year                                               15%
Long term Capital gain                 1 year to 3 years                                   10%
Very long term Capital gain          Beyond 3 years                                      Nil

This slab of Capital gain shall courage and incentivize the long term investment in the Stock Market & subsequently reduce Volatility in short to medium term.

Mihir Mehta, Senior Vice President, Ashika Capital Limited

The proactive approach of the Government in building an ecosystem for budding entrepreneurs is laudable. The provision of funding and setting up an organized platform for the same is a much needed move because financial capital often becomes an impediment for growth and sustainability. I feel we have just touched the tip of immense entrepreneurship potential in India and support from the Government in terms of financial capital will be a major boost"

Expectation for Agriculture Industry

Dr. Bhushan Bhavsarv, MD, Vetphage Pharmaceutical

"With environmental degradation and climate change among major concerns of our time, the need to promote sustainable farming – both crop farming and animal farming – must be high on government’s agenda.

As an organization working in the field of sustainable poultry farming, we expect the government to lay down a clear policy for sustainable farming and animal rearing. These include healthy diets for poultry, medication free rearing, safe disposal and safe processing. The government must incentivize farmers to adopt the use of safe and healthy rearing practices that lead to a more sustainable approach to poultry production. The government must also encourage organizations working to devise sustainable farming solutions to animal farmers.

Falling consumption on a national level has emerged as a serious concern for different sectors as well as the economy as a whole. Poultry industry is no different. In fact, reports have shown that poultry farmers are struggling to cope with rising feed costs and falling consumer demand. Some poultry farmers have also been demanding duty free imports of maize (an important poultry feed) to help them tide over the high feed costs. We hope the government will pay due attention to the sector in the upcoming budget.

Expectation for HealthCare and Wellness

Dr. Prakriti Poddar, Managing Trustee of Poddar Foundation

Narendra Modi government ambitious National Health Policy 2017 remains an unfulfilled promise if the budget allocation for the health sector during the year is any indication. In India, approximately 18 crore people suffer from mental health illness - depression, stress, suicide.  However, the amount of funds that the government has allocated for mental issues is only Rs 50 crore in its National Mental Health Program.

We expect a balanced doctor-patient ratio as the treatment gap makes it difficult for the government to manage the mental health of the working-age population, which is a key social and economic issues as they are integral to the functioning of the economy. The Mental Health Act made it mandatory that every insurer shall make provisions for medical insurance for the treatment of mental illness on the same basis as is available for the treatment of physical illnesses. In case of hospitalization during mental illness, the coverage will include analysis and diagnosis of a person's mental condition, treatment as well as care and rehabilitation of such person for his mental illness or suspected mental illness.

However, making mental health a part of health insurance is not enough especially when the infrastructure and doctor to patient ratio cannot facilitate its smooth functioning. This is why the union budget needs to focus on mental well being in a wholesome way and emphasize the integration of mental health services in basic health care system in India to improve upon its affordability and accessibility. The government should raise more awareness by organizing campaigns and empathy classes wherein people share what is preying on their mind instead of agonizing over it by keeping it in.

Ms. Anika Parashar, Chairperson- Organ India, CEO- River Rock Ventures

The primary focus of the Union Budget is to promote inclusive growth in the country; however, women wellness - especially menstrual hygiene - is an area that needs to be emphasized.

To go green in the future, the government should ensure the use of biodegradable menstrual products over non-biodegradable ones. This one initiative could bring down the number of disposable sanitary napkins adding to the landfill, which currently stands at 12.3 billion annually. The government could support start-ups who are endeavouring to offer biodegradable products at affordable prices, keeping in mind the current condition of the environment.

Although the sanitary napkins are tax-free, the expenditure incurred in their production is still taxable. Decreasing import duty for raw materials could help such start-ups to stretch themselves in the market, meeting the public demand.

The government should also take measures on educating and teaching women the importance of hygiene during periods, pregnancy, menopause, Post-Partum depression, PCOD, mental health issues and other general health-related issues''.

Mr. Nikhilesh Tiwari, Founder  & CEO, ColMed

At present, India imports nearly 80% of all medical devices and domestic manufacturing took more of a hit post GST as the imports became cheaper by 11%. As the imports went up by 24% in the previous fiscal, the government needs to take urgent measures to boost local manufacturing if it wants India to become a manufacturing hub.

For starters, tariff protection will boost the domestic industry and encourage competition, which will drive price stability. Secondly, we should increase the regulations to cover most medical devices and ensure responsible manufacturing and protect the interests of patients. Preferential pricing will promote quality in public procurement, and ensure that the patients who access the public healthcare system get the quality of treatment that they deserve.

These changes will ensure a level playing field and help put an end to the import dependence, which is vital if we want to achieve universal health coverage in line with the United Nation & Sustainable Development Goals. In addition, the Government should give export promotion scheme for local manufacturer. Custom duty refund in case of re-exports.

Expectation for Textile Industry

Ms. Mansi Gupta, Founder & CEO, Tjori

The economy of the country in general has taken a dip of concern and textile sector has been suffering drastically because of this. The ongoing US-China war has led to drastic impacts on exports of Indian textiles. Incentives to make the exports better were schemed but were delayed while implementation. The world is at a technological era and advancement of the textile sector is still very slow. The need for better fund allocation is required towards the technological advancement of environmental friendly textiles. New incentive plans and schemes need to proposed in order to adopt global practice which in turn would increase production.

A fall in the outlay from 600 Crores to 500 Crores is a big dip that the industry will face and to help bridge this gap we need to promote and incentive Indian marketing platforms for sales in the country. The marketing funds on an e-commerce website drained by any company is drain of the countries fun as the top marketing platforms are all companies of the US. A strict tax regulation scheme needs to be imposed on them in order for the money to stay within the country.

I anticipate the budget of 2020-21 and hope that the textile sector has some beneficial fund allocation that would help boost the sector.”