CEOs of top tech firms hail tax norms for digital economy in Budget 2021

The chief executive officers of some of the top Indian startups and tech companies have welcomed the tax breaks and incentives in Finance Minister Nirmala Sitharaman’s Budget presented on Monday.

They said coming in the wake of the Covid-19 pandemic, the Union Budget looks to strengthen many of the important pillars for economic recovery and future growth.

Kalyan Krishnamurthy, CEO at e-commerce company Flipkart Group said there is a clear focus on attracting greater investments into infrastructure, boosting domestic output and creating jobs. He said it is focused on accelerating the adoption of digital technologies, and giving a much-needed boost to MSMEs (micro, small and medium enterprises) and startups.

“It is a well-thought-through Budget that unlocks new opportunities for the ‘Make in India’ and ‘Digital India’ missions and lays down a promising road map of growth and opportunities for today’s young and aspirational India,” said Krishnamurthy.

Bhavish Aggarwal, chairman and Group CEO of ride-hailing firm Ola said measures under Atma Nirbhar Mission will help create global champions in automobiles, financial services, and technology. It would also foster an environment where India becomes integral to global supply chains. He said increased investment in insurance and infrastructure will open new avenues of capital. Also, improvement in ease of business will transform India into a global innovation hub. “We strongly support the government’s clean air focus with our EV (electric vehicle) plans that will accelerate the world’s transition to sustainable mobility,” said Aggarwal.

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Budget 2021 holds out various positives for the startup sector. Kunal Bahl, co-founder and CEO of e-commerce firm Snapdeal said the move towards providing social security benefits for gig workers will add a much-needed safety net. He said it will help this sector grow in a sustainable way and help the many millions that are a part of it. Also, reducing residency requirements for founders will allow talent to flow and will boost the start-up ecosystem.

“Extension of tax holiday for start-ups by 1 year, boost to digital payments, increasing threshold for small businesses to Rs 2 crore are other gains for the startup sector,” said Bahl.

The year 2020 saw an 80 per cent increase in digital payments, especially from tier 2 and 3 cities. The government has understandably focussed on capitalising on this momentum and incentivising the adoption of digital payments for the year ahead.

“I believe the Rs 1,500 crore incentive announced will open a plethora of opportunities for Fintechs to innovate for the new normal, leading to large scale adoption even in the smallest of towns and villages,” said Harshil Mathur, CEO and co-founder of fintech unicorn Razorpay. “I’m hoping the funds will be used towards developing alternatives to zero MDR (merchant discount rate) policy and initiatives towards bringing digital financial literacy in vernacular languages.”

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Vikas Garg, chief financial officer at digital payments giant Paytm said during the pandemic, digital payments emerged as one of the key enablers of empowerment at the grassroots. He said it brought millions of people under the fold of the formal economy. “Government’s continued emphasis on increasing investment in infrastructure, insurance and digital payments will ensure financial inclusion of the masses,” said Garg.

The National Education Policy has been a strategic move towards guiding the development of India’s education. To strengthen the policy further, this Union Budget is focusing on initiatives like National Digital Educational Architecture (NDEA), according to Vamsi Krishna, CEO and co-founder of edtech company Vedantu. This is expected to provide a diverse education ecosystem for the development of digital infrastructure, educational planning, governance and administrative activities.

“I would like to see more investments and budget allocation to go into the education sector to enhance it with more trending technologies which will make education accessible to students in the farthest corners of the country,” said Krishna.

Industry executives said overall the Finance Minister has presented a balanced budget with adequate focus on key areas like infrastructure development, manufacturing healthcare and education. The impetus towards disinvestment and the promotion of new businesses are steps in the right direction.

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“Urban Company is particularly pleased with the government’s focus on providing social security benefits including ESIC (Employees’ State Insurance Corporation) benefits towards gig workers,” said Abhiraj Bhal, co-founder of technology-enabled home services firm Urban Company. “This is a welcome move and takes forward measures outlined in the Social Security Code approved by the Parliament last year.”

This budget comes on the heels of a series of roundtables with key stakeholders in government, regulatory bodies, and the entire private equity, venture capital and startup ecosystem.

“The discussions were wide-ranging and very positive,” said Renuka Ramnath, chief executive and managing director at Multiples Asset Management and chairperson Indian Private Equity and Venture Capital Association (IVCA). She said India needs at least 2.5 per cent of the GDP (Gross domestic product) to come in the form of PE, VC investments for the country to reach its $5 Trillion target (around Rs 8.75 trillion or $125 billion). “Only an internationally competitive tax and regulatory environment, as well as a level playing for domestic capital – unlisted shares, will catalyze investors to look towards India,” said Ramnath.

Industry executives also said the allocation of Rs 50,000 crore for the National Research Fund for the next five years is a definite step towards boosting the research ecosystem in a coordinated way.

“Focus on innovation and R&D, coupled with the PLI (production linked incentive scheme) for electronic manufacturing schemes lays down a very strong foundation in building a self-reliant digital India,” said Supria Dhanda, vice president and country manager for India, Western Digital. “We are confident that the technology industry will join hands with the government in its plan to enhance manufacturing capabilities and expand R&D centres,” said Dhanda.