Budget 2024: Startups want govt to double down on Mudra, Startup India, R&D

As the Modi government gears up to present its first Union Budget post-Lok Sabha Elections 2024, the startup sector awaits expansion of the Mudra scheme and enhanced support via Startup India. "...Expansion of credit programs like Mudra loans and support for startups through initiatives such as the Startup India Seed Fund Scheme to encourage innovation and entrepreneurship," equity research firm Fisdom Research says in its budget expectation report.

In its 2024 election manifesto, the BJP discussed support for startups and MSMEs through various initiatives. In its interim budget, too, Finance Minister Nirmala Sitharaman had talked about the role of entrepreneurs in the country as "rozgardata". "PM Mudra Yojana has sanctioned 43 crore loans aggregating to Rs 22.5 lakh crore for the entrepreneurial aspirations of our youth. Besides that, Fund of Funds, Startup India, and Startup Credit Guarantee schemes are assisting our youth. They are also becoming ‘rozgardata’," said Sitharaman. The FM had also announced the extension of certain tax benefits to start-ups and investments made by sovereign wealth or pension funds until March 31, 2025.

The Union Budget 2024, to be announced today, must encourage innovation, support the start-up ecosystem and promote R&D through weighted deduction, says consultancy major Deloitte. "In today’s age, GCCs are transforming into globally integrated innovation-focused strategic hubs...start-ups should be encouraged to innovate and generate more intellectual property and licences."

Another consultancy major PwC talks about the role of the Union Budget in nurturing a conducive environment for the fintech and payments industry. "The Union Budget 2024–25 is expected to further accelerate the adoption of digital payments and encourage growth in terms of innovations," write PwC experts.

When it comes to emerging startups, they expect the government to fund infrastructure like state-of-the-art facilities, co-working spaces, and access to essential services. "It is crucial to extend these benefits to entrepreneurs who are not from elite institutions like IITs and IIMs. By democratising access to resources, we can unlock the potential of a broader talent pool," says Ajay Goyal, founder and CEO, Erekrut, a tech human resource startup. Additionally, the stakeholders say it is important to find a way to incentivise companies to build products and create intellectual property from India, which can be sold worldwide. "Only a handful of success stories are there, while many others have good products, availability of funds to scale their businesses is lacking," says Amit Prasad, founder and CEO, SatNav Technologies, a Hyderabad-based startup focussing on intellectual property focused products.

Mohammad Athar (Saif), partner, PwC says the contribution of MSMEs to the Indian economy is significant. "In order to realise the economic growth target of USD 35 trillion by 2047, it is crucial to fully harness the growth potential of MSMEs for a Viksit Bharat." He says MSMEs face several challenges such as limited access to finance, technology and skilled resources. "Addressing these bottlenecks will require concerted efforts by both public and private sector stakeholders."

The outlook is "cautiously optimistic" for the MSME sector, with projections suggesting a growth rate of about 2.5% CAGR. "Regular flow of affordable credit will play a critical factor in ensuring this sector delivers to its potential. We expect the government to recognise the efforts of lenders that are transforming micro-enterprise lending in India by providing customised credit lines," says Krishan Gopal, CFO, Aye Finance. Axis Securities, in its budget expectations report, says the government could allocate more funds towards digital infrastructure, AI and cyber security. "Industry leaders are hopeful for incentives to spur investments in startups and emerging technologies."