Budget 2020: Reaction on budget from Industry, Startup founders, Investors, and Analysts

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With the bid to boost the economy through the multiple investment announcements in the different sectors like health, rural, education, startups, agriculture and Infrastructure, The finance minister Nirmala Sitharaman on Saturday tabled the Union budget for the fiscal year 2020-2021.

Here are some reactions from Indian businesses, Startup founders, Investors and Analysts:

Raj N. Phani, Founder of Zaggle, and the author of “Made in Hyderabad”:

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“On income tax, having two regimes is complicated. The exemptions should be allowed along with the new slabs. The dip in collections of income tax will be more than adequately covered by increased consumption and hence GST, as well as the money multiplier effect kicking in driving MSME growth thereby also creating more jobs and more jobs, means that India would have more income taxpayers.

It’s a very conducive budget for startups particularly the ESOP tax treatment and extension of 7 to 10 years to carry forward losses. The increase in turnover from 25 cr to 100 cr for taxable profit and initiatives to boost entrepreneurship is a welcome move. In addition to this, the removal of DDT is a significant move which was the need of the hour.”

Ms. Daksha Baxi, Partner & Head – International Taxation, Cyril Amarchand Mangaldas:

“Major announcement of 100% tax exemption on all types of income to major FDI investments in infrastructure projects before 2024 with a lock-in of 3 years should be received well for boosting investments in infrastructure.”

Ms. Sanya Goel, Director, and founder of Fuel Humsafar:

“Ms. Sitharaman said in her speech that entrepreneurship has always been the “strength of India,” and proposed a slew of measures to ensure ease of doing business for Indian startups, including a seed fund to support early-stage startups and an investment clearance and advisory cell for entrepreneurs, among other measures and called India’s growing crop of entrepreneurs ‘job creators’.

Govt proposes easing of tax payments for startups Finance Minister Nirmala Sitharaman proposed easing of tax payments for startups to promote the growth of budding entrepreneurs “by deferring the tax payment by five years or till they leave the company or when they sell, whichever is earliest.” Currently, ESOPs, or employee stock option plan, are taxable.

We welcome the announcement of an eligible startup having a turnover of up to Rs 25 crore is allowed a deduction of 100 percent of its profits for three consecutive assessment years out of seven years if the total turnover does not exceed Rs 25 crore.”

Mr. Anil Kumar Gupta, Partner, MicroSave Consulting (MSC):

“Interestingly budget talks about artificial intelligence (AI), machine learning (ML) and Internet of Things (IoT) at quite a few places. It also refers to entrepreneurs and start-ups also.

This focus is a good sign for the entire start-up and technology community. The relaxed provisions of ESOP will help start-ups attract and retain top talent.

Besides finally recognizing start-ups having a turnover of 100 crores for tax holiday will boost the growth stage start-ups. Setting up of investment clearance will help the budding entrepreneurs to build new solutions for India’s diverse needs.”

Jaideep Hansraj, Managing Director & CEO, Kotak Securities:

“The Union Budget has tried to balance higher expenditure and still maintain a prudent fiscal deficit target of 3.5% for the fiscal year 2021.

Removal of Dividend Distribution Tax (DDT) will lead to higher cash flows in the hands of cash-starved India Inc. If individual taxpayers opt for the new tax regime then it will result in higher cash in the hands of the individuals. This, in turn, would lead to increased spending or higher investments, both being good for the country.

Market expectations were high on capital market reforms which have not materialised and to that extent, there could be some near term disappointment.”

Abhilash Pillai, Partner, Cyril Amarchand Mangaldas, Warehouse, Infrastructure:

“More govt warehouses on govt land is a welcome step. It should be developed with state of the art facility under the PPP model and should have unhindered access. This will help in increasing production and sales. FCI & WCI can also lease out excess space available to private operators.

More hospitals, educational institutions, and manufacturing facilities are expected to boost up the demand in the real estate and construction sector.

Info on the land bank can be easily collated and made available if land titling legislation can be implemented across the country with the help of AI and digital governance. Technologically advanced States should be asked to help other States in implementing this.

Incentives should be given to the States who are proactive in setting up an e-land bank. This will also help in completing the development of Smart Cities, PMAY – Urban & Rural.”

Zarin Daruwala, CEO, India, Standard Chartered Bank:

“The personal income tax cuts for the middle class would help address the urgency to revive consumer demand.

The focus on physical infrastructure along with the social sector (health, education, rural, water) would boost the medium-term growth potential. In my view, the budget rightly attempts to boost spending by enhancing non-tax revenues via higher disinvestments including stake sale in LIC and IDBI Bank.”

Ajay Singh, Chairman & Managing Director, Spicejet:

“The announcement for 100 new airports under UDAN (scheme) is a very positive move.

Concessions to sovereign and pension funds to get long term funds for infrastructure is positive too.”

Ajay Sawhney, Partner, Cyril Amarchand Mangaldas, Agriculture, Infra & logistics:

“Krishi Udaan and Kisan Rail schemes are a welcome change in the budget presentation. These schemes will play a pivotal role in the proposed 16 point action plan to boost agriculture and farmer welfare.

If formulated and implemented well, these schemes will be the ‘different set of solutions’ that the agriculture sector has been longing for. Our policies have traditionally failed to recognise many essential issues in the agriculture sector including those of efficient storage and transportation.

Lack of adequate scientific and technical facilities to store and transport perishable commodities has been plaguing the sector. The announcement is at least evident of the fact that the Government acknowledges that issues being faced by the agriculture sector are intertwined and not independent.

It may take some time to evolve an efficient agri-based storage and logistics solution, but if both the railway and ministry of civil aviation back this initiative well, we could see a very meaningful and positive impact on the agriculture sector in the near future.”

Jay Cheema, Partner, Cyril Amarchand Mangaldas, Oil & Energy:

“While higher investment in the sector is a welcome step, the budget falls short of bringing natural gas in the GST regime which is a long time appeal by the gas industry.

Thus to achieve a higher share in energy bids for natural gas, the imposition of GST would have been a prudent measure in order to enhance the sector.”

Kunal Bahl, CEO & Co-founder, Snapdeal:

“Thankful to the Hon’ble FM for accepting the start-up sector’s request for ESOP taxation reforms. Also, the higher time & turnover limits for carrying forward of losses for start-ups will enable them to optimize growth decisions in formative years.

Overall, Budget 2020 is a thoughtful weaving together of specific proposals to tackle varied issues. Measures to improve access to finance for MSMEs and reduced taxation for the middle-income segment are welcome steps.

Boosting physical infrastructure, expanding digital connectivity and growing use of technology in government functioning are important building blocks for the long-term growth of the Indian economy.”

Mr. Abhishek Bansal, Chairman and Managing Director, Abans Group of Companies:

Removal of interest and penalty payment on disputed tax, if paid by 31st March 2020 and some additional penalty, only if paid till 30th June 2020, is a welcome move, as it will increase the tax receipts for the government and also relieve the taxpayer from the cost of excessive penalties and cost of paperwork.

The creation of an International Bullion Exchange by GIFT CITY will add liquidity and depth to the gold commodity market. There is tremendous value potential to be unlocked from the gold industry in India in terms of it being one of the largest consumers of the precious metal globally and in terms of the finesse of jewelry produced in India, thereby acting as a vast employment generator.

As the true value of this gets unlocked by the formation of the bullion exchange, India will gain its rightful place in the global gold markets.

Enablement of rupee derivatives trading at GIFT City, Gujarat is also a welcome decision as it will offer greater credibility, and hence allow the Rupee to find its true value.

Partial sale of a stake in LIC is also a welcome step because it will provide monetary inflows to the government, which will help fund reduction in inflows due to tax exemptions and other breaks to the industry. This will hence help the government keep the fiscal deficit within the projected limits.

If this is read in conjunction with the government’s efforts for divestment of Air India by offering a 100% management stake sale as well as support in terms of reduction of debt, a positive story emerges in terms of the government is determined to push through the divestment of strategic assets and hence raise resources.”

Aakash Vaghela, Founder & Managing Director, AV Organics LLP:

“The Union Budget has some welcome announcements for start-ups and the economy at large.

The setting up of an Investment Clearance Cell for entrepreneurs (which will also offer funding assistance), deferring the ESOP tax burden on employees for five years (or until they exit the company if this occurs earlier), the abolishing of audits for small companies with an annual turnover of INR 5 crores are all steps that will create an enabling environment for start-ups.

The digital refund of duties to exporters is another good move. The robust allocations for agriculture, infrastructure development, nutrition programs, and other segments could also help boost job creation.

Nonetheless, the bottom line will vest on how well these programs are implemented.”

Digvijay Singh, COO, Indian Angel Network:

“A single window clearance cell will surely attract domestic & foreign angel investors.”

Deepak Mittal, Co-founder & CEO, TO THE NEW:

“Being the first budget of the decade, this budget holds immense value & importance and we are glad to see the government’s continued commitment towards positioning India a digital hub and fostering emerging technologies.

We are thrilled with the announcement of a soon to be rolled out policy to enable private sector to build data center parks throughout the country. This would reap benefits such as on-demand access to ICT infrastructure, cater to Indian regulatory requirements as well as drive scalability for businesses in India.

We were, however, also expecting the government to announce measures with respect to Data Protection keeping in mind the amount of Data being created and stored at unprecedented rates.

Moreover, the government’s move to set up an Investment Clearance Cell for entrepreneurs to offer assistance in funding, will certainly encourage more start-ups to set up their businesses in India.

This will, in turn, lead to the growth of the Indian economy. With a slew of growth measures announced, the emphasis of the government is very clear on the overall economic development.”

Mr Hemant Sood, Managing Director, Findoc Financial Services Group:

“The themed budget by the Hon’ble Finance Minister has introduced the budget which has positives for both common man and corporates. This is a budget for an Aspirational India and has done a balancing act by trying to stick to Deficit target and giving boost to the economy either through spending or rationalization of taxes.

The fiscal math is resting on a ambitious target of disinvestment of INR 2.1 Lakh crore.

For the middle class having an income of upto 15 Lakhs the proposal by the Hon’able finance Minister of changing the tax slabs and tax rates is a probably a good news as it will put more money in the hands of the common man, thereby giving a boost to the consumption economy.

In addition to above, Removal of DDT for companies is a positive for market as it will help FPIs/ FIIs and FDI. MNC will be able to take exemptions of dividends paid to them by their Indian subsidiary or Indian Unit under DTAA

Proposal for settlement of Tax Litigations without payment of penalty and penal interest, is nearly a welcome step by the Finance minister, but we need to wait for the fine print of the budget before we can say that this latest step would help in reducing litigations and unlocking the money has been locked in tax disputes.”

Nikhil Arora, Vice President and Managing Director, GoDaddy India:

“The Union Budget 2020 is a reflection of the Government of India’s vision and commitment towards delivering an inclusive growth.

The proposed reforms especially those focused towards MSMEs and startups such as provision of seed funding for early-stage startups and setting up of a portal based investment clearing cell, will further help to bolster growth of independent ventures in India.

Big announcements like deferred payment of ESOPs, as well as the creation of an e-market place for MSMEs, are also laudable steps by the Government towards uplifting the overall entrepreneurial spirit in the country.

We also believe that the proposed allocation of INR 99,300 for education and the allocation of INR 3000 for skilling initiatives, can be instrumental in delivering better educational infrastructure and innovation.

As India gears up to chart the next chapter in its strong growth story, we at GoDaddy continue to work in collaboration with the Government and our partner ecosystem, to help entrepreneurs and small businesses grow their ventures online, with our easy-to-use and affordable tools and solutions.”

Anurag Jain -Co-founder, KredX & Founding Member, Digital Lenders Association of India (DLAI):

“It was heartening to see a continued thrust by the finance ministry on facilitating funding for MSMEs and focus on solving the problem of delayed corporate payments for small businesses.

The MSME sector controls more than 40% of industrial production in India. The subordinate debt, introduced in the budget will ease the working capital woes faced by MSME without interfering with the existing exposure of banks. Augmentation of CGTMSE fund will further enhance the lending capabilities of financial institutions thereby reducing the working capital gap.

Secondly, idea of an app based invoice financing product strikes the right chord and will infuse liquidity in the supply chains of corporates while making cash flow available to MSMEs. While we await the details, such a product will definitely benefit the “longer tail” vendors in the services sector.

Lastly, as representatives of fintech sector which has close to 2500 new businesses, reforms for startups is heartening. Digital platform for IPR will safeguard new ideas and will encourage more innovation. Similarly, the tax reforms on ESOPS is a big move and should help a new business attract better talent.”

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Krishna Mali
Krishna Mali
Founder & Editor of TechGraph

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