How the Budget 2024 puts the spotlight back on human development

The Union Budget 2024 signals out for long-term growth fueled by skills and employment. It sets the stage for India's continued economic and technological ascent, focusing on Development, Prosperity, and Inclusive Innovation. 

The budget’s commitment to skill development by prioritizing large-scale skilling of youth with courses designed to meet current and emerging needs, alongside a central skilling program is crucial. It presents a significant opportunity for the industry to collaborate with the government in driving talent density and fostering inclusive growth. 

This is a consecutive 7th budget where the finance minister focuses on tech as the foundation for growth. The vision of a "New Digital India" sees technology not just as a tool, but as a catalyst for transformation. The commitment to digitization was resoundingly clear in every major announcement in this budget. The announcement to establish DPI applications for growth sectors such as agriculture and areas like credit, e-commerce, education, healthcare, law and justice, MSMEs, and corporate governance is a monumental step forward.

Capital growth in India is thriving due to the favorable environment for Global Capability Centres (GCCs), significantly boosting the country's services exports. GCCs have become integral to India's economic framework, now contributing over 1% to the national GDP. The Finance Minister’s announcement on streamlining transfer pricing assessment procedures is a welcome move. We have had detailed discussions with the government and provided inputs on safe harbour rules, Advanced Pricing Agreements, and assessment procedures. We will continue collaborating with the government on the specifics to ensure India’s transfer pricing regime becomes more attractive and globally competitive. This will boost IT exports and enhance the ease of doing business for Global Capability Centers and the IT services industry.

Despite India boasting the world's third-largest start-up ecosystem, the angel tax has been stifling growth by deterring legitimate investments. The government’s announcement to completely abolish the Angel Tax is set to transform the start-up ecosystem. This is a significant victory and a long-standing request from industry and nasscom. Such a tax does not exist elsewhere in the world, and its abolition will boost India’s global innovation and entrepreneurial competitiveness. 

The MSME sector forms the backbone of India's economic growth. It was great to see the Finance Minister’s focus on regulatory support for MSMEs, including, credit guarantee scheme for machinery purchase, Self-financing guarantee fund, new assessment model for MSME credit based on digital footprint and credit support during stress periods. Additionally, the focus on space tech and the space economy, with plans to expand it fivefold and a dedicated ₹1,000 crore VC fund, will significantly drive innovation and growth in India’s burgeoning SpaceTech sector.

Furthermore, the reduction in TDS from 1% to 0.1% on payments made by e-commerce platforms to sellers is a significant development. We have long advocated for this measure to unlock working capital for sellers on e-commerce platforms. This move will encourage more sellers to participate in the e-commerce ecosystem. Other measures in the Union Budget align with the industry’s longstanding recommendations. The move to give credit of TCS against TDS on salary is also in line with our recommendation. This is relevant for employees who obtain shares of their parent organizations under ESOP/ESPP schemes and are covered within the ambit of the Liberalised Remittance Scheme.

Lastly, the budget sets the tone for Sustainable growth roadmap for Viksit Bharat. The government's focus on digitization, energy security, improving data governance, and processing various sectoral databases, as well as incentives for new employment, are all positive steps.

India today boasts over 31,000 operational technology start-ups, with 3,200 specializing in deep tech. This sector is poised to contribute between $450 billion and $500 billion to India’s economy by 2025, underscoring its substantial impact. Leveraging this ecosystem facilitates job creation, accelerates digital transformation, and enhances transparency and traceability. Despite its potential, the sector is characterized by its complexity and high entry barriers, necessitating patient capital, a robust intellectual property (IP) regime, and a longer timeframe for market entry. Therefore, we would request the government to prioritize the enablement of some of these asks through the quick implementation of the national DeepTech policy. 

While a lot of the announcements made during the budget speech will be dependent on swift and thoughtful implementation. Leadership, strategic investments, and a focus on innovation and talent will position India as a leader in the global technology arena. As we harness these initiatives, India is poised to chart a new course, driving unprecedented growth and prosperity for all its citizens.
 

Views are personal. The author is Chairperson, NASSCOM