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Year 2020 has been challenging on the world economy, and the situation is no different in India. In February 2021, everyone in the country will be expecting the government to implement a structure that helps get the economy back on track. As the month for Budget 2020-21 nears, startup ventures in India have a few recommendations of their own.
If we compare the last four years of the country’s progress on the Global Innovation Index, India has advanced to the 48th position (in 2020) from 81st (in 2015) as the most innovative country. The rise in India’s ranking can be attributed to the startup companies. As of today, the government’s Startup India Initiative has recognised 38,756 startups under it.
However, in 2020, many startups lost fundings, faced investment deprivation and tax burden. Despite the financial crunch this year, entrepreneurs are looking for ways to do business efficiently with a beneficial tax structure in place.
In this section, we have put forth the expectations that citizens could have from India's Union Budget 2021. Let us begin.
We have enlisted the expectations that different sectors have from the upcoming Union Budget.
There is no other way put to this, that the Indian economy has been hard-hit due to the on-going situation the world is facing. GST and corporate tax is also faced a major blow. The country’s healthcare inadequacy is evident and needs changes on priority. Along with this, the government needs to focus on recovering the country’s economy - that is the jobs, spendings, and investments.
From the financial and professional services sector: The government can implement ways to bring back research and development incentives. Along with this, they can also undertake measures to reduce taxes to boost economic activity, which is typically known as fiscal stimulus.
From the manufacturing sector: The government can consider implementing an infrastructure development fund. Since the development of roads and highways in India has been one of the growth driving factors lately, having stability on the raw material prices is preferred.
Since Chinese manufacturing has seen a significant drop in the world market, it is an opportunity for India to step in as a reliable supply chain manufacturer.
From the energy, oil, and gas sector: It is important to stabilise the regulatory environment for international investors that will further help the country tap on the retrospective tax issue and attract future investments.
From the food and drink sector: Implementation of electronically generated trade documents should be a top priority for the government. Focusing on digitisation and innovation will prove to be a differentiating factor to develop an Atmanirbhar Bharat (self-reliant India).
From the businesses and startup sector: The startup owners want the government to make funding available to them in the coming year. Further, the focus should be on creating an investor-friendly ecosystem and lenient tax regime that will help budding entrepreneurs scale their business ideas.
Overall, India’s Budget 2021 is expected to focus on boosting the growth of its economy. At the Reuters Global Investment Outlook Summit, 2021 - the Finance Minister of India - Nirmala Sitharaman said - “I would think 2021-22 will be very big, good traction year for achieving a really good rate of growth that itself is going to be a launching pad for 4-5 years of growing at a good speed, provided we do enough on the budget and spend on infrastructure”
The finance minister admitted that inflation is terrifying, and supply disruptions accentuate the issue. She also highlighted the fact that Prime Minister Narendra Modi’s meeting with global investors is crucial.
When talking about the income tax, she mentioned that the government has already extended several tax concessions for sovereign funds, which further gets linked to the National Investment Pipeline that has a significant multiplier effect.
Further, the Reserve Bank of India (RBI) has raised a proposal to allow corporates into the banking sector, which has been in talks lately. Talking about the distress in the corporate and banking section, Sitharaman stated in her interview with Times Now - “I am monitoring banks. Because we could extend timely working capital, many who could have faced severe stress have just held up. Many have gone back to business, and it is reflecting in the GST and PMI numbers. Banks are also open-minded. With liquidity being fairly easily available, stressed companies will survive.”
It would not be wrong to say that Budget expectations are high. Given the state of India's economy, the Budget 2021 will give the country a much-needed chance to get back on track once again. Implementing the aforementioned changes could well do the trick. It leaves to be seen if Budget 2021 lives up to expectations of everyone.
Read more about Budget 2021 and Income Tax by visiting Bajaj Markets online.
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