2022 Budget Recap: Impact on the startup ecosystem

The 2022 budget paves the way to spearhead innovation in areas such as Agritech, Fintech, Deeptech, Crypto and more. Here are the key takeaways from the budget & the impact it will have on the startup ecosystem.

Increased focus on building a digital economy

The word digital was used 35 times during the budget speech and the government laid importance on the role that startups will play in helping India transform into a digital economy by enabling startups to conduct business with ease, reducing the complexities for investors, support for entrepreneurs across sectors and more.

Big boost for agri-tech startups:

Startups operating in the agricultural and rural sectors will be backed by fund mobilized via NABARD. The NABARD agritech fund & the Kisaan Drones initiative will pave the way for increased digitization in the sector which directly and indirectly employs nearly 50% of the India population.

Clarity on crypto: 

With a 30% tax, the government finally cleared some doubts about the legitimacy of the status of crypto currency in India. With RBI launching its own digital currency the government wants to support startups operating in the domains of web3, crypto, blockchain and more.

Tax holiday for startups: 

In light of COVID still continuing to create business uncertainties, government has extended the tax holiday incentives for startups by one more year. This will certainly aid startups who businesses took a hit or are still recovering from the COVID shock especially the early stage companies which were formed during COVID.

Expert panel for PE/VC investors:

The budget acknowledged the fact that 2021 was a massive year for private market that gave rise to over 40+ unicorns and clearly established India as a global startup hub that is attracting investor interest and capital from around the world. Setting up an expert panel will help address many ambiguities for investors/startups such as ESOPs, carry, angel tax and more. This step will position India as prime location for attracting foreign capital.

The future of EV's:

Given India's rising infrastructural and mobility needs, the government prioritised on supporting the battery swapping technologies to not only help push for mass adoption of electric vehicles but also to gradually reduce dependency on fossil fuel vehicles which will boost India's EV startup ecosystem working in the domain.

ESOP Parity:

With secondary exits and listing gains, 2021 saw a massive spike in startup employees & founders participating in the angel investing ecosystem. By capping the tax surcharge on unlisted equities at 15% this will ensure more liquidity in the hands of startups founders and employees which will create a positive flywheel effect on the startup ecosystem.

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