20 key takeaways for the technology sector from the 2018-19 budget speech

The 2018 budget featured a number of announcements that may be of interest to anyone engaged with the technology sector or the startup ecosystem. This note takes a look at some of these announcements in order to identify how the business environment may be impacted by the 2018 Budget

1. Economic Growth in the last year: The Indian economy is a 2.5 trillion dollar economy, and is the seventh largest in the world. The IMF has forecast that India will grow at 7.4% next year, and services have resumed growth rates of 8% plus. Exports are expected to grow at 15% in 2017-18, and the economy is on course to achieve a high growth rate of 8% plus.
2. Ease of doing Business: India has broken into the top 100 of the World Bank’s Ease of Doing Business rankings, jumping 42 places in the last three years.
3. E-NAM’s: The Government will develop and upgrade existing 22000 rural haats into Gramin Agricultural Markets (GrAMs), electronically linked to e-NAMs (e-National Agriculture Markets) and exempted from regulations of APMCs, providing farmers with the facility to make a direct sale to consumers.
4. Specialized agro-processing financial institutions: The Government will establish specialized agro-processing financial institutions in the food processing sector, and has doubled the allocation of the Ministry of Food Processing from Rs. 715 Crore to Rs. 1400 Crore in 2018-19.
5. National Programme on Artificial Intelligence: The NITI Aayog will initiate a national program to direct India’s efforts in the area of artificial intelligence, including research and development of its applications.
6. Mission on Cyber Physical Systems: The Department of Science & Technology will launch a Mission on Cyber Physical Systems to support the establishment of Centres of Excellence in order to invest in research, training and skilling in robotics, artificial intelligence, digital manufacturing, big data analysis, quantum communication and Internet of Things (IoT).
7. Allocation of funds for the Digital India programme: The Government has doubled the allocation on the Digital India programme to Rs. 3073 Crore in 2018-19 in an attempt to build a digital economy and an innovation ecosystem.
8. Unique ID for Businesses: The Government will evolve a scheme to assign every individual enterprise in India with a unique ID along the lines of the Aadhar system.
9. Venture Capital Funds: The Budget speech mentions a commitment to take additional measures to develop a special developmental and regulatory regime for the growth of Venture Capital Funds (VCFs) and angel investors in order to strengthen the environment for their growth.
10. Smart Cities Mission: 99 cities for the Smart Cities Mission have been selected with an outlay of Rs. 2.04 Lakh Crore, which will be used to implement projects like Smart Command and Control Centres, Smart Roads, Solar Rooftops, Intelligent Transport Systems and Smart Parks.
11. Bharatnet project: The Government will set up five lakh wi-fi hotspots to provide broadband access in rural areas, and has provided Rs. 10000 crore in 2018-19 for creation and augmentation of Telecom infrastructure.
12. Fintech in India: A group in the Ministry of Finance is examining the policy and institutional development measures that are needed for creating the right environment for the growth of Fintech companies in India.
13. Fastags: The Government is replacing the system of physical toll payments with the use of Fastag and other electronic payment systems in order to make road travel seamless, and will come out with a policy to introduce toll systems on “pay as you use” basis.
14. Cryptocurrencies and Blockchain technology: The Government has stated that it does not consider cryptocurrencies legal tender or coin, and will take measures to eliminate use of crypto-assets in financing illegitimate activities or as part of the payment system. However, it maintains that it would explore the use of blockchain technology proactively for ushering in a digital economy.
15.  5G Test Bed: The Government will promote the adoption of emerging new technologies such as Fifth Generation (5G) technologies. One of the measures towards this adoption is the establishment of an indigenous 5G Test Bed at IIT, Chennai by the Department of Telecom.
16.  Policy for Hybrid Instruments: The Government will evolve a separate policy for hybrid instruments given their importance to startups and venture capital firms.
17.  Expansion of the applicability of the tax deduction provision: Section 80IAC of the Income Tax Act, which provides for tax deductions for startups was also amended to expand the definition of “eligible business” for a tax deduction, as the requirement for the services to be driven by technology or intellectual property is done away with, thereby expanding the scope of the definition to include business models that aren’t technology-driven.
18.  National Logistics Portal: The Department of Commerce will develop a National Logistics Portal as a single window online market place to link all stakeholders.
19.  Exchange Traded Funds: The Department of Investment and Public Asset Management will come up with more Exchange-Traded Fund offers along the lines of ETF Bharat-22, including debt ETF and other offers.
20.  Education Technology: An announcement that heralds positive changes for startups engaged in the Ed-Tech sector is the Government’s stated intention to “increase the digital intensity in education” to facilitate a move from “black board” to “digital board”.

[Authored by Aniruddh Nigam, TRA intern, with inputs from Nehaa Chaudhari, Public Policy Lead, and Pushan Dwivedi, Associate]