Modi 3.0 walks the talk on startups and tech in today's Budget

Union Finance Minister Nirmala Sitharaman addressing a post Budget press conference. (Courtesy: PTI photo)

A dozen years after the dreaded angel tax made an entry into the startup lexicon and killed many young companies, it has been finally done away with in today's Budget.

The startup ecosystem has long complained that the angel tax regime, which was originally started in 2012 as an anti-abuse measure to prevent money laundering, actually drove away smaller investors who couldn't afford the compliance burden.

While the Modi government had tried to find multiple quick fixes within the law in the preceding years, they rarely ever worked. The fact that the government has finally abolished it at the start of its fresh tenure shows that Modi 3.0 remains committed to startups and tech, at a time when it is expected to focus more on populist measures.

This emphasis on the sector is reflected in the fact that the Ministry of Electronics and Information Technology (MeitY) has received a 52 percent boost in its budget estimate, increasing its outlay from around Rs 14,000 crore to around Rs 21,000 crore. The majority of this increase is reflected in the higher outlay for PLI schemes related to semiconductor and electronic manufacturing.

Another noteworthy non-populist announcement for the startup sector is the setting up of a Rs 1,000 crore venture capital fund for the space industry. It follows the Indian Space Research Organisation (ISRO's) recent achievements such as successfully landing Chandrayaan-3 near the Moon's South Pole, and the emergence of multiple domestic promising startups in the sector such as Pixxel and Agnikul Cosmos.

The Budget showed that the government wants to replicate its successes with Aadhaar and the Unified Payments Interface (UPI) — of using such digital public infrastructure as instruments of economic inclusion.

With today's Budget, it has set out an ambitious plan to facilitate the implementation of a DPI in agriculture over 3 years, bringing over 6 crore farmers under the formal land registry system. As part of the Agri Stack project, the government also plans to conduct a digital crop survey in 400 districts this year.

The good news in today's Budget is not just restricted to domestic tech companies. The FM also proposed the withdrawal of the 2% equalisation levy, which currently applies to payments received by non-resident e-commerce operators for online sales of products or services.

The move is expected to provide relief to foreign digital companies like Google and Meta, and the levy will cease to be applicable from August 1, 2024, onwards.