Budget 2024-25: What does it hold for start-ups, AI, e-commerce, and advertising?

On Tuesday, Finance Minister Nirmala Sitharaman presented the Union Budget 2024-25 before the parliament. Policymakers prioritised nine key areas to establish a comprehensive growth plan through strategic allocations. The budget emphasised employment and upskilling, infrastructure, innovation and R&D, and taxation reforms among other areas, forming the government’s financial strategy for the fiscal year. 

While the budget seems to have missed out on some of the demands that many had anticipated, it featured silver linings for multiple sectors. Some of the major announcements did lead to industry-wide discussions such as the abolishment of the Angel Tax. 

The budget is big on employment and job generation as well as agriculture with a focus on urban development. A total of INR 1.48 lakh crore was allocated for education, employment, and upskilling, along with the provision of loans up to INR 10 lakh for higher education. The government also introduced up to five schemes aimed at boosting employment, with a package worth INR 2 lakh crore, targeting the employment and upskilling of over 4.1 crore youth in the next five years. The Indian manufacturing sector received a boost through job creation incentives.

On the industry front, e-commerce experienced some relief with TDS being reduced from 1% to 0.1%. 

In a significant development, in what could be one of the several after-effects of the budget, the rupee declined five paise to hit an all-time low of 83.71 against the US dollar after the government raised tax rates on capital gains.

On the other hand, the impact of the capital gains tax was evident in the stock market as the NSE Nifty 50 ended down 30.20 points or 0.12% to settle at 24,479.05, while the BSE Sensex fell 73.04 points or 0.09% to 80,429.04. 

MSMEs to benefit 

In her speech, Sitharaman placed emphasis on the growth and support of Micro, Small, and Medium Enterprises (MSMEs), announcing several measures aimed at bolstering this crucial sector of the economy. A new credit guarantee scheme for MSMEs in the manufacturing sector was introduced. This scheme will facilitate term loans for the purchase of machinery and equipment, eliminating the need for collateral or third-party guarantees.

“Access to credit continues to be a significant hurdle for MSMEs in India. The Union Budget 2024-25 places a strong emphasis on the upliftment of MSMEs and announces several financing-related programs to bridge the credit gap in the sector,” remarks Yashraj Vakil, CEO of CaptainBiz. He continues, “The introduction of the new collateral-free credit guarantee scheme, providing term loans up to Rs 100 crore, is a welcome announcement. This initiative will help manufacturing SMEs invest in equipment, technology upgrades, and capex planning. In turn, this will allow them to improve their output significantly and contribute more to India’s exports, thereby enhancing their participation in the global value chain and strengthening India’s position in international markets.”

Parimal Heda, Chief Investment Officer, Go Digit General Insurance, says, “New assessment model for MSME credit and announcement of credit guarantee scheme will also foster better insurance collaboration with lending companies and aid in better assessment of risks.”

“The new credit guarantee scheme for MSMEs in the manufacturing sector will help early-stage ventures overcome initial hurdles, further supporting startups and MSMEs by offering easier access to funding, which is vital for scaling operations and developing cutting-edge technologies allowing them to focus on innovation and growth,” predicts Pankaj K Arora, Co-founder of Whilter.AI. 

Will Angel tax removal lead to start-up growth?

The government’s decision to abolish the Angel tax for investors is being seen as a positive sign by industry experts that could lead to growth in the startup ecosystem wherein more investors would be willing to invest in upcoming and innovative ventures. 

“The removal of the Angel Tax is a big win for Indian startups. This bold move, along with the Anusandhan National Research Fund will supercharge our startup and tech-led research ecosystem. We’re creating an environment where startups can now dream big, innovate fearlessly, and build global giants from India, especially in the field of AI/Tech, amongst others. This budget clearly signals India’s intent to become a global innovation powerhouse, says Sanket Shah, CEO and Co-Founder, Invideo. 

“Abolishment of angel tax for all classes of investors will provide a huge fillip to the start-up sector that in the past had witnessed funding winter. This will bring in the much-needed capital, especially from the foreign investors to the growing start-up ecosystem of the country and aid in their future growth, adds Parimal Heda. 

“Removing the angel tax and reducing import duties on essential commodities like mobile phones and precious metals, are likely to stimulate the startup ecosystem and consumer market,” opines Yasin Hamidani, Director, Media Care Brand Solutions. 

Vinay Agrawwal, Founder and CEO of Hubler thinks that the MUDRA loan limit enhancement will encourage budding entrepreneurs. He comments, “The government’s decision to abolish the angel tax for all investor classes in the latest Union Budget will fuel innovation and growth in the Indian startup ecosystem. The MUDRA loan limit enhancement is another welcome move to encourage budding entrepreneurs.”

“The abolition of angel tax for all investor classes is a game-changing move that signals the government’s unwavering commitment to nurturing our nation’s innovative spirit. This pivotal reform will inject much-needed momentum into our startup landscape, which has faced headwinds recently,” holds Abhinav Jain, Co-Founder & CEO, Almonds AI. 

“This 2024-25 Union Budget is highly influential to ensure long-term success in the startup ecosystem. By doing away with the Angel Tax, startups have been enabled to encourage a renewed business approach and enhance valuation. This will enable startups to undertake expansion initiatives without concerns about taxation, while also attracting increased funding from angel investors. Furthermore, the centre’s emphasis on upskilling will provide a viable pipeline of trained professionals for startups, ensuring long-term growth and scalability,” remarks Ravi Mittal, Founder & CEO of QuackQuack. 

Women, e-commerce get relief; advertising could benefit 

With e-commerce getting significant relief from TDS, industry leaders are optimistic about its implications. 

“The proposed decriminalisation of delays in TDS payments and the reduction of TDS rates for e-commerce operators are welcome changes that will enhance operational efficiency,” opines Vaibhav Gupta. Gupta further thinks that the significant investment in infrastructure and rural development will open new markets and opportunities for digital marketing and advertising.

The budget also featured over INR 3 lakh crore being allocated for schemes benefiting women. 

“We’re particularly thrilled by the push for higher female workforce participation through women’s hostels, creches, and targeted skilling programs. These initiatives not only promise to boost industry growth but also create vibrant opportunities for innovative branding strategies,” says Ayushi Arora Gulyani, Founder & CEO, Media Corridors. 

On how the substantial aids given to Bihar and Andhra Pradesh could potentially benefit the advertising industry, Ahmed Aftab Naqvi, Global CEO and Co-founder, GOZOOP Group, explains, “The Rs 15,000 crore aid for the development of Amaravati will make the city the new greenfield IT capital of Andhra Pradesh, will boost the startup ecosystem, find a bigger base and in return also show green shoots for the advertising industry. The budget announced Rs 26,000 crore in Bihar towards the development of road projects, airports, medical colleges, highways and sports facilities which is a major development that will only increase opportunities to highlight all this work and hence benefit the ad industry.”

Not comprehensive enough?

Some industry leaders believe that the budget could have benefited from being more comprehensive by including packages for digital as well as regulatory guidelines for AI. 

“The budget lacks a comprehensive strategy to address the potential job displacement caused by AI advancements. A proactive approach, including retraining programs and direct benefit transfers for affected workers, could have been beneficial,” remarks Mukul Goyal, Co-founder of Stratefix Consulting. 

Yasin Hamidani says that the hike in investment taxes, particularly on short-term and long-term capital gains, might dampen investor sentiment and market activity. 

“The recent budget announcement presents a mixed bag of outcomes. While the PM Package’s focus on job creation in the manufacturing sector and incentives for first-time employees is noteworthy, it does not address the needs of the digital marketing industry. The absence of specific measures for digital marketing companies is concerning, given their significant role in driving innovation and economic growth,” observes Dr. Vikram Kumar, MD and Founder, SRV Media. 

Urging the government to share guidelines on generative AI, Pankaj K Arora says, “We urge the government to continue prioritising AI research and development, along with establishing clear ethical guidelines for generative AI. This will ensure that technological advancements are made responsibly, fostering trust and ensuring that innovation benefits society as a whole.”

Bottomline

Sharing an overall review of the budget, Shradha Agarwal, Co-Founder and CEO, Grapes, details, “The budget focusing on bolstering the employment prospects for women and youth is indeed a positive move as it will equip them with valuable skills, enabling them to contribute more effectively across industries, foster innovation, and boost productivity. The proposed allocation of Rs 1.48 crore for skilling can play a pivotal role in boosting job opportunities across the country. The changes in the new tax regime is a welcome step by the government, providing a major relief to the salaried class. The tax reliefs will pave the path for a coexisting ecosystem that will benefit both the organisation and employees at the same time.”

Shrenik Gandhi, Co-founder and CEO, White Rivers Media, shares his comprehensive reading and analysis of the budget:

Implication on A&M, M&E and Gaming Start-ups:

The economic survey of 2023-24 noted 7% growth in Advertising and Marketing start-ups; 5% in Media and Entertainment start-ups and 4% growth in Gaming start-ups. With measures such as abolishing angel tax for all classes of investors and establishing a corpus of ₹10,000 crores to meet the funding needs of start-ups – the government has steamed the ‘Start-up India’ initiative.

Implication on Artificial Intelligence: 

Both the Economic Survey and Budget highlighted the push towards Artificial Intelligence and advanced technologies. With 16% of the world’s AI talent and over 13,000 start-ups diving into fields like AI, IoT, Robotics, and Nanotechnology, India is positioning itself at the forefront of innovation, rapidly embracing AI skills and technologies. As part of building ‘AI in India and AI for India’ the government is walking the talk on developing indigenous AI capabilities, ensuring socially impactful AI projects, and promoting ethical AI amongst other AI-driven initiatives.

Implication on Telecom and E-commerce Advertising: 

With close to 1.16 billion mobile subscribers (2nd highest in the world), reducing BCD to 15% on mobile phones and some electronic items – the budget is clearly indicative of the ‘tech-tonic’ shift in consumption patterns of Indian consumers – this will propel major digital spends by brands on mobile advertising.

In addition, Bharat 6G Vision document and Alliance, ensuring broadband connectivity for all Gram Panchayats,100% FDI in the telecom sector coupled with UPI, ODOP, ONDC, the govt. is fueling growth for advertisers who are optimally using the telecommunication and e-commerce sectors.

Source: Social Samosa