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The Union Budget 2024 - A step closer for India to being a technology powerhouse
The Union Budget 2024 - A step closer for India to being a technology powerhouse

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The global population is growing at an accelerated rate. Alongside this, digital adoption is increasing in all facets of daily life. Digital transformation with automation, cloud technologies, and Gen AI have become key focus areas for enterprises. From an economic perspective, this growth is positive. However, with most of the global population living in emerging economies such as India, the Philippines, Vietnam, Indonesia, China, etc., the main demand increase is centred around these economies. Apart from that, US and European enterprises are constantly facing cost pressures, which force them to shift several cross-functional departments to emerging economies.

In the past decade, India has demonstrated its strength as one of the largest exporters of IT services globally. Enterprises are tapping into the Indian technology talent pool through their capability centres in India. This thriving IT-enabled services sector in India is a result of a series of economic reforms and shifts in periodic waves since the 1990s. Interestingly, these reforms and shifts were not adequate to address the requirements of technology product development in India, and the nation’s enterprises struggled immensely due to inadequate infrastructure, limited access to capital, and a shortage of product talent. By products, it is referred to as digital public goods, e.g., laptops, smartphones, etc., and the software and applications that run on these products. It was only in the mid-2000s when startups started to flourish in India, triggering the transformation of India into a technology product nation. Government initiatives like ‘Startup India’ and the ‘Digital India’ ecosystem played a significant role in this transformation journey.

India is on track to becoming a leading technology and innovation hub. The union budget 2024 proposes to accelerate this journey by prioritizing ‘ease of doing business’. The budget focuses on critical areas such as manufacturing support, startup growth, digital infrastructure, workforce skilling, ease of investment inflow, and sustainable innovation and has been widely acclaimed by technology leaders. It displays the government’s commitment to laying a solid foundation for resilient and prosperous growth. A few key tenets of the budget that bolster India’s journey to becoming a technology powerhouse are discussed below.

Regulatory support for micro, small, and medium enterprises: The budget proposes to introduce a credit guarantee scheme for machinery purchases, a self-financing guarantee fund, a new assessment model for MSME credit based on digital footprints, enhanced credit support during periods of financial stress, and an increase in Mudra loan limits. These schemes will help MSMEs to expand capacities, scale production, and increase in size, making them competitive. The Indian government has been making efforts to make electronics and semiconductor manufacturing in India an attractive offering for global companies. The schemes of budget 2024 will be pivotal for the development of the manufacturing ecosystem of this industry in India.

Transfer pricing and Safe Harbor Rules (SHR): The union budget proposes to expand the scope of Safe Harbour rules and streamline transfer pricing assessment procedures to reduce litigation in international taxation and enhance certainty. This would bolster IT exports and ease business for capability centres and IT services industries.

Abolition of Angel Tax: India has the third largest startup ecosystem in the world. According to the Finance Act, 2012, in the IT Act, every startup that receives funding from an angel investor pays a certain angel tax to the government. Budget 2024 proposes to abolish such angel tax. By removing this tax, the government aims to bolster the startup ecosystem, boost the entrepreneurial spirit of the nation’s youth, reduce the financial burden on startups, and attract more domestic and international investments.

Skill development: The budget proposes a centrally sponsored scheme for skilling in collaboration with state governments and industry. With the scheme, the government commits to large-scale skilling of youth with courses designed to meet the current and emerging needs of technology talent in India.

Various Infrastructure :

  • E-commerce Export Hubs: The government proposes to set up e-commerce export hubs to enable MSMEs and local manufacturers to sell products in international markets. These hubs will facilitate trade and export under a seamless regulatory and logistic framework.
  • Industrial Parks: The budget proposes the development of industrial parks with complete infrastructure in or near 100 cities.
  • Digital Public Infrastructure Applications: The government will support the development of DPI applications at scale for productivity gains, business opportunities, and innovation. The applications are planned in all sectors – e-commerce, health, education, and urban governance.

Other proposals and conclusion: In addition to the above, there are more proposals in the Union Budget 2024 which indicate India’s commitment to a tech-powered future. The proposal of Budget 2024 to formulate an economic policy framework to facilitate employment opportunities and sustain high growth with technology as an enabler reflects a positive sentiment for the nation’s focus on being at the forefront of technology. It is proposed to operationalize the Anusandhan National Research Fund for basic research and prototype development and establish mechanisms to spur private sector-driven research and innovation at a commercial scale. The budget proposed to enhance technology adoption towards the digitalization of the economy. It also indicated its ongoing activity around Jan Vishwas Bill 2.0, which will improve the ‘Ease of Doing Business’ for startups and unicorns of India. To incentivize the manufacturing of PCBAs of telecom equipment in India, the budget proposed to increase the basic customs duty from 10 to 15%. The Union Budget 2024 is full of optimism for the technology sector in India. With a tangible action plan with coordinated efforts among governments, states and private sector firms and investments flowing from the planned sources, India will become the world’s leading technology hub sooner than planned.


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Ankan Guria
Senior Manager

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