How Budget 2024 Renews Emphasis on Human Development

The Union Budget 2024 signals long-term growth driven by skills and employment. It sets the stage for further economic and technological growth for India, focusing on development, prosperity and inclusive innovation.

Budget commitment to skills development by prioritising large-scale youth training with courses designed to meet current and emerging needs, alongside a central training programme, is key. This presents a significant opportunity for the industry to work with the government to increase talent density and support inclusive growth.

This is yet another budget, the seventh, where the Finance Minister has focused on technology as a foundation for growth. The vision of a ‘New Digital India’ sees technology not just as a tool but as a catalyst for transformation. The commitment to digitalisation has been clearly visible in every major announcement in this budget. The announcement of setting up DPI applications for growth sectors like agriculture and areas like credit, e-commerce, education, healthcare, law and justice, SMEs and corporate governance is a monumental step forward.

Capital growth in India is flourishing due to the favourable environment for Global Capability Centres (GCCs), which is significantly boosting the country’s service exports. GCCs have become an integral part of the Indian economic framework, now contributing over 1% to the country’s GDP. The announcement by the Finance Minister regarding streamlining of transfer pricing assessment procedures is a welcome move. We have had detailed discussions with the government and provided information on safe harbour rules, advanced pricing arrangements and assessment procedures. We will continue to engage with the government on the details to ensure that the Indian transfer pricing regime becomes more attractive and competitive globally. This will boost IT exports and ease of doing business for Global Capability Centres and the IT services industry.

Even though India boasts the third largest startup ecosystem in the world, the angel tax is stifling growth by discouraging legitimate investment. The government’s announcement to completely scrap the angel tax aims to transform the startup ecosystem. This is a significant victory and a long-standing demand from industry and nasscom. Such a tax does not exist anywhere else in the world and its removal will strengthen India’s global innovation and entrepreneurial competitiveness.

The SME sector is the backbone of India’s economic growth. It was great to see the Finance Minister’s focus on regulatory support for SMEs, including a credit guarantee scheme for machinery purchases, a self-funded guarantee fund, a new SME credit assessment model based on digital footprint and credit support during periods of stress. Also, the focus on space technology and the space economy, with plans to expand it five-fold and a dedicated VC fund of ₹1,000 crore, will significantly drive innovation and growth in India’s emerging SpaceTech sector.

Further, the reduction in TDS from 1% to 0.1% on payments made by e-commerce platforms to sellers is a significant achievement. We have long advocated for this measure to unlock working capital for sellers on e-commerce platforms. This move will encourage more sellers to participate in the e-commerce ecosystem. Other measures in the Union Budget are in line with long-standing industry recommendations. The move to grant TCS in lieu of TDS on salary is also in line with our recommendation. This is significant for employees who receive equity in their parent organisations under ESOP/ESPP schemes and are covered under the Liberalised Remittance Scheme.

Finally, the budget sets the tone for a sustainable growth roadmap for Viksit Bharat. The government’s focus on digitalization, energy security, improving data management and processing of various sectoral databases, and encouraging job creation are all positive steps.

India currently boasts of over 31,000 active technology startups, of which 3,200 are deep tech. This sector is expected to contribute $450-500 billion to the Indian economy by 2025, underlining its significant impact. Leveraging this ecosystem facilitates job creation, accelerates digital transformation, and increases transparency and traceability. Despite its potential, the sector is characterized by complexity and high barriers to entry, requiring patient capital, a strong intellectual property (IP) system, and a longer time to market. We would therefore request the government to prioritize enabling some of these demands through the rapid implementation of a national DeepTech policy.

While many of the announcements made in the budget speech will depend on swift and deliberate execution, leadership, strategic investment and a focus on innovation and talent will position India as a leader in the global technology arena. Leveraging these initiatives, India is poised to chart a new course, driving unprecedented growth and prosperity for all its citizens.

The views are personal. The author is the chairman of NASSCOM