2023 Budget expectations from Start-ups: Artfine, Cashinvoice, FinBox, Valuematrix.ai, spocto & KoinX
Union Budget 2023 has been widely acclaimed as a fiscally responsible budget that promises to bring about India’s much-needed economic growth and development. The budget has proposed several measures to reduce the fiscal deficit, increase tax collections and promote investments in Fintech, infrastructure, digitalization, and other sectors. It also provides incentives for small businesses and startups.
New-age Entrepreneurs are hoping for the most from the budget, so let’s look at some of the significant expectations they expect for Budget 2023 from various industry experts.
Mr. Arvind TCA, Co-Founder of Artfine, a specialist structuring company that offers end-to-end solutions in supply chain finance, is expecting:
Credit Insurance for MSMEs
The government should impose a priority sector obligation on insurance providers to protect MSMEs. According to data, only one transaction under the IRDA has occurred in the past year, underscoring the lack of intention. Credit insurance has allowed vendors, SMEs, and MSMEs to cover risks and consider expansion plans. In addition to managing non-payment risks that impact the trade finance portfolios of SMEs and MSMEs, it gives banks, suppliers, and NBFCs access to new markets.
Making OCEN accessible to SMEs
The government introduced the Open Credit Enablement Network (OCEN) two years ago. A retail credit program that uses online marketplaces to connect borrowers and lenders and expand access to microcredit for the hitherto underserved MSME sector. However, the government overlooked a crucial aspect of the OCEN process that prevents 60 million SMEs from using this program for loan purposes. While account details are available to individuals, they are not available for small and medium companies. The government should therefore encourage the flow of information if it wants to have an impact. Some signature developments in the budget announcement are needed to expedite the process and enable retail banking for SME companies.
Enabling TReDS access to larger MSMEs
To reach more MSMEs and buyers, a larger group of people must be given access to TReDS participation. However, this policy suggestion has been on hold for a while. Alternatively, participation in TReDs should not be restricted to companies with up to 250 crores in annual revenue; instead, a broad approach should be taken, and companies with up to 2000 crores in yearly income should be allowed on TReDS.
Mr. Arun Poojari, the CEO and Co-Founder of Cashinvoice, who has over 17 years of experience in the financial services industry, including 12 years at Tata Capital, says,
Utilizing/ Encouraging MSMEs for import substitution as part of the Make in India program
The government is focusing on import substitution and encouraging Make in India projects as there is a significant potential for increased import substitutions; hence MSMEs should be assisted in improving their cost competitiveness which can be done by creating a framework for SEZs centered on import substitution that can be replicated across the country and providing particular incentives to MSMEs for establishing units in such SEZs.
MSME Facilitation Councils must include Medium Enterprises
Alternatively, Medium Businesses must be included in MSME Facilitation Councils, which currently only serve Micro and Small Enterprises according to the MSME Development Act 2006. Thirty-nine thousand four hundred sixty-seven medium enterprises registered under the Udyam Registration portal as of November 25, 2022. Therefore, it is necessary to include the Medium Industry in the Micro and Small Enterprises Facilitation Councils to settle delayed buyer payments.
Rajat Deshpande, CEO, and Co-Founder of FinBox -A B2B digital lending infrastructure provider says,
“Leveraging digital infrastructure projects such as UPI and Aadhaar to improve last-mile delivery and policies to incentivize digital payment methods will go a long way in boosting access and inclusion.”
The 2022 Budget took a significant step towards increased digitization by announcing the setting up of 75 digital banking units or DBUs across the country, and I’m excited to see a few progress in the digital banking space:
1. Banks and payment providers are looking forward to incentives or a fiscal boost to continue offering digital prices. Coming to MSMEs, the 2022 Budget announced an extension of the ECLGS scheme till March 2023.
2. The TReDS facility for MSMEs could also do with some simplification, and hopes that the government opens new avenues for MSMEs to get an invoice and cash-flows-based financing through digital means in the open market.
3. Co-lending is yet another innovation that’s reshaping the nature of MSME credit, but the government needs to do more to promote the same and boost financial inclusion. Clear risk mitigation policies around the model would also amplify its popularity.
Aditya Malik, Founder of ValueMatrix.ai and a mentor with the Nasscom DeepTech Club, says,
“After the Digital India push of the Govt., we now need Innovation First India to Institutionalize that we need investment which can create a back demand for our Ph.D. and research talent to grow, stay back, and not be brain drained by the more developed economies. Our DeepTech Industry desperately needs Tax SOPs to bolster sustained and stable growth. Given the unstable global signs of IT, this could be one of those sniper shots which can re-energize the Industry.”
Puja Srivastava, Co-Founder, and CTO at sports said, “As an entrepreneur, I think it is important that there should be an increase in the GST exemption slab which will enable us to have more working capital in hand on a day-to-day basis & help in financial enablement. The government could announce steps to reduce tax litigation and concession on indirect taxes levied on businesses run by women entrepreneurs. Also, there should be initiatives by the government to promote business loans for women entrepreneurs without any collateral considering the fact that India will only become a trillion-dollar economy if more women become Finance champions.”
Sumeet Srivastava, Co-Founder & CEO spot said, “Previous Budgets have provided respite to fintech startups but have not relieved us of greater tax burdens. I am hoping to see a reduction in tax slabs up to 30 lacs in order to boost liquidity in the market. From a debt collection standpoint, one of the primary drivers for short-term defaults is a lack of disposable income. The boost to liquidity can result in lower defaults by borrowers. Secondly, fintech has sought exemption in GST till a certain limit of their revenue for a long. GST for debt collections service comes under reverse charge and hence there is a huge disincentive for the industry, especially for new-age startups which are leveraging technology for collections. The expectation from the budget would be to keep in mind the changing needs of the new-age Indian business models.”
Punit Agarwal, Founder of KoinX, said, “The year 2022 has been rather an interesting year for the global economy and startups, but in 2023 we can expect a lot more for Web 3 and other startups. As India is home to the 3rd largest number of startups, we can expect the government to leverage the tax relaxations to overcome the fiscal consequences of the pandemic crisis.
Keeping in view the current market situation, the startup’s founders committee can build organized entrepreneurialism and finance education to encourage the upcoming generation of successful entrepreneurs. The startup funding in India was around $2 billion, which was the lowest in the previous two fiscal years, which means investors are getting highly selective and are keen to make deals that have investment profitability and growth. Also, it is anticipated that the government may allow nationalized banks to use accumulated GST credit as leverage that, when happens, is obliged to benefit SMEs and startups. As the need of the hour says, the government can take into consideration and overall view the startup community’s requirements keeping in mind the futuristic perquisites from the rising nation.”