India’s real GDP growth in 2021-22 is estimated to be 9.2 percent, which is 30 basis points lower than the RBI and IMF’s projections of 9.5 percent, according to the NSO’s first estimates. India’s GDP accounts for 2.32 percent of the global economy. GDP in real terms is expected to reach Rs 147.5 lakh crore by the end of 2021-22, according to some estimates.
Extend, expand ECLGS
With the Union Budget 2022 approaching, micro and small businesses throughout the country are hopeful that the government will announce steps to assist and ease the uncertainties caused by the COVID-19 pandemic. For the majority of the new fiscal year, it is expected from the government to consider extending and expanding the Emergency Credit Line Guarantee Scheme (ECLGS). The rates of interest in these programs should not be capped, as this encourages lenders to make these funds available to micro-scale firms with significant operational costs. Capping interest diverts much of this money to larger businesses, thereby cannibalizing the most vulnerable micro businesses.
Finance Minister Nirmala Sitharaman has been encouraged by the fintech industry to further liberalise the tax environment for financial sector startups in the upcoming Budget, noting that it has enormous potential to promote financial inclusion and create major job possibilities.
Prioritise supporting growth
In recent years, the government has introduced a number of laws and initiatives aimed at promoting the welfare and growth of the startup community. With a continual influx of young entrepreneurs into this ecosystem, we want the government to develop an uncomplicated regulatory structure, policies, and standards for startups so that businesses can operate without administrative barriers.
Entrepreneurs are expecting the Budget for 2022-23 to prioritize supporting growth by recovering both consumption and investment demand while keeping inflation under control. While foreign factors are mostly to blame for inflation, they want India’s economic agenda should focus on addressing supply-side bottlenecks, notably in the health sector.
A framework for providing tax incentives and quick access to cash would be a positive move. Fintechs in the microcredit and lending space, which invest in technology and other tools to reach out to the unbanked and underbanked segments of the population who aren’t served by traditional NBFCs and banks, are working toward achieving financial inclusion.
Clarity on cryptocurrency taxation
Apart from startups, cryptocurrencies are gaining traction in most financial services companies’ boardroom conversations. Despite the lack of certainty on its legality and/or acceptability, cryptocurrency investments surged from around $923 million in April 2020 to a stunning $6.6 billion in May 2021. Currently, there are several difficulties regarding whether the investment needs to be revealed and offered to tax in India by a taxpayer, pending any rules and the absence of any specific provisions in Indian tax laws dealing with the taxability of cryptocurrencies. It is necessary to specify the process for calculating fair market value, costs, taxable income, reporting requirements, and so on.
Experts have been demanding for cryptocurrencies to be recognized as an asset class, and a new law is anticipated in the Union Budget of 2022. They expect the government to explore levying TDS/TCS on the sale and purchase of cryptocurrencies in the Budget. This could be a watershed moment for the cryptocurrency sector. The government is anticipated to propose changing income tax legislation to tax cryptocurrency – expected to be levied over a particular level – and to include such transactions into the scope of designated transactions for income tax reporting purposes.
Easy access to capital for women-led startups
In 2021, India’s startup ecosystem attracted approximately $36 billion in private equity investment, as demand for digitalization surged exponentially in the wake of the COVID-19 outbreak. Despite accounting for nearly half of the population, women in India contribute barely 17 percent of GDP. According to the Sixth Economic Census, 90 percent of women entrepreneurs run microenterprises, with 79 percent of them having to fund their operations themselves. According to a recent research, India has over 8 million female entrepreneurs and women hold 10 percent of all official businesses.
Women-led startups are also looking at ways to create an ecosystem by introducing tax benefits like the standard deduction and easy access to capital, particularly for young women-led businesses with fewer than ten employees. This will offer the community a boost, allowing every woman entrepreneur to benefit financially from these solutions.