As everyone waits for the announcement of the upcoming Union Budget 2021 with bated breath, the big expectation is how the Budget will set course for economic recovery in the wake of the adverse effects of COVID-19. Technology has been one of the highly resilient sectors of our economy and the pandemic has served as a catalyst for digital and technological adoption across various industries.

India has emerged as one of the largest and fastest-growing tech markets in the world, and technology has introduced fundamental changes in the way businesses operate today. India’s remarkable digital growth and exponential data penetration have led to strong demand for the development of digital infrastructure. Hence, the technology industry has many expectations and hopes pinned on the Union Budget. The central government needs to look at elevating technological advancements as a strategic priority as India can increase its stake in the data centre market with the extension of necessary policy support and adequate incentives.

Expectations from Budget 2021

The technology industry has largely remained immune to the repercussions of the global pandemic and has rather witnessed a positive growth trajectory as enterprises were propelled to fully embrace remote work models and distributed workforces in minimal time. On the consumer end, there has been a stark behavioural shift as many scrambled to adopt digital channels for higher-velocity daily purchases as well as the high deployment of tech in services like education and healthcare.

Given the fact that the technology sector tends to have a multiplier effect on the economy broadly, it is expected that the government will implement favourable policies that are effective in creating a robust digital infrastructure and ecosystem that can support innovation at all levels.

The backbone of Digital India is the Data Centre and Cloud Services which are supporting the fast-growing digital economy. The government must look to bring in necessary regulatory interventions, such as introducing data protection guidelines, as well as make provisions to encourage investments in these sectors by adopting policy measures related to improving infrastructure and promoting strong connectivity.

The government also needs to make space for provisions to incentivise research and development of the latest technologies including artificial intelligence, robotics, machine learning. This will in turn enhance India’s science and engineering talent to develop our strategic capabilities in core industrial and scientific research, along with acting as a multiplier for the overall economy.

India needs a technology-friendly tax policy. There is also a need to integrate technology-driven start-ups in the government’s action plan to boost the financial wellbeing of rural India. Various small and medium-sized enterprises are working to take the AI industry to the next level. Since the MSMEs are the biggest growth drivers of the economy and the second-largest segment after agriculture, we need more focus on extending credit facilities to them and enabling them to adopt new-age technologies that would further help in their development. Thus, the government needs to look at making ‘Make in India’ and ‘Digital Transformation’ intersect and provide an incentive to corporate India at a larger level by allowing businesses some sort of tax rebate. Revised tax policies, simplified GST structure, and appropriate policies that can provide a thrust for digital innovation can further incentivize home-grown tech start-ups and brands. This will help MSMEs in the tech domain to operate in a more level-playing field alongside MNCs and other big players.

In this year’s Budget, there needs to be attention directed towards measures for better regulation of start-ups dedicated to Bharat Finclusion, which will help in attracting more foreign investment. An increase in expenditure to further the financial accessibility to unbanked & underbanked is crucial at this juncture, and India, currently, is largely lagging behind. Bharat needs equal, easy, and affordable access to quality financial products customised and built for Rural India.

As far as taxes are concerned, currently, the GST applicable is as high as 18 per cent. But, in the upcoming Budget, and in due course of time, the stakeholders expect that this is corrected, given the increasing importance of financial wellness becoming a lifestyle as opposed to a vanity metric.

In addition, the provisions drafted must require no major changes for at least the next five years. This would reduce the compliance burden on start-ups and make management easier.

The Fintech industry has similar expectations lined up as the finance minister has been quite vocal about establishing the Indian Fintech footprint globally. Therefore, such fiscal policies are expected that will encourage banks and financial institutions to collaborate and work in tandem with Fintech companies so that they can expand their digital services, especially in rural areas.

The ongoing slump in the economic growth rate can be dealt with by executing milestone policies and stronger governance to reinstate the essential liquidity and put the economy on track. Relaxation in taxes for technical advancements can create a thriving for deep tech businesses in the country, inviting more foreign direct investments (FDI) and trades.

The Union budget 2021-22 budget should be a macroeconomic big-ticket budget with less insistence on incrementalism and concentrate on economy boosters and growth drivers. The fiscal deficit should be considered from a 3-5 year perspective and FM should be comfortable working with a higher Fiscal deficit. The momentum in Q3FY2021 needs to be built on and stimulus should be given to the economy. Inflation can be targeted through supply-side measures and the poor can be supported via direct transfer benefits. The global upheaval due to the pandemic is both a challenge and an opportunity and the FM has a glorious opportunity on hand to shift gears permanently.

The drifting geo-political sands against China presents India with an opportunity to attract overseas investments. To capitalize on this, the government should provide long-term visibility in the tax and regulatory frameworks. To stimulate investment flows, the government can introduce industry-specific incentives, revisit SEZ benefits and provide concessional tax-withholding rate for project funding in priority sectors.

Summing Up

Technology has been one of the handfuls of areas that showed enormous strength during the global pandemic, and Covid-19 has proven to be an impetus for digital adoption and innovation pan-India. Given the critical role that the technology sector plays in the development of Digital India, the government is expected to allocate more funds and resources towards fortifying India’s technological capacities so as to pave the way for the nation’s economic progress.

The author is the CEO and Co-Founder of PiChain Labs

DISCLAIMER: Views expressed are the author's own. Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.