New economy: Push for technological innovation is lacking

While the benefits of technology for our economy and in our daily life was well known, the Covid-19 disruption, revealed to us the extent to which its use cases can be stretched and also its reliability during times of a crisis to keep the economy and our life functioning as normal as possible. Whether it was work from home, concluding mega deals via web conference (the way Reliance Industries concluded its mega capital raise), consulting doctors via video call, developing vaccines with the help of big data and analytics, it was developments in technology that made this possible. Given that, this Budget could have been used as a base to kick start policies to make India a technologically superior nation by the end of this decade so that we do not miss out on innovation vs countries like the US and China.

Multiplier effect

Technology is one space that undoubtedly has a big multiplier effect in bringing in efficiencies in economy and boosting growth and we need to act early to move up the innovation curve. The benefits of early adoption of 5G cannot be over emphasised in this regard. But, in this context, the Budget’s lack of clarity on 5G auctions in FY22 is disappointing.

As mentioned in the Economic Survey, India ranks 48 in Global Innovation Index for 2020. Given its talent pool that can be tapped and size of economy, this is a poor ranking. The report also notes that government has been doing the heavy lifting in R&D and makes a case for private sector to contribute more to R&D. This would require a more enabling ecosystem, high prevalance of technology and simpler taxation and regulations. The Budget, however, has few small positive steps in the extension of incorporation date by one year for eligible start-ups to avail of tax benefits. The last date of incorporation for start-ups to avail of existing provisions of section 80-IAC has now been extended to April 1, 2022. This provides for a deduction of an amount equal to hundred percent of the profits and gains derived from an eligible business by an eligible start-up for three consecutive assessment years out of 10 years at the option of the assessee, subject to conditions. However going forward, the government must look to see how this policy can be evolved to reflect changing scenarios. For example, a lot of tech and innovative start-ups sprout to address certain pain points in business or economy and cannot be timed to avail tax benefits. Hence this policy of providing incentives only for a particular time period would be worth a revisit by the next Budget so that we ensure the right incentives and ecosystems are created to facilitate mushrooming of start-ups.