Budget 2023 will further chase more startups out of the country

The above picture of our finance minister Hon. Nirmala Sitharaman perfectly sums up the benefits the Government has provided for the Indian startups in this new budget. “Zero”.

Another year, another disappointing budget for the Indian startups. However, for a change the government this time has also managed to miff the investors both national and international.

Enough said and done about the budget I will cut straight to the point of how the budget 2023 has made added to the woes of the already troubled Indian startups.

Abolishing angel tax exemption for foreign investors

Government has abolished the exemption on investment raised through foreign investors under the angel tax regime. However, the exemption still continues for investments received from SEBI registered VCs and AIFs (Alternative Investment Funds).

This will be a major turn off or discouraging factor for foreign investors to invest in Indian startups which were hailed as emerging and third largest ecosystem globally. Foreign investors’ appetite for Indian startups just started growing a few years ago but with this new announcement the Government seems to have nipped this new formed enthusiasm right off its bud.

This will have an adverse negative effect on the Indian startups which are already struggling due to shortage of funds and other regulatory issues. The reason its a major concern is because if you look at the funding data of all the years carefully more than 70% of the funding into the Indian startups came from foreign investors. Another big reason to worry is because there is no Indian origin VC or PE who has the capacity to invest growth capital on the scales of $100+ million dollars. The risk appetite and the investment capacity of the Indian investors are pretty low. Most of the Indian investors are just limited to the seed and angel level funding. Even today all the Indian startups look upto the foreign investors for growth funding. So this will be a major major hit on the already struggling Indian startups.

This will further drive away the Indian startups out of the country. Indian startups are already increasingly looking towards Dubai, Singapore and Ireland. With the abolishment of the angel tax exemption the Indian startups will only flee at a faster pace.

Last year when the Indian startup ecosystem was a boom, it found a mention in the Budget and however, when its ailing and when it needs the Government’s support more than ever the Government has not only ignored it but also added salts to its wounds by adding to its existing woes making it further difficult for them to grow.

The Government has further managed to alienate the backbone of the economy, the unsung heroes i.e. the startup founders and this drive will only encourage them further to find a safe heaven outside India where they will be respected and rewarded.