Union Budget 2021: Government should continue with reforms on tech innovation; support start-ups and increase R&D outlay
Modi Administration’s strength has been its thrust on reforms, innovation and digitization. Some of the recent successful business reforms carried out by the Modi government include the Goods and Services Tax (GST), Insolvency & Bankruptcy Code, RERA in the field of Real Estate, Biometrics & Direct Benefit Transfer, and opening of FDI.
Reforms involving digitization in a diverse country like India generates immense data that is helping over 1,400 start-ups to analyze and come with products and services, benefiting the society.Indians known for frugal innovation have potential to build solid start-ups. Indian companies have converted the pandemic situation into opportunities to innovate, build digital reach and ecosystem backed up by strong research.
The government has aided startups to innovate across key sectors like-e-commerce, fintech, healthcare, and manufacturing. Digital India,Bharat Net, Make In India, Startup India, industrial corridors, Pradhan Mantri Jan ArogyaYojana (PMJAY), National Education Policy, and Diksha, to name a few are some of the projects government launched with the objective to empower the country digitally across industry. Digital healthcare is a significant part of the centre’s plans for a Digital India.
The innovative ecosystem has led to the growth of Unicorns including Paytm, Byju’s, Razorpay, PineLabs, Zerodha, and Postman.
Here are a few thoughts that would further value add on the government’s reform process in the upcoming Union Budget 2021.
Some of the projects like Start up India, Digital India, and Bharat Net are running behind their schedules, mainly on account of execution problems due to bureaucratic hurdles. Globally, successful businesses have been established with speedy access and approval processes. The government needs to remove these hurdles and enable speedy execution of its projects that is necessary in transforming the country into a $5 trillion economy.
Tax relief should be given to start-ups and MSMEs (Micro Small & Medium Enterprises), especially those affected by the pandemic. Fintechs should be supported by banks and financial institutions for easy liquidity access; there is a need to upskill and reskill labour, especially in digital technology.
R&D is the most important factor that the government has to seriously ponder about. US, Japan and South Korea have been countries that have advocated policies inspiring R&D and innovation. In fact, innovation has a direct co-relation with investment in R&D. US and Japan on an average spend 3% of their Gross Domestic Product (GDP) on R&D. South Korea spends a whopping 5% on R&D. It is only due to this R&D focus that these economies could create technological super brands like Apple, Sony, Samsung and Tesla.
For the past several years, India has been spending only an average of less than 1% of its GDP on R&D. This has to steadily be improvised to at least 3%.
Low latency high speed 5G networks and broadband highways are the need of the hour. 5G needs to be considered as an essential utility, just like electricity or water. TRAI Chairman PD Vaghela recently said there is a need to increase R&D investment in telecom to expand technology development capabilities and leverage Indian IT’s capabilities in telecom that will make the country a leader in telecom space. For this, a complete overhaul of the existing practices and policies and industry-academia linkages need to be established. India has the potential to be a leader in telecom software development and a good manufacturing base for telecom products, serving the PM’s dream of an ‘Atmanirbhar Bharat.’
The government has worked hard in improving its journey in ease of doing business from 2014 to 2020. Similarly it should work towards creating a system towards improving the country’s ranking in the Global Innovation Index.
By Veerendra Jamdade, CEO, Vritti Solutions Ltd