Expectations from the Union Budget 2025: A Boost for India's startup ecosystem and innovation

One of the primary expectations from the Union Budget 2025 is the simplification of tax structures and the introduction of tax incentives for startups. The current tax regime, with its complex compliance requirements, often poses a challenge for new businesses. Industry experts recommend reducing the tax burden on startups by lowering the corporate tax rate and extending offering tax holidays for the initial years of operation. Additionally, simplifying the goods and services tax (GST) filing process and reducing the Tax Deducted at Source (TDS) rates can significantly ease cash flow issues for startups.¹

Access to capital remains a critical challenge for startups in India. The budget is expected to address this by enhancing funding opportunities through government-backed venture capital funds and credit guarantee schemes. The establishment of a dedicated fund for deep tech startups, focusing on areas like artificial intelligence, blockchain, and robotics, can provide the necessary financial support for high-risk, high-reward ventures². Furthermore, easing the criteria for obtaining loans and providing interest subsidies can help startups secure the capital needed for growth and expansion.

Robust infrastructure is essential for the growth of the startup ecosystem. The budget should prioritise the development of innovation hubs, incubators, and accelerators across the country. These facilities can provide startups with access to state-of-the-art technology, mentorship, and networking opportunities. Additionally, improving digital infrastructure, such as high-speed internet connectivity and data centres, is crucial for tech-driven startups to thrive². Public-private partnerships can play a significant role in building and maintaining these infrastructures.

Clear and supportive policies are vital for fostering innovation. The Union Budget 2025 is expected to introduce policies that encourage research and development (R&D) and protect intellectual property rights (IPR). Streamlining the process for patent applications and reducing the associated costs can incentivise startups to invest in R&D². Moreover, creating a regulatory sandbox environment can allow startups to test new technologies and business models without the fear of regulatory repercussions¹.

The availability of skilled talent is a cornerstone for the success of startups. The budget should allocate funds for skill development programs tailored to the needs of the startup ecosystem. Initiatives like coding boot camps, entrepreneurship training, and industry-academia collaborations can bridge the skill gap and help ensure a steady supply of qualified professionals¹. Additionally, policies that facilitate the hiring of international talent can help startups access a diverse pool of expertise.

Collaboration between the government and private sector is essential for driving innovation. The budget should promote public-private partnerships (PPPs) in areas such as healthcare, education, and agriculture. These partnerships can leverage the strengths of both sectors to develop innovative solutions to societal challenges². For instance, PPPs in healthcare can lead to the development of affordable medical technologies and improve access to quality healthcare services.

Sustainability is expected to be a major focus, both from a startup as well as an investor perspective. Focus on policies promoting green technologies and eco-friendly business practices is expected. Startups that prioritise sustainability and ethical innovation are hoping to benefit from government support and consumer preference.

The IPO market in India is looking up for 2025, with expectations of increased IPO volumes and a more favorable macroeconomic backdrop. A number of unicorns and start ups are in the fray to go public. One of the key challenges these companies face is to adopt the enhanced regulatory requirements that become applicable to a public company on listing. A gradual glide path to adopting these additional requirements with adequate safeguards and defined thresholds can attract more companies to consider going public. Potential interest rate cuts could further boost the IPO landscape, making it an exciting time for startups considering going public.