India’s Union Budget 2025 received widespread praise from startup leaders, who hailed the government’s initiatives aimed at spurring innovation, boosting consumption, and strengthening the startup ecosystem. These measures, including tax relief and new funding allocations, are set to provide significant support to entrepreneurs across India, from urban centers to rural areas.
Startup Ecosystem: A Big Boost with Funding Allocations
One of the most notable announcements was the government’s proposal to allocate an additional ₹10,000 crore to the Sidbi Fund of Funds to support startups. This move is being lauded by top startup pioneers like Prashanth Prakash, founding partner at Accel. He emphasized that the funding boost, along with initiatives to support deeptech startups, will provide the necessary capital to push India’s startup ecosystem to the global innovation frontier.
Prakash highlighted that deeptech investments, including in fields like AI, semiconductors, quantum computing, and spacetech, require long-term investment. The proposed Fund of Funds (FoF) dedicated to deeptech startups is seen as a vital step to keep India’s innovation-driven growth on track. Prakash also noted the complementary nature of the government’s AI Mission, which will help drive the next phase of India’s entrepreneurial journey.
Tax Relief to Stimulate Consumption
Another major highlight of the Union Budget is the series of tax relief measures aimed at putting more money in the hands of the middle class, stimulating both urban and rural consumption. According to Kunal Bahl, co-founder of Snapdeal and Titan Capital, these measures will have a direct impact on consumption patterns across India.
Bahl pointed out that by easing tax burdens, especially for the younger workforce, the government is encouraging greater spending. This will not only boost spending in essential sectors like healthcare and education but also increase discretionary spending, further enhancing lifestyle upgrades across India.
Supporting Domestic Investment in Startups
With a significant portion of capital flowing into India’s startup ecosystem coming from foreign investors, Bahl emphasized the importance of increasing domestic capital participation. A strong local investment base is critical for stability, especially during times when external funding might be volatile. The proposed funding measures are expected to encourage more domestic players to engage with the startup sector.
What’s Missing in Budget 2025?
While the budget was widely welcomed, there were areas that some startup leaders felt could have been addressed. For instance, Bahl and Rohit Kapoor, CEO of Swiggy, raised concerns about the taxation of Employee Stock Option Plans (ESOPs). Currently, ESOP taxation is a barrier for many Indian startup employees, and both leaders called for a reconsideration of how ESOPs are taxed to make them more attractive to potential talent.
Additionally, Siddarth Pai, founding partner at 3one4 capital, suggested that the Inter-Ministerial Board (IMB), which certifies startups for tax benefits, should be reformed. With only 3,000 of 1.5 lakh DPIIT-registered startups receiving IMB certification, Pai emphasized the need for a more streamlined and transparent process.
Conclusion: The Path Forward for India’s Startup Ecosystem
The Union Budget 2025 represents a clear commitment to supporting India’s rapidly growing startup ecosystem. With tax relief measures, strategic funding for deeptech ventures, and efforts to attract more domestic capital, the government is laying the groundwork for accelerated innovation and economic growth. As the ecosystem matures, the need for progressive reforms, particularly in areas like ESOP taxation and startup certification, remains a crucial factor in realizing India’s entrepreneurial potential.
As we move forward, the collaboration between the government, private sector, and innovation hubs will be key in shaping the next phase of India’s entrepreneurial revolution. The government’s focus on both entrepreneurship and consumption is expected to have a lasting impact on the economy and the nation’s global standing in innovation.
