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The Union Interim Budget was announced on 1 February 2024 by the Finance Minister Nirmala Sitharaman. Not surprisingly, there has been careful allocation of budget and resources for the tech sector. From technology grants of ₹1 lakh crore for technology research, to funds for deep-tech in the Defence sector, to emphasis on building a digital infrastructure for tech adoption, the components of the technology budget paves the way for innovation and growth. We take a closer look at the details of the budget for technology adoption and seek to understand how digital transformation can boost productive for the MSME sector in India.
Also read: Key highlights of the Interim Budget 2024
Overview of the Technology aspects of Interim Budget 2024
There can be little debate on the role and need for technology adoption for MSMEs and businesses in general. Modern technologies and data is not only reshaping how businesses operate but also creating new opportunities for all. Focus on deep-tech and R&D, innovation and start-ups are steps towards building a resilient, digitally savvy economy. Highlights of the funds allocation in technology include:
- ₹1 lakh crore allocation to R&D in technology and innovation (with 50-year interest free loan) to promote growth, employment, and development
- Budget allocation for deep-tech for Defence sector
- Focus on the ‘Make in India’ approach and efforts towards establishing India as a centre for electronics manufacturing and semiconductors
- Additional funds allocated for the Production Led Incentive (PLI) schemes across sectors
- Prioritisation of STEM programmes and infrastructure support for medical colleges (Note: STEM programmes already show 43% women enrolment) and incentives offered for setting up academic centres for science, technology and related programmes
Let us take a closer look at the Interim Budget technology allocation details to have a thorough picture of how funds have been distributed.
₹1 lakh crore corpus for R&D in technology and innovation
The focal point of the Interim Budget 2024 was on the distinct allocation of ₹1 lakh crore funds towards research and development in technology and innovation. India is a young nation and innovation in technology is often regarded as the foundation for long-term growth.
- The corpus is designed to offer long-term financing or re-financing
- There will be low or no interest rates, i.e., 50-year interest free loan
- This will also encourage participation from the private sectors in conducting research in sunrise domains (i.e., AI, biotechnology, renewable energy) and take the nation’s research capabilities forward
This initiative marks the government’s commitment towards harnessing the potential of today’s youth and new technologies to solve complex challenges that the nation (and the world) is facing.
Many consider the technology funds allocation in the Budget as a ‘game changer’. It gives the country the platform to leverage the enormous talent pool. The funds can also be useful to encourage technology entrepreneurship and build an ecosystem of innovation and start-ups, especially for MSMEs.
Deep-tech funds allocation for Defence sector
In continuation of the previous discussion on the importance of technology adoption across the nation, the Interim Budget also spoke of launching a new scheme for strengthening deep-technologies for Defence purposes.
This too is in alignment with the nation’s goal towards being self-reliant or aatma nirbhar. This move strengthens the government’s strategy to build an ecosystem where technology supports and drives national security and ushers in economic growth.
In general, the Ministry of Defence (MoD) continues to get the highest fund allocation among other ministries. This year, the Defence Budget amounts to approximately ₹6,21,540.85 crores. (Source: Press release, pib.gov.in)
IT hardware and semiconductors budget
Chips and electronics manufacturing is another core area the government is prioritising. A combined hike of 71.4% was proposed for the sector.
A significant amount of fund was allocated for the Production Led Incentive scheme (PLI) to drive domestic manufacturing of hardware and semi-conductors. This is in alignment with the government’s efforts towards building a resilient and self-reliant nation (i.e., being ‘Aatma Nirbhar’).
Under the PLS scheme, other sectors that were benefited include:
- Automobile sector with ₹3,500 crores funds allocation
- Food Processing with ₹1,444 crores funds allocation
An approximate sum of ₹6,200 crore has been provided for large scale electronics and manufacturing and IT hardware to that effect. A budget of ₹6,903 was also allocated for the long-term for building an ecosystem for development of semiconductors and display manufacturing.
Funds for promoting science and technology
In addition to the ‘Jai Anusadhan’ corpus towards R&D in technology, there’s also the mention of funds allocated for science and technology departments. These allocations are a clear indicator towards the government’s focus on developing the science and technology space for the future. It also indicates preparing the youth to compete globally and creating a level ground for employability.
Technology grants for digital transformation and other initiatives
Digital transformation, technology innovation, new technologies – these were some of the most talked about discussion points in the Interim Budget. Some of the other notable mentions in Tech and R&D as per the Interim Budget were:
- Allocation of ₹759 crores for projects on cybersecurity
- Funds amounting to ₹1.37 lakh crores for the Ministry of Communications
- Allocation of ₹17,319.51 crores for Ministry of Electronics and Information Technology for projects under central schemes
- Achievement of the Skill India Mission that has trained 1.4 crore youth, re-skilled 54 lakh people, and set up 3,000 new ITIs
These initiatives on education, technology, innovation, infrastructure development, and sustainability are a clear picture of growth and inclusivity the government is prioritising.
Technology grants – What it means for the MSME sector
The importance of small scale industries and MSMEs is immense and the government has always been proactive in introducing schemes and measures to support their development and growth.
The Interim Budget acknowledges the importance of the micro, small and medium enterprises in India and prioritises the accessibility and availability of funds, relevant technologies and training for their growth and global competitiveness.
The high allocation of funds to electronics manufacturing and infrastructure development can be read as a sign that there will be relevant incentives and schemes announced in the future to promote and nurture them. There are many small units in the manufacturing sector in India – and a simple way to propel their growth is by creating multiple opportunities in the ancillary sectors.
With the volumes allocated to the semiconductor, cybersecurity, electronics manufacturing and related IT sectors, it wont be surprising to see large and small companies venturing into this space. It also creates a platform for new entrants in the form of innovative start-ups.
Similarly, the corpus of ₹1 lakh crore in sunrise domains, is likely to encourage more start-ups and entrepreneurs to enter this sector.
The Interim Budget also highlighted how the next five years will be instrumental in earning ‘Sabka Vishwas’ and unprecedented development. Collectively, it will enable to achieve the overall dream of a developed India by 2047.