Landmark Reforms: India's Startup Ecosystem and Foreign Investment Boost

The US India Strategic and Partnership Forum (USISPF) lauds the abolition of the angel tax and key reforms in the Union budget, which promise to enhance investment, local manufacturing, foreign investor parity, and the ease of doing business in India. Significant budget measures will drive economic growth and innovation.

The abolition of the angel tax across all investor classes is a landmark reform benefiting India's startup ecosystem, according to the US India Strategic and Partnership Forum (USISPF). The proposal, applauded in the Union budget, includes a reduction in tax rates for foreign companies to 35 per cent.

"India has long been a country of engineering and tech talent, yet there have been gaps in the innovation ecosystem," said USISPF. The abolition of the angel tax will stimulate increased startup funding from both domestic and international sources, marking a crucial reform for India's startup ecosystem.

The decision to reduce tax rates for foreign companies to 35 per cent creates parity between domestic and foreign players, providing a significant boost for global investors seeking to shift their international supply chains away from China.

Additionally, duty cuts on critical imports such as medical equipment, mobile phones, and solar energy machinery will enhance local manufacturing capabilities and supply chain efficiencies, crucial for India's industrial growth.

The inaugural budget of Modi 3.0 achieves a fine balance between inclusive fiscal prudence and growth-oriented initiatives, supporting both home consumers and foreign investors by improving the ease of doing business in India, the USISPF noted.

Measures like duty exemptions on vital cancer drugs reiterate the government's commitment to accessible healthcare, reducing costs for life-saving treatments.

Financial sector efficiency and transparency will increase through the establishment of a financial sector vision and strategy, taxonomy for ESG financing, and simplification of FDI regulations. These efforts will attract foreign investment and promote economic growth while strengthening debt recovery infrastructure.

Boosts for the renewable energy sector include emphasis on critical mineral missions, energy transition policies, and digitalization, driving investments in mining, green technologies, and innovation.

"Removing the equalization levy and ongoing reforms for fair taxation practices for non-resident digital companies reflect India's adaptation to the digital economy," USISPF commented.

"Reforms in transfer pricing regulations, streamlined assessment procedures, and expanded safe harbors enhance transparency in cross-border transactions, promoting compliance and reducing tax disputes. These measures foster a favorable environment for business operations in India," USISPF concluded.

The USISPF is confident the Budget will propel India's economic growth, boost investments, job creation, and innovation, solidifying India's position as a global economic powerhouse.

(With inputs from agencies.)