India's Emerging Startup Ecosystem Awaits 2025-26 Budget Boost

As the Union Budget 2025-26 nears, industry leaders voice expectations for continued support of venture capital, MSMEs, and emerging tech. With India becoming the 3rd largest startup hub, demands include revised ESOP taxation and targeted funding for sectors like AI and robotics. Leaders urge government policies to sustain ecosystem growth.

As the Union Budget for 2025-26 approaches, leading figures in various industries have expressed their hopes for ongoing governmental support, especially in venture capital funding, MSME growth, and emerging technologies such as AI and robotics. India's startup and venture capital ecosystem has experienced significant expansion recently, fueled by proactive government policies.

The country's startup ecosystem ranks third globally, boasting over 100 unicorns and shaping the future of innovation and entrepreneurship. This year, industry players are advocating for increased government backing, including sector-specific funds, MSME-focused private equity funds, a stronger domestic VC industry, and revisiting ESOP taxation.

Utkarsh Sinha, Managing Director of Bexley Advisors, underlined the pivotal role of the Fund of Funds for Startups (FFS) in attracting high-quality limited partners to India's VC sphere, which has amplified overall funds raised. Sinha and others are optimistic about government initiatives to set up targeted sector funds to ensure comprehensive VC support from early to late stages.

The nurturing of India's MSME sector is crucial for its transition to larger, global companies, according to Sinha. He suggests government-backed Alternative Investment Fund (AIF) schemes for non-tech MSMEs to encourage equity-driven growth and consolidate market players.

Apoorva Vora, co-founder of Finvolve, emphasizes policy support for burgeoning deep-tech areas like AI, robotics, and agritech. He predicts policies enhancing capital access, venture capital tax benefits, and streamlined regulatory frameworks will propel growth in these sectors and attract venture capital investments.

Vora advocates for measures facilitating capital access, tax incentives for venture capital, and regulatory simplification. This approach, he argues, would stimulate startup growth and draw more investments in emerging technologies, positioning India as an innovation leader.

Archana Jahagirdar of Rukam Capital sheds light on two critical issues for government consideration. She argues for a tax alignment on Employee Stock Option Plans (ESOPs), contemporaneous with the sale of shares to ease employee financial burdens during early startup stages.

Rehan Yar Khan of Orios Venture Partners urges bolstering India's domestic venture capital industry. Highlighting the dominance of overseas VC capital, Khan calls for tax breaks encouraging local participation and unlocking institutional capital. Jahagirdar supports creating a sovereign fund, akin to international models, to institutionalize risk capital and enhance accessibility.

She also praises the government's previous budget allocation for space startups and anticipates similar funding initiatives in the forthcoming budget to support the wider startup ecosystem. (ANI)

(With inputs from agencies.)