Budget 2022-23: Key highlights from the lens of Mela Ventures
The Government of India has released the Budget for the year 2022-23 on 1st February 2022. Here are the key highlights from the lens of Mela Ventures.
Digital and Sustainable India were the key themes for the budget 2022-23
The budget recognises the contribution of the Indian start-up community towards the growth of economy and has incorporated key changes to scale the Indian start-up ecosystem. From extending timeframe for availing benefits to capping surcharge on long term capital gains from unlisted securities in parity with listed securities, to promoting trust-based governance, green clearances, and digitisation of manual process the budget will be a catalyst for next set of unicorns.
The budget clearly highlights India’s mission of being digital economy from digital rupee, digital assets, digitisation of manual process etc. The government recognises the importance of technology with its focus on key areas such as Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, Clean Mobility Systems, Climate Action, Deep-Tech, Digital Economy, Pharma and Agri-Tech. To encourage investments in key themes by establishing thematic funds managed by Private Fund Managers for investment and Innovation in Sunrise sectors with government contributing upto 20%.
The government has also placed huge emphasis on climate change and circular economy. To reach the carbon neutral economy, few initiatives such as promoting EV for public transport, Battery Swapping Policy/ Energy as a service for increase in EV adoption, energy management through ESCO business model have been proposed.
The Budget recognises PE/VC Industry as a key enabler for the growth of Indian Start-up community
- PE/VC investments reached an all-time high of $77 bn. in 2021 from $48 bn. in 2020 growing approximately ~1.5x
- The start-up segment garnered ~37% share in 2021 from 15% in 2020
- In 2021, India overtook the UK to emerge as the third highest country in the number of unicorns (44) after the US and China which added 487 and 301 unicorns respectively. As of January 14, 2022, India has 83 unicorns with a total valuation of US$ 277.77 billion
- India’s ranking in the global innovation Index has also climbed 35 ranks from 81th in 2015-16 to 46th in 2021
The government recognises the contribution of private equity and venture capital industry and has agreed to set up an expert committee to address the challenges and help scale the industry.
Budget from the lens of Mela Ventures:
- Drone-As-a-Service will act a key enabler for technology adoption in the Indian Agriculture ecosystem. Mela Ventures has been an early investor in General Aeronautics. General Aeronautics has been a leading player in the Drone-As-a-Service segment for the agriculture sector. They have developed a unique indigenous technology ensuring even spraying and larger coverage of pesticides. The other benefits of using drone spraying include:
- No health hazards due to spraying of pesticides through drones. As per a study published by BMC public health, ~385 million people, particularly among farmers and agriculture workers, are poisoned by pesticides every year including 11,000 deaths per year, around 60% of deaths occur in India. Beyond the immediate deaths, most people suffer long term chronic illnesses including neurological disorders
- The Indian agriculture ecosystem is fragmented with ~85% of farmers being small and marginal i.e. owning less than 5 acres of land. Hence Drone-As-a-Service module will ensure higher adoption of technology and create huge employment opportunity for rural India
- Technology to optimize supply chain in India is a key focus for Mela Ventures. The Government is keen to build a Unified Logistics Interface Platform (ULIP) for seamless multi-modal connectivity, efficient movement of goods through different modes, reducing logistics cost and time, assisting just-in-time inventory management, and in eliminating tedious documentation.
- We believe to scale the Made in India initiative, investments need to be made to make the Indian supply chain competitive, efficient, predictable, and resilient
- The logistics cost in India stands at 14 percent of GDP, compared to the global average of approximately 8 percent.
- Key factors contributing to the same are: Heavy dependence on road network, Road transportation currently accounts lions share at about 64%
- The per-ton-km cost of transportation through road is almost double at INR 2.58 /ton-km, compared to Rs 1.41/ton-km for rail and Rs 1.06/ton-km for waterways
- One of the inhibitors of under-utilisation of rail, waterways and airways is limited integration and visibility across modes i.e. FTL, LTL and parcel in the road network, railways, airways, waterway
Overall we, at Mela Ventures are very happy with the thrust given in the budget towards start-ups, VC/PE ecosystem and technology in general. May this be the beginning of the next set of technology-rich, globally scalable and sustainable Unicorns.