AI Labs, 5G Apps & New Data Policy: All Things Tech in the Union Budget 2023

Here are the key announcements by FM Nirmala Sitharaman that have to do with tech and tech policy.

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The Union Budget 2023 was presented by Finance Minister Nirmala Sitharaman at the Lok Sabha on Wednesday, 1 February.

In a speech that lasted around 87 minutes, Sitharaman mentioned 'data' ten times, 'entrepreneurship' six times, 'technology' four times, and 'cryptocurrency' zero times.

Why it matters: This is going to be the last full Budget of the Modi 2.0 government. With the general elections set to be held in 2024, all eyes are understandably on the policy decisions announced as part of the Budget that could impact crypto investors, tech startups, and other industry stakeholders.

"This year's budget looks at all the sectors holistically with a special focus on agriculture, tourism and green growth while keeping technology and digitisation at the core to accomplish the listed objectives," Kazim Rizvi, the founding director of think tank The Dialogue, told The Quint.

Here are all the key announcements for India's tech sector in the Union Budget.

  1. Artificial Intelligence

    Three Centres of Excellence for artificial intelligence will be established in top educational institutions across the country, the finance minister said.

    Commenting on the proposal, Rahil Chatterjee from Ikigai Law told The Quint, "There is a clear focus on expanding digital services and preparing the economy for industry 4.0. The three CoE for emerging tech is important as it will boost R&D in the sector and upskill the workforce."
  1. Data Governance

    "A national data governance policy will be brought out. This will enable access to anonymised data," Sitharaman said.

  1. Online Gaming

    The threshold of Rs 10,000 for TDS on winnings in the case of online gaming has been done away with, as per the Union Budget announcement.

    The government is also reportedly looking to "clarifying taxability relating to online gaming." Currently, a GST rate of 18 percent is levied on the commission earned by online gaming companies. But an inter-ministerial panel had recommended raising the tax rate to 28 percent, prompting backlash from the sunrise sector.

    Welcoming the move to rationalise direct taxation for online gaming, All India Gaming Federation (AIGF) CEO Roland Landers remarked, "We are happy to note that the Finance Bill carves out the distinction between betting and gambling activities and online games, through introducing a new section 194BA which taxes a user's net winnings from online games at the end of the financial year."

    Ankur Singh, who heads the gaming tech company Witzeal Technologies, also shared his insights. "Now as the Indian gaming market is expected to grow at a 27% CAGR reaching 8.6 billion dollars by 2027, government support will further help to streamline the industry and provide structured growth to this burgeoning industry," he stated.

  1. DigiLocker

    A "one-stop solution" will be designed using DigiLocker services for citizens to update their IDs and addresses that are maintained by various government government agencies and regulators.

    • The scope of documents that can be stored in DigiLocker is also set to expand, as per the announcement.

    • The KYC process will also be simplified and "risk-based," instead of the one size fits all approach

    • "An Entity DigiLocker will be set up for use by MSMEs, large business

      and charitable trusts," Sitharaman said

  1. 5G Apps

    Over 100 labs for developing applications using 5G services will be set up in engineering institutions to realise the new range of opportunities, business models, and employment potential," Sitharaman said.

    • Apps pertaining to smart class rooms, precision farming, intelligent transport systems, and healthcare will be developed, she added.

  1. Digital Payments

    Mentioning that a 71 percent increase was recorded in digital payment transactions (and 91 percent increase in transaction value), Sitharaman said that "fiscal support for this digital public infrastructure will continue in FY2023-24."

  1. Agri Stack

    In her speech, Sitharaman said that the government is looking to develop a digital public infrastructure for agriculture that is open source and interoperable.

    What will it be used for? "This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, improved access to farm inputs, credit, and insurance, help for crop estimation, market intelligence, and support for growth of agri-tech industry and start-ups," the finance minister said.

    Kazim Rizvi of The Dialogue opined that this will "help the agriculture industry to have similar kinds of digital public infrastructure such as UPI (Unified Payments Interface) and ONDC (Open Network for Digital Commerce)."
  1. Platform Proposals

    The Centre is looking to upskill youth using modern technology, particularly by rolling out a Skill India Digital platform that would also serve as a bridge between MSMEs and the youth. They would also have access to entrepreneurship schemes via the platform, Sitharaman revealed in her speech.

    Another digital platform that was announced as part of the Union Budget 2023 was IGOT Karmayogi. It would specifically aid government employees in their online training.

  1. Smartphone Manufacturing Boost

    "To further deepen domestic value addition in manufacturing of mobile phones, I propose to provide relief in customs duty on import of certain [smartphone] parts and inputs like camera lens," she said.

  1. E-Courts

    A whopping Rs 7,000 crore has been allotted in the Union Budget 2023 to kick off Phase 3 of the Centre's E-Courts project, in an attempt to efficiently administer justice.

  1. National Digital Library

    Libraries are apparently making a comeback, but in a virtual manner. The Centre proposed setting up a national digital library for children and adolescents. The library's catalogue will feature books across geographies, languages, genres and levels, and they will be accessible from any device.


Survey Says?

Besides stating that the crypto asset market is volatile in nature, the Economic Survey 2022-23 identified fragile backing, increasing complexity, non-transparency, and governance problems as the key issues plaguing the new form of digital assets.

  • It also made a case for taking a global approach to crypto asset regulation.

  • In a subtle nod to the FTX fiasco, the survey said that the "increasing importance of [centralised crypto exchanges] could force regulators to consider them as systemic financial market infrastructures."

  • The energy implications of crypto mining found a mention in the survey as clashing with other public policy objectives.

"There are regulatory gaps at each stage when crypto assets are issued, transferred, exchanged, or stored by non-bank entities. Crypto’s cross-sector and cross-border nature limits the effectiveness of uncoordinated national approaches."
Economic Survey 2022-23

What They Wanted

The key demands of the Indian crypto industry are a reduction in TDS on crypto transactions and allow investors to offset their losses in one crypto asset against gains in another crypto asset, according to a report by Inc42.

  • Clarity on the definitions of gross revenue and telecom activities are among the issues raised by Indian telcos, according to a report by The Times of India.

  • A robust GST mechanism has been sought by the online gaming industry as the government looks to regulate the sunrise sector.

  • Solve for ESOPs such that they are not taxed twice, that is at the time of exercise as well as at the time of sale.

  • Reform capital gains taxation laws as domestic investors currently have to shell out more than foreign investors in long-term capital gains for unlisted companies.

  • Roll out a carbon credit policy so that EV charging service providers can get high returns on investment by selling the credits to environmentally conscious companies.

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