Indian tech startups beneficiary of rising smartphone penetration

Question: Due to the pandemic, the rate of growth of startups has not picked up in most parts of the world. Has it also affected India businesses, despite the Government giving several fiscal incentives to promote them?

Answer: So far in this calendar year Indian startups secured $ 16.9 billion of venture capital funding. This is despite the fact that the economic recovery has been slow as in other countries. Figures of Global Data’s financial deals reveal that a total of 828 venture capital funding deals took place during January to July 2021. These included capital raised by Flipkart, Zomato and Think and Learn. This is attributable to the fact that there is rising smartphone penetration and affordable mobile internet which has propelled India into the digital landscape. The main beneficiaries of this trend are the technology startups.

Q: Are any steps being taken to improve data security in order to protect confidential information pertaining to customers considering the fact that online business is increasing by leaps and bounds?

A: The Reserve Bank of India has imposed a ban on storing card data by e-commerce companies. They will now have to adopt tokenization or ask customers to themselves enter their card number. Tokenization refers to linking of card data to a token which is given to the merchant. The token can be used only for payments by the specified merchant. This will improve data security and ensure customer safety. This new rule of the Reserve Bank of India will become effective for all card based transactions from 1st January, 2022, when online companies will be prohibited from storing card information. Many large e-commerce companies are proposing to become payment aggregators which will enable them to process payments for their own businesses.

Q: Development of infrastructure has been the top priority of the Indian Government. However, constraints of funding have been the main bottleneck. Is the Government relying entirely on foreign capital as internal resources are drying up?

A: While the slowing down of the Indian economy has resulted in a decline in tax revenues, the government is working towards an asset monetisation programme for raising funds required for infrastructure spending. The national asset monetization pipeline seeks to mobilize Rs1 trillion from twenty asset classes which will be offered to private investors. These assets comprise of 25 airports and 31 sea ports. Funds will also be raised by monetisation of toll collections from roads and highways. Railway station redevelopment, permission to run private trains and right to use the dedicated freight corridor will enable mobilization of substantial revenue. The government will not lose control because ownership of all these assets will remain with the Government. State Governments are also encouraged to raise funds through disinvestment of their State public sector units.

H. P. Ranina is a practicing lawyer, specializing in tax and exchange management laws of India.