As India gears up for the upcoming Union Budget, startup founders and investors are calling on the government to address long-standing structural challenges that continue to slow innovation and scale. While the country’s startup ecosystem has demonstrated resilience amid global uncertainty, industry leaders believe the next phase of growth will depend on easing regulatory friction, unlocking domestic capital and building strong technology infrastructure.

Despite steady momentum, founders say ease of doing business remains a major pain point. Complex GST compliance, frequent filings and delayed refunds consume valuable time and resources, often diverting attention away from product development and market expansion. Medhansh Seth, Founder of AceCubing and author ofSurrogate Entrepreneur, stressed that simplifying compliance should be a top Budget priority. He noted that founders already manage multiple responsibilities, from fundraising to operations, and reducing administrative burdens would significantly improve efficiency and compliance across the ecosystem.

Beyond regulatory reforms, startup leaders are also urging the government to focus on unlocking domestic capital. According to Seth, India has a large pool of idle private wealth that could be channelled into innovation if the right incentives are introduced. He suggested measures such as reducing long-term capital gains tax on startup exits to encourage greater participation from high-net-worth individuals and domestic investors, helping reduce dependence on volatile global funding cycles.

Another major demand from the startup community is increased investment in critical technology infrastructure. Founders have highlighted gaps in domestic data storage, semiconductor manufacturing and AI computing capacity. As India generates vast amounts of data but stores only a small fraction locally, experts argue that expanding data centres, GPU capacity and semiconductor infrastructure is essential to fully leverage emerging technologies like artificial intelligence. Strengthening domestic capabilities is also seen as crucial amid rising geopolitical tensions and global supply chain disruptions.

The push for indigenous AI development has gained particular urgency. Ritu Mehrotra, CEO and Co-Founder of Shunya Labs, said India has the talent to build world-class AI systems but needs stronger policy support and infrastructure investment. She emphasised that reliance on global Big Tech platforms limits long-term strategic autonomy and that the Budget presents a critical opportunity to support homegrown AI computing infrastructure and foundation model development.

Investors believe India’s startup ecosystem has matured beyond software-led models, with growing momentum in deeptech, advanced manufacturing and climate-focused innovation. However, scaling such businesses remains challenging due to long development cycles, regulatory approvals and the need for extensive testing and certification. Ankit Kedia, Founder and Lead Investor at Capital-A, said targeted government support through shared testing facilities, predictable regulations and long-term incentives could help startups navigate these challenges and emerge as globally competitive players.

As expectations build ahead of the Union Budget, startup leaders agree that decisive action on compliance reform, domestic capital mobilisation and core technology infrastructure could play a defining role in shaping India’s innovation journey in the years ahead.