The Budget is an opportunity for the Government to display its positive growth-centric leadership and boost the entrepreneurial sector
With verdict 2019 giving a greater political force to the NDA Government for the next five years, people expect it to continue with its economic reform agenda. Indirect taxation reforms in the form of GST, greater formalisation of the economy and decisive action against black money are measures that have helped bring structural changes to the India economy. However, these hard-hitting reforms have also contributed towards economic slowdown as indicated by latest statistics. The GDP growth for the last quarter for FY 2019 was estimated at 5.8 per cent, the lowest in the last five financial years. Widespread unemployment is another major concern that bedevils the economy. As Finance Minister Nirmala Sitharaman prepares to announce her first Budget, there is imminent need to provide a positive stimulus to the economy along with concrete measures to create more jobs. Innovation and entrepreneurship have been the bedrock of the growth story of China, which has emerged as the world’s second largest economy. A strong policy and infrastructural support, digital economy and ease of doing business are factors that propelled it to become the world’s second largest producer of “unicorns.” China’s very own Baidu, one of the largest Artificial Intelligence and internet-based companies in the world, rivals Google. We must take a leaf or two out of China’s book if want to engineer an entrepreneurship revolution in India.
Here are a few expectations from the 2019 Budget:
Get rid of angel tax: This form of tax has been the most punishing for start-ups, who are unable to avail funds and investments. Under this tax, start-ups have to pay on the investment they have received in case the company’s valuation of equity doesn’t match with that of the tax authority’s assessment of the same. In such cases, the IT department considers the “difference” in valuation as “taxable income.” Thankfully, in the interim Budget announced in February this year, the Government provided an exemption from angel tax to companies raising a capital of up to Rs 25 crore. However, start-ups want angel tax to be abolished completely this Budget.
Regulatory reforms: Much more needs to be done in terms of easing the compliance of regulatory mechanisms and reducing entrepreneurs’ points of contact with the bureaucracy. Ushering in a single window clearance route that provides end-to-end solution for all regulatory and procedural compliances can make the entire process much simpler. Making the regulatory process easier will be most beneficial to entrepreneurs in small towns, who lack knowledge, exposure and understanding of starting businesses.
Incubation support: We discussed earlier as to how policy support to entrepreneurs helped China’s start-up sector grow big time. Notably, the country is home to 115 university science parks and has over 1,600 technology business incubators that offer mentorship, regulatory/legal advice as well as office spaces to budding entrepreneurs. In a country like India, where digital literacy is still confined to a limited population, incubation centres must be set up at all Government universities so that a strong network is developed between students, residents, alumni as well as the industry.
Boost entrepreneurial spirit: While major cities in India are buzzing centres of entrepreneurial energy, we need a greater democratisation of this resource across regions, one that crosses the urban-rural divide. This is critical to create widespread employment. Most firms like to start operations in big cities to be able to avail the wide consumer market as well as better physical infrastructure. The Government must consider offering incentives to entrepreneurs who chose to establish their start-ups in smaller towns. Incentives may include tax benefits and funding help to such small businesses.
Intensifying exports: Exports are perhaps the most vital source of income for any growing economy, especially for India, which imports energy. The deficit in our country’s balance of payments has continued to grow. Current account deficit stood at $16.9 billion or 2.5 per cent of the GDP in the December 2018 quarter, compared with $13.7 billion or 2.1 per cent a year ago on the back of widening trade deficit worth $49.5 billion. The only way out here is to substantially reward/incentivise exports of Indian products. Initiatives like ‘Make in India’ and ‘Digital India’ instill confidence among entrepreneurs that this Government is serious to make India a manufacturing hub. But along with manufacturing, a strong market for Indian-made products has to be created across the globe. A strong exports-oriented policy will bring substantial forex reserves to the country’s treasury, which is a need of the hour for India.
President Ram Nath Kovind stated in Parliament that the Government has set a goal of 50,000 start-ups in the country by 2024. While this augurs well for the economy, it must be backed by initiation of favourable policies that make the process of converting a potential business idea into a flourishing enterprise smooth.
(The writer is president, international operations, of a leading agri firm)