With the buzz following the introduction of the “Start-Up, Stand Up India” and “Make-in-India” initiatives, entrepreneurial community has brimmed with anticipation regarding the budget. Even with the mixed opinions and feelings about the government meeting the entrepreneur&’s budget expectations, there are some positives that are bound to make a much-needed impact in the industry. Despite challenges of a growing population, widespread poverty and deteriorating global markets, it has been a force to be reckoned in the recent times. But one has conceded that to ensure sustainable growth and development, there is a serious need to accelerate entrepreneurship in order to facilitate job creation and enforce economic stability.
It is, hence, necessary to include the government&’s vision for entrepreneurs as an integral point of contention while analysing the budget, as much as it&’s revelation for farmers and the rural populace. The finance minister truly scripted a path for new beginnings through tax incentives, to not only first time house buyers within the Rs 50 lakh range but also new start-up businesses. Tax exemption on secured profit to the tune of a full 100 per cent, except for moving annual total, for three years to up-and-coming start-ups is just the boost that these businesses need in order to survive and persevere in this competitive market. This is a welcome move by the government and can surely change the face of employment in India by encouraging entrepreneurship.
At the same time, it has emphasised on ease of doing business in India, a crucial factor in gaining momentum in international as well as domestic trade. By relaxing registration norms and saving time and cost for start-ups to get licensed as a company, the government has ensured some of the elusive ease of doing business, at least for the entrepreneurs. Moreover, the corporate income tax rate for companies with a turnover of less than Rs five crore has been lowered to 25 per cent, a policy which will benefit many entrepreneurial firms.
Due to capital constraints and technical expertise, most start-ups begin as digital ventures and focus on e-commerce for promotion and sale of goods and services. Digitisation of India under the “Digital India” initiative will bear fruits for such start-ups in the future. By making the dissemination of digital literacy in rural areas, the government has opened up a myriad of opportunities. With the additional advantage of implementation of Aadhar smart card system in rural India, the scope for paperless, cashless transactions between start-ups and rural consumers and sellers, and e-commerce market growth has widened. Another exciting observation is that the lower rate of taxation in royalty income from patents may encourage software start-ups to innovate and concentrate on invention of digital technology and grab intellectual property rights for the same. However, the conspicuous omission of tax relaxation in software companies, especially considering the foreign competition, is seen as a blow to many entrepreneurs.
While the road has been paved for a boom in start-ups, there is a lot left to be desired. Entrepreneurs have demanded more tax reforms and policies to promote ease of doing sustainability of an enterprise, including the ambiguity and expansion of Foreign Direct Investment in most sectors like retail and food products has dampened spirits of small and medium businesses. The budget may have pushed the industry towards the right direction, but it may need a shove in the future.
The author is joint managing director, Bonita India.