A lot rests on the upcoming Union Budget. Even as India has emerged as an investment oasis in a subdued global environment, the ripple effect of the recent global volatility has been felt in India as well. Investors are circumspect and domestic stock markets are feeling the jitters.
However, I believe that over the past year, the government has taken significant strides to revive the economy, and a job well begun is a job half done. The Union Budget 2016-17 presents a golden opportunity for Finance Minister Arun Jaitley to put in place medium and short-term wins to take the positive momentum and sentiment forward.
In the current scenario, it will be of paramount importance to capitalize on the opportunity and create a 'snowball effect' from the momentum of successful of flagship schemes launched by the government, such as Make in India, Skill India, StartUp India, Jan Dhan Yojana and Mudra Yojana, which are sowing the seeds of a silent industrial revolution in the country.
The country has more than 19,000 technology-enabled startups, led by consumer Internet and financial services startups, the report said. Total funding for Indian venture capital-backed companies topped $12 billion (Rs 82,500 crore) across more than 1,220 deals in the past two years, with $7.3 billion invested in over 880 deals in 2015 alone, according to startup data aggregator Tracxn.
Keen to create the best ecosystem for start-ups, the government is likely to come up with more incentives for budding entrepreneurs in the upcoming Budget on the lines of Singapore.
In the recently announced action plan for start-ups, the government has announced exemption of capital gains tax. But the exemption comes with a rider that such entities would have to invest capital gains in the Fund of Funds recognised by the government. Similarly, there are issues concerning benefits in investments in listed and unlisted start-ups.
While India's startup ecosystem continues to develop at a rapid pace, the exit options for risk capital investors, who have poured in billions of dollars backing home-grown ventures, remain bleak, according to the Economic Survey 2015-16 released by the Government on Friday, and which was tabled by Jaitley.
I believe that India should follow the Singapore model to promote young entrepreneurs and limit movement of start-ups from India to the South-East Asian country as Start-ups in Singapore find good infrastructure, tax transparency, no bureaucratic hurdles, clear and defined rules and regulations and listing in international markets from Singapore is much easier than from India.
Prime Minister Narendra Modi on January 16 unveiled a slew of incentives to boost start-up businesses, offering them a tax holiday and inspector raj-free regime for three years, capital gains tax exemption and Rs 10,000 crore corpuses to fund them. The government had also announced a self-certification scheme in respect of nine labour and environment laws and said there will be no inspection during the first three years of launch of the venture.
It is possible that the government may take steps to further align the Service Tax rates with the expected tax rates under the GST regime. The Government should, however, keep in mind the adverse impact of any increase in the Service Tax rate on start-ups. Further, in this Budget, the Government should also lay down the clear road map for the introduction of GST in India.
India is fortunate to have a rapidly developed healthy start-up ecosystem. It is now important to build on this strength to take Indian start-ups to the next level. It is hoped that Budget 2016 will bring in measures towards building a more start-up friendly India.
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Young entrepreneur and founder of Augmen which works with development sector agencies, NGOs and startups by empowering them to work more efficiently by developing technology, solutions and strategies for fast paced and sustainable growth