How should the Indian Budget, 2015 be ?- Start-up’s Perspective

Well, There’s a huge buzz about what will this Indian Government do in the upcoming budget, this weekend. News channels are cranking up TRP’s with discussions by experts, economists, Politicians etc; Online News Posts are writing about it. Every one is watching at this Indian Budget. But as usual, most discussions are hovering around the same Jejune & Prosaic Topics like Macro-Economics, Tax Cuts etc; Which obviously & unarguably might be important, but some important stake-holders in the economy, get definitely sidelined, as the Indian Juggernaut is focusing on Macro-Issues & permeate a balance of Fiscal deficit, Growth Rate & uplifment of the poor.

One of the important stake holders of our economy or for that matter any economy are start-ups. Start-ups disrupt, create a new ecosystem around them and even develop cities and most importantly create new jobs across the ecosystem. You can read about the impact and importance of startups to any economy on this Yourstory.com Article. 

I am jotting down some unconventional, but feasible & effective ideas, which our Indian Budgets should consider. Obviously These ideas are totally startup-centric:

1.Tax Incentives, Soft Loans & Subsidies for “Tech/Software-Product” Start-ups: In 2013, the total size of the Global Software Industry was US$407.3 billion!! The Indian IT Industry majorly revolves around IT services and business process outsourcing (BPO). In 2012, the IT Sector contributed to 7.5% of India’s GDP! The Total aggregated revenues US$100 billion in 2012, where export revenue stood atUS$69.1 billion and domestic at US$31.7 billion, growing by over 9%.

But at the end of the day, Indian IT industry is labeled as the “Body Shopping” & “IT Outsourcing” hub of the world. There are about 2.5 Million Software engineers in India and we have not been able to produce one large or Global Tech Company!! The Apples,Facebooks, Microsofts, SAPs of the world contribute heavily to their respective stock markets and disrupt the ecosystem.

Our Indian Budgets should lay emphasis on this fact and encourage “Tech Product” startups. The Export Margins will increase and India can become an“Intellectual Property” Hub with High Quality of work happening in the IT Sector. It has been unfortunate that our Policy makers generalise IT into one single Industryrather than breaking them into sub-sectors and providing conducive policies for each sub sector, separately. If the “Tech Product” industry becomes Tax Free, the Indian Industry and manufacturing sector will get an access to better quality Software Products at much lesser pricing, creating a huge domestic demand for the Indian Software Industry, which has been relying heavily on the export market and less on domestic consumption by the corporate world. Also imagine, the lesser cost of operations and IT expenditure, that can be possible!!

2. Tax SOPs & Soft Loans for the Logistics/Transport Sector In India: With the Growing E-Commerce Industry in India and Players like Flipkart, SnapDeal, Jabong, Myntra and now the MNC- Amazon proving the power of Indian Consumer demand and rubbishing the myth that India will take huge time to adapt to E-Commerce,“Logistics” is one of the largest Cost Centres & an impediment for these E-Commerce companies turning Profitable. Not to Forget Innovative startups such as“Delhivery” focusing on E-Commerce and making a Mark. Now Infrastructure development will take it’s own time. But why not companies like Delhivery, Warehousing Companies, Logistics SOftware Companies, RFID Companies which are used for efficient Tracking, get soft Loans and huge Tax Incentives. As a result, the cost of carrying inventory will go down and more such innovative dare devils will spring up. Lets not forget Logistics & E-Commerce is slated to employ around 1 Million People by 2016!!

This should also be applicable to Companies like Ola Cabs, Meru, tab Cabs,because at the end of the day these startups are providing an alternative to Public Transport, which is actually the responsibility of The Government.

3. Long Tax Holidays, 100% FDI and Soft Loans for Research, Development & Pure Sciences Companies: A Huge Brain Drain of Indian Scientists, Technocrats & Researchers is now a well known phenomenon since past 2 and a half decades. It is a matter of pride that Indians have been able to send one of the most efficient and Inexpensive vehicles to Mars, in the form of “MangalYaan”, but is R&D slated to be the forte of Government agencies only? Why is the Private sector and more-so the start-up sector not encouraged by the Government by giving them a free hand and make them Tax Free and make available to them Capital at a very feasible cost? Companies like Invenzone, GrayMatter, Emergence Bioenergy etc; should not have the need to move their headquarters to Singapore, Caymen Islands etc; Land should be made available to them at a lower cost for R&D Activities and Raw material should be tax free!!!

At the end of the day, our policy Makers keep on saying, that we want to make in India. Why should it not be : “Create in India”, “Think in India” & “Develop in India”. Why should we always hanker for Nuclear Technology from Russia or USA and Mechanical Engineering Technology from Germany or Europe? WHy can’t our Researchers & Scientists be given impetus and Financial Freedom to create our own technology, when we have the Intellectual Potential available in India to do so.

This step will encourage an eco-system which will be resilient, creative and also solve the issue of “Importing of Technology”, that we have to regularly resort to.

4. 300% Rise in Salary of Teachers by the Pay Commission & the Government: Lets acknowledge the Fact that in Both Numbers and quality, the teachers are deficient in India, especially in the Engineering, BioTechnology & Medicine Sectors. In the last 15 years, Teaching has moved down the priority of career choices. I understand that Startups or entrepreneurs are a result of practical explorations, learnings & circumstances, but we should not ignore the fact, that basic grounding does happen at our seats of Learning. IITians have been in news for raising funds and creating beautiful start-ups and some credit does go to the faculty in seeding, incubation and encouragement of non-Rote Learning. In a survey I did with 500 brilliant engineers, 465 were ready to take teaching as a profession, if their salaries were at Par! or better than what The Indian education Industry offers.

A Lot of Good Faculty & teachers have been mentoring and incubating some great startups in India. And If we do not take this step, we will have to soon import teachers from China, as well. This step will create a more vibrant ecosystem in India for startups, where Research, Mentoring and seeding of entrprenurship does happen at educational institutions, as well. This should increase with the infusion of greater quality of Teachers.

5. Tax SOPs & Freedom from Capital Gains Tax to Venture Capitalists, Angel Investors, Seed Capitalists & Early Stage investors: The Government of India should thank the VC’s in India for risking their capital with some interesting Ventures in India. Rather than looking at VC’s with the same Lens as investing in Stock Market, the Capital Gains Tax should be Exempted. Infact like Insurance, a new section like 80C should be made to make investing by a Vneture Capital or investing with a venture Capital Tax Free, till a limit. Micro VC’s and Micro Seed Capital firms can be created.

In terms of investments made, the share of venture capital is still minuscule with about $630 million invested last year compared with private equity inflow of $8.5 billion. But it accounted for 46% of the total deals in 2013. Early stage deals have steadily risen from 110 in 2010 to 179 in 2013, while private equity and buyout deals have fallen from 262 to 213 in the same period, according to data from EY. But it is the quantum of new funds raised by India-focused venture capital firms in the last three years – $ 3 billion – that has turned the spotlight on an asset class that is drawing attention from both local and overseas investors.Sequoia Capital, the Silicon Valley fund famous for its early bets on iconic companies such as Google, Apple and messaging app WhatsApp, is the latest to announce an India fund of $ 530 million, which it unveiled in May.

Now by taking this step, VC’s will be encouraged and attracted to invest in startups and will unfold the ecosystem to be competitive to Silicon Valley. Not only, The Cost of Capital be lesser, but the VC’s will target more portfolio companies. This might create a behemoth of an ecosystem for startups, attracting Talent, Cheaper Funds, creating Jobs and creating a huge ancillary industry of accelerators etc;

I hope some Policy Maker does read this article and works on what can be done for the startup sector in India, which has been ignored even after contributing a lot to the Country

Your Feedbacks, suggestions and Ideas for this is welcome, as I believe there is a lot that the Government can do for the startup community.

I will include brilliant Ideas with credits in this article, itself.

Also Published on Linkedin Pulse

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Shubham DC Rai

“Go-Giver”, “Connector”, “Entrepreneur”

Hand Phone: +91 97697 03607

Twitter: @shubhamrai

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