Needed: Credit guarantee scheme, easier tax regime and easier exits for start-ups

Arun Krishnan        Last Updated: February 19, 2016  | 13:42 IST

Arun Krishnan
The month of February in India is always pregnant with possibilities. It's the time of the year when winter gives way, sometime grudgingly but increasingly with alacrity (given the global warming phenomenon) to spring. It is also the time when the country awaits, what has become in post-liberalisation India, an annual ritual of some importance - the presentation of the Union Budget by the country's finance minister.

As the founder of a nascent start-up in the technology space, there are essentially two categories of announcements that are of prime importance to me - a) those that influence the activities and existence of start-ups and b) those that influence the overall macroeconomic climate. Here is my wish list for this year under these two categories.

a) Influencers on Start-up Activities - The Start-up India initiative announced by PM Modi included a number of promises that would enable the start-up ecosystem in India to grow and flourish. The key areas that the start-up world would be expecting the Finance Minister to deliver on are:

Easier tax regime - With the current state of taxes in India, technology companies are finding it increasingly difficult to be competitive. Implementation of the income tax exemption up to three years for start-ups would be a welcome step.

Credit guarantee fund - Setting up of the Rs 10,000-crore fund that enables the flow of venture debt financing from the banks to start-ups would be a shot in the arm for the start-up ecosystem.

Easier exits - Hacking through the hackneyed system that till now has made exiting a business slightly more difficult than climbing Mount Everest would again allow entrepreneurs to 'Fail Fast' and move on to newer challenges.

b) Influencers on Macroeconomic Climate - Small start-ups are more vulnerable to the volatility in the macroeconomic climate than larger firms. My expectations from the Budget are as follows:

 

  • Fiscal discipline - RBI Governor Raghuram Rajan has clearly indicated that he considers controlling inflation to be his primary focus and has indirectly hinted that he expects to see the Finance Minister follow through on his earlier promise to keep the Budget deficit in check.
  • Increase in FDI inflows - While the government is trying to give a boost to the economy through large-scale infrastructure projects, FDI inflows have a significant role to play in allaying the fears in the minds of large companies both in India and abroad about the sustained growth prospects in our country.
  • Passing on benefits of low oil prices - The government has been using the savings from the lower oil prices to fund subsidies as well as large infrastructure projects. However, passing on these benefits to the private sector is imperative and cannot be put off indefinitely.
  • GST - Finally, GST. While this does require the bill to be passed by both houses of parliament and doesn't come under the Budget announcement per se, it is critical that political parties of all hues put aside their differences and put the interests of the nation above their narrow political interests by passing the bill in the Budget session.

The author is an ISB alumnus from the PGPMAX Class of 2013 and Founder and CEO of HR analytics start-up, n! Factorial Analytical Sciences. Views expressed here are personal

 

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