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Very Disciplined, Somewhat Disappointing: Ravi Kiran, VentureNursery

Ravi Kiran     March 1, 2016

The experts have spoken on the Budget everywhere - on TV, on twitter, on blogs and in newspapers. I liked what perhaps the biggest expert of them has reportedly said. "Big Takeaway is that there's no Big Idea", says P. Chidambaram, one of India's longest serving Finance Ministers.
Well said, Mr. Chidambaram and that's exactly why I respect the team that helped Mr Jaitley pen the 2016 Budget. I have said this before and I will say it again. For far too long, the Indian people have been conditioned to depend on the Budget speech for the big ideas.

I hold a different view. If the Government's vision for the Economy and the Society has three components - reforms, initiatives and financial support, the role of the Budget is to deliver a strong financial plan only against that part of the action plan that has been prioritised by the leadership team. To look for drama in a rather necessary exercise is, in my view, naïve.

This is why I like what this Government is doing - a commendable decoupling of vision and policy from financial planning. The Prime Minister announces big and bold vision and initiatives and the Finance Minister tries to figure a way to provide for as many of those as he can, within frameworks of prudence and pragmatism. That's what a good CEO-CFO team is supposed to do.

A lot of Government programs initiated and announced earlier - rural income and agriculture, infrastructure, social sector, black money, small businesses, housing, higher education - got financial action in Budget proposals supporting them. One thing I liked in particular is the Government's emphasis on usage of technology in many areas - land records, educational degree certificates, agri produce procurement, new company registration and even income tax records.

I liked the Rs 1,000-crore Higher Education Fund and the decision to make 20 institutes world class, and I hope some real transformative outcome will be achieved by this.  

It's a Budget that aims to benefit our farmers, poor women, new employees, very small and small businesses, and in my view, what's good for the poor and the Economy cannot be bad for any business, including start-ups.

Am I happy from the direct viewpoint of the start-up ecosystem? No.

I can ignore the fact that start-ups got a 45 second mention in the FM's two hour speech. My main grouse remains that the Government is continuing to use terms like entrepreneurship, innovation, start-ups and small businesses interchangeably. This just can't go on forever. Mr Prime Minister and Mr Finance Minister, the Silicon Valley you so respect, wasn't built by small businesses.

Here are my scores to the Budget's start-up'ish mentions:

1. One-day company registration
: Necessary reforms, but no need to have said this in Budget, because this does not need financial plan. Plus 'one day' may be just theatrics. Even 7 days is good enough - as long as all the steps from name search to filing of documents like MoA, AoA and allotment of all sorts of numbers [PAN, TAN etc] can be done within that timeframe. The PM spoke about the Ease of Doing Business reforms earlier and let the Government issue a well thought out action plan only on this subject, save those 3 seconds from Budget speech.
Score: 6/10.

2. SC-ST entrepreneurship: Helping hundreds of SC and ST people take Rs 500 Crore from the banks is all right, but I don't believe creating a caste system in entrepreneurship is a terrific idea. Most of us would ignore it just because it's a meagre Rs 500 Crore. Plus has anyone thought beyond disbursement as a metric? I would love to know. Score: 3/10.

3. Income Tax waiver for 3 years out of 5 for start-ups: The PM spoke about this on Jan 16, many of us have pointed out the fallacy, but someone went ahead and wrote this in the proposals anyway. This has questionable meaningfulness in the start-up world. Most start-ups don't turn a profit in 5 years, they are figuring out what the hell to do. Score: 1/10.

4. Reduction of time frame for long term capital gains to 2 years: 
Nice headline decision, but again, questionable meaningfulness on the ground, unless trading of illiquid stocks on some of the many tech platforms emerging now becomes real. This one is particularly open to abuse, by later stage investors and since the definition of a start-up has been made quite discretionary. Score: 4/10.

5. Waiver of capital gains tax: The spirit of this will be killed by the 'conditions apply' Waiver if the gains are invested in Government approved Funds. If the investment is made by an individual in a company majority owned by him. To me, this once again demonstrates an inadequate understanding of the start-up ecosystem by our policy makers. Score: 2/10.

On things not done, such as any real attempt to increase the base of angel investors and corporate angels, introduce incentives for people to take high risks and invest in disruption and innovation and supporting private individuals, accelerators and networks that mentor start-ups when no one will look at them, I feel very disappointed.

But as they say, the real work happens outside the speech. So like most start-ups, I remain hopeful.

*In addition to investing in over 30 start-ups in four years, in his personal capacity as an angel investor, Ravi Kiran in 2012 co-founded VentureNursery, amongst India's most successful and revered start-up accelerators, out of which have graduated companies such as OYO Rooms, Talview, Klip and InvenZone. Ravi Kiran can be reached at @ravitwo


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