Budget 2017 spells dream run for start-ups

By Shantheri Mallaya Feb 2nd 2017
Budget 2017 spells dream run for start-ups

The Union Budget 2017 gives ample scope for businesses to start, expand and look at their profits equitably.

While America reels under some of new President, Donald Trump’s monumental pronouncements, home turf here was slightly different. The Union Budget 2017 came in quite early this year, amid unsubtle accusations by the Opposition that the Central was trying to play to the gallery with a keen eye on the UP-Punjab elections. 

While all the budget timing rumours may have some merit, Finance Minister’s presentation of the budget was fairly smooth sailing. One is tempted to dismiss it as populist, but a closer look at some of the announcements and you realize, if these are carried out in spirit, will have positive long term spin-offs for the economy.  

Among a plethora of business announcements that Jaitley made, what I rate as the most encouraging pieces in the budget would be:

1. The lowering of 8 percent Presumptive Taxation Scheme for businesses to 6 percent for MSME, and the lowering of corporate tax rates to 25 percent from 30 percent for Rs 50 crore turnover companies. 

2. The tax holiday for start-ups, and an ensuing Amendment to the Companies Act, which will ease up the registration process for start-ups to as swift as one working day. 

On the other hand, the reduction in the Presumptive Taxation Scheme rate takes the load off the demonetization hit small business segment to maintain copious books of account. At the same time, it ensures 6 percent coming in as taxes. This in itself makes the step as revolutionary as any under income disclosure scheme introduced earlier as part of personal income tax reforms.  

[Related: IT channels laud digital drive; tax sops for minions]

The interesting connecting dots to this is, post the demonetization wave, almost all the major Indian banks are plush with cash and are under a mandate to show project funding. Start-ups and other expanding businesses can jump at this opportunity to access easier funds at competitive rates.  Will it rain start-ups now, like never before? Well, yes. Will the start-up wave last? It remains to be seen.

The positive cascading effect of the MSME –Start-up SOP, however, will spill over to the Indian manufacturing sector which is rapidly climbing the digital curve. As one promising IT solution provider quipped, “Our customers have enough avenues for monies to contemplate innovation, automation and digitization. This is a very big news for smaller players like us.”

The other populist measure, the allocation of MNREGA budget of Rs 48,000 crore was quite evidently an answer to the Opposition’s demand, but, the government can change the game if they implement the promise of rural employment in a manner better than the earlier regimes. Imagine the talent pool that will come into mainstream and corporate workforce. 

This might be the year that India will witness a form of mass Brain Gain, in the light of the Trump administration putting a cap on H-1B visas and the outsourcing wheel spinning for now on Mexico. Will India be the next hit? No sweat, we can welcome the workforce at equitable compensation packages. Many of them, as one can see, are also potential top notch entrepreneurs. All this might have been happening over the years, but, 2017 onwards, this phenomenon is likely to accelerate in the light of the outsourcing/offshore services revenues backlash which many larger ITES players are already facing, and of course the timely impetus given to entrepreneurship in India.  Young and mature businesses do not need to look too far to foster their organizations. 

Want to innovate in India? Want to relocate to India? This might be the time. 

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