In the last financial year, there were 4200 new organizations launched in India. This number puts India at number three in the ranking of global startups sector. These institutions raised up to $9 billion from an array of funding agencies in 2015. With these appealing numbers, the Indian government launched an ambitious project in January 2016 which they referred to as ‘Startup India, Stand up India’.
This government project entails a Rs. 10000 crore corpus fund that will finance the startups all over the country. There will be tax exemption on all capital gains, and the project will play the role of a credit guarantee fund. Additionally, there will be a centralized point of contact to provide hand-holding support for the startups. The government will provide self-certification that will not be subjected to any inspection for the first three years to encourage more innovators and investors to launch new startups.
The initiated project supports the set up of core innovation programs in five lakh schools. Also, it champions for Indian Parliament to pass into law a bill that will allow startups to complete their exit process in just 90 days. Here is all you need to know about the upcoming Indian Budget.
Expectations from the Indian budget 2016-2017
Statistics globally show that startups contribute up to 50% of the GDP in developed nations. However, the contribution of startups in India is significantly less. Therefore, the government has taken upon themselves to review the policy framework for startups and SMEs to provide a perfect environment for these types of businesses to thrive.
Consequently, the collapse of new startups and acquisition of others by large companies will be reviewed in the budget. Though India is among the fastest-growing economies in the world, the government aims at pushing for the growth of regional businesses to provide employment opportunities for their citizens.
Though the government strives to support startups and SMEs, a critical analysis of the proposed laws shows that many of the startups do not qualify to utilize the benefits of this scheme. For example, the startups trading in physical products like a furniture business or grocery store finds it hard to access the funds than IT/e-commerce startups. Thus, there is need to restructure the policy framework to accommodate more businesses. Some of the main recommendations include:
Finance
The set up of a Rs.10, 000 crore outlays and credit guarantee scheme for a fund-of-funds to increase access to available capital for more startups and SMEs. The government proposes the set up of a startups oriented bank for increased lending in many regions. Also, it is suggested that the legal frameworks be restructured and upgraded to cater for the registrations and subscriptions of startup businesses in a faster and efficient manner. Larger companies and investors are also encouraged to provide finances and form partnerships with startups to reduce the rate at which the new businesses collapse.
Tax
The government proposes the creation of separate tax rates for the startups to encourage growth and flourishing of these startups successfully into SMEs. Also, the startups will be provided with a tax holiday period depending on the types of industries and sectors in which they operate.
Incubation Centers
The government will commit to providing an excellent environment to accelerate processes for approvals and obtaining licensing for startups operation equipment. The government will create and construct new spaces for the startups to operate from and utilize.
