Budget 2017 Fails To Impress Startups
Startup entrepreneurs want more benefits from the government.
Given the hoopla around government’s ‘Startup India, Standup India’ initiative launched last year, the startup community was expecting some big-bang reforms in Budget 2017. But Finance Minister Arun Jaitley has not met their expectations.
The government did announce some measures that will benefit startups. The tax concession policy has been tweaked to give firms incorporated after March 31, 2016 a three-year tax holiday any time during the first seven years. The government has relaxed the need for promoters to hold more than 50 percent of the voting rights for losses to be carried forward.
A Muted Budget For Startups
The startup community said Budget failed to meet their expectations. “Increasing the period of profit-linked deductions available to startups, from three years out of five years to three years out of seven years, is a big relief for the startup ecosystem, but it missed to touch upon various other policies,” said Sandeep Aggarwal, Founder, ShopClues and Droom.
There are a lot of things I was hoping Budget 2017 to touch upon; for example, policies to ensure that capital is easily accessible to entrepreneurs, repatriation of money coming to India, R&D credit, no capital gains for any kind of startup sale or exit and to make foreign listing for any Indian company straightforward.Sandeep Aggarwal, Founder, ShopClues and Droom
Calling the budget muted for startups, Ravi Gururaj, Chairman, NASSCOM Product Council, said the government’s announcements will make an impact in the long term and shows that the government is supportive.
The government recognised some of the demands by the startup community. Like, the recognition that carry-forward losses would continue when founder’s holding falls less than 50 percent. But these will only benefit startups that are built today and the outcome of these relaxations will be visible in the long term.Ravi Gururaj, Chairman, NASSCOM Product Council
Investors say that the initial euphoria around Startup India has died down and announcements do little good till the government acts on them.
Harshad Lahoti, CEO of Angel investment firm ah! Ventures, told BloombergQuint over the phone that half way down the government’s five-year term, it’s done little more than some ‘cosmetic changes’.
When the government last year announced Startup India, there was a lot of expectation that every year something or the other will be done for startups, but unfortunately, with other priorities of the government like elections, among others, initial euphoria around Startup India has died down. There is nothing the government has done to follow on the ambitions they had put up.Harshad Lahoti, CEO, ah! Ventures,
Angel Investor Ajeet Khurana said the government has got into the habit of periodically using the word startup, with out doing much for the ecosystem.
“There is a feeling that if we will use the word startup in any context, then somehow we are encouraging the startup, but that is not perhaps the case. They (the government) in fact are in a habit to pretend to be startup friendly while doing very little. As far as the startups are concerned, this government has five opportunities, it has already lost three,” Khurana added.
Ananth Narayanan, Myntra CEO, called it a ‘moderately’ positive budget. Narayanan told BloombergQuint that continuing investment in digital infrastructure will enable more customers to come online and will be a boost to e-commerce companies.
Kunal Khattar, partner at early-stage venture capital fund AdvantEdge, said the budget is important only if there are any changes in direct or indirect taxes. He said the concept of budget is getting less and less relevant as the government can announce policies at any time of the year.
Just because the government hasn’t made much announcements that doesn’t not mean they will not make announcements. It is not the question of being let down or expectations as policy announcements happen throughout the year. What is important is the action that happens on the ground. At an individual level, the ecosystem is way better today than it was two to three years. Also, I am all for less governance and policing then government announcing policy and trying to get into the things.Kunal Khattar, Partner AdvantEdge
Also Read: What India Inc. Makes Of Budget 2017
Digital Payment Or BHIM In The Forefront?
Digital push has taken a front seat after demonetisation. Jaitley said in the Budget speech that promotion of digital economy is an integral part of the government's strategy. The finance minister added that the government’s BHIM, or Bharat Interface for Money, app will unleash the power of mobile phones for making digital payments and financial inclusion.
Vidhya Shankar, executive director, Grant Thornton, said it is the first time ever an Indian government has explicitly emphasised on digital economy and micro, small and medium enterprises (MSMEs) -- on the back of a successful Startup India initiative.
“The follow-up to improve connectivity, infrastructure plus other policy measures announced in the Budget 2017 will further fuel the growth of startups and early stage investments in our country,” he said
Bipin Preet Singh, Founder & CEO, Mobikwik, said the government must have also considered promoting startups in the digital payments and digital security areas.
We understand the government wants to promote BHIM to signal greater adoption. I think they should have kept it little more balanced, and given the amount of the work we have done, we were expecting a word of encouragement as what the payment companies have done.Bipin Preet Singh, Founder & CEO, Mobikwik