Budget 2016: Utkarsh Joshi, Principal at The HR Fund, highlights the key aspects of improvements required in the human resource (HR) of India to accelerate growth in the country’s gross domestic product (GDP). The Union Budget 2016 (presentation date is 29th February) is being awaited with a lot of expectations both in India and internationally with major institutions calling India to be the next biggest growth engine. With the GDP growth projections on the rise and all eyes on India, it is very crucial that the government focuses on the key issues that will strengthen the Indian economy.
It is a widely accepted fact that India is on its way to become the largest and youngest working population in the world. India’s human capital is going to be the biggest boon for the economy if it is honed and utilized properly. Here are the expectations and recommendations from the government in the upcoming Budget 2016.
Improving the overall efficiency of the Indian workforce and skilling the still untrained ones can potentially be the biggest boost that the country needs today. With only 2.3 per cent of the total workforce in India having undergone formal skill training as compared to 68 per cent in the United Kingdom (UK) and 52 per cent in the United States (US), the gap is very high. The National Skill Development Corporation’s (NSDC) efforts are yet to show significant results yet with just 40 percent placement record as registered in 2015.
“Skilling India” is probably the biggest step in that direction but it has a long way to go and needs more support. The problem with such initiatives remains with the implementation and unless that is taken to the last step, these initiatives fail to show the desired results. It is very important to understand how the skilling problem sits behind all the other initiatives that the government is planning like“Make in India”, “Digital India”, and “Start Up-India”, etc. It is the problem of the demand side andthe desired output cannot come with the right input. The government expects private players to enter the skilling domain to not only support but also take over some of the important activities. The government needs to pave the way for private sector to do business more easily and new innovative start-ups in this area to burgeon without too many regulatory hassles.
Entrepreneurship in HR and Ease of doing business Index:
Promotion of entrepreneurship in India needed the much awaited and talked about boon that it received from the recently announced “Start Up – India” initiative.The central government clearly understands the importance of entrepreneurship and realizes the fact that thisis going to create jobs in the country.With all the job creation, new age companies, ever growing businesses and the growing economies of the company, it is quite obvious that innovation in HR is fast becoming a necessity and entrepreneurs in the field of HR are now looking up to the government to improve the ease of doing business in the country. Even today we see many entrepreneurs flocking to Singapore and other more friendly hubs to setup a company as they offer a much leaner and quicker mechanism. The measures announced towards achieving these goals in the “Start-Up India” event would need a lot of work from the government before we see that actualizing.
Thereare many issues with the policies surrounding ease of doing business and unnecessary obstructions with the regulatory affairs. Being in the field of investing into HR start-ups, we at The HR Fund are seeing an increasing number of start-ups that are flourishing in the area of HR solutions that need the support and right environment from the government in order to establish their businesses.Many issues have been addressed by the government (which would still need a lot of work), but many remain. Below are a few examples.
Tax deducted at source:
Start-ups currently have to claim tax deducted at source (TDS). Many start-ups are generally known to have been making losses in business but still sellers and banks deduct TDS, which affects their liquidity. There should be a mechanism where one gets a generic exemption from everyone.
Tax on investment received:
The current Income Tax (IT) Act obligates all start-ups to pay taxes on all and any investments that they receive including angel investors. Such clauses de-motivate a lot of angels and the government should look to encourage new businesses by giving both the start-ups and the angel investors the required tax breaks.
Start-ups face huge amount of scrutiny from all regulatory bodies, which needs to be mollified a little, such as the mandatory requirement for every company to file audited accounts every year and submit returns even when they do not have any revenues on their books.
Other aspects to improve business scenario:
The issues relating to payment of gratuity, provident fund (PF), and contract labor regulations also need to be looked at. Few important things to improve business scenario in the country would be rise in the income tax exemption limit,reduction in company tax, service tax and TDS to someextent to support businesses.
Labor laws are directly linked to improving the “ease of doing business” index of the country. The government is in the process of consulting with all stakeholders to derive the new amendments and has already initiated steps to streamline various laws and acts. The cabinet has given its nod on two new legislations pertaining to improving the existing labor code on wage and small factories act with lot more expected in near future. The government is trying to amalgamate the 44 existing laws to make things simpler for the businesses, which would require some serious efforts. Once implemented, the steps have the potential of not only improving the ease-of-doing-business index but also of generating more employment, which would be key to the growth of Indian economy. It would also benefit the working conditions and environment across various industry segments.