Following the dampening effect of demonetization on the Indian economy, all eyes are on the Union Budget 2017 to rekindle the momentum.
Government policy has typically lagged technological development and innovation. So far, startups have had to grow by maneuvering through regulatory bottlenecks, rather than enjoying policy support. Against this backdrop, the PM’s Startup India initiative, launched last year, came as a highly welcomed and long overdue move. More than 20,000 technology-enabled startups mushroomed across the country in the span of a year.
Budget 2017 is expected to give another fillip to the startup industry. An impetus to startups could come in the form of further tax sops, simplification of taxes, an increase in the tax-holiday period and exemption from the Minimum Alternate Tax.
India’s startup ecosystem is developing at a rapid pace. Entrepreneurs need to have easier access to unsecured loans as well as angel and VC funding. Through policy support, the business landscape needs to improve to encourage more investors to consider funding startups. Moreover, investors should have smoother exit routes. An investor, having cashed in on a business, would fund another, and the cycle of funding and growth would continue.
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The Merit of Value-Addition
Budget 2016 had levied duties on products such as batteries and chargers, while waiving duty on the components being used to manufacture these products. Budget 2017 should continue with this differential duty system, encouraging home-grown companies to take on more value-added manufacturing of mobile phones and computers. For this, the component ecosystem needs to be strengthened further.
It’s Purely Business
Businesses are hopeful that Budget 2017 would lower the corporate tax rates as well as revise tax slabs. More taxpayer-friendly initiatives, especially through tax simplification, are widely anticipated. Moreover, the speedy implementation of GST would make compliance simpler for businesses, especially traders and ecommerce companies.
Simply lowering corporate tax, albeit highly welcomed and necessary, would not be sufficient to drive growth of the Indian economy. Consumption needs a boost, and for this, the discretionary income has to increase through a reduction in personal income tax.
(The article has been authored by Priya Nigam. She is a co-founder of Pinig Tech Pvt Ltd, which provides customized tablets for the B2B segment.)