“Words can inspire but only action creates real change.”
Presenting the second Union Budget, the Finance Minister asserted that entrepreneurship has always been the strength of India and proposed a number of measures and policy changes to help boost the Indian startups. The Budget was a step in the right direction, but these are just baby steps for an economy that needs giant leaps to become an innovation hub.
We are also hopeful that the investment clearance and advisory cell will go a long way in strengthening the startup environment and improve the ease of doing business within our community. The proposed 5-year deferment of tax payments on ESOPs by startup employees in the Union Budget, we believe, is a step in the right direction. However, it does not satisfactorily address the complete concerns and other pain points that have been plaguing the startup ecosystem.
Firstly, the ESOP taxation change, in its current form, applies only to around 200 startups recognised by the IMB (Inter-Ministerial Board), thereby, severely restricting its scope. It is only fair that all DPIIT-registered startups enjoy the benefits of the proposed changes equally. Secondly, we strongly believe that ESOP taxation must be revised as per global norms, else, it would become an ineffective tool of talent acquisition and retention.
We also require cohesive measures towards improving the ease of doing business and strengthening the overall ecosystem. To ease the working capital crunch faced by startups, a lowering of TDS rates on payments to DPIIT registered startups and MSMEs is necessary. To enable greater rupee capital participation, allowing universities and public trusts to invest in Alternative Investment Funds (AIF) will make a considerable impact. Achieving tax parity between listed and unlisted securities, which at present vary significantly, will enable startups to attract greater investments. The provision of R&D benefits for companies will help spur innovation and startup activity in India, enabling a structural shift in the economy towards building high-value capabilities.
We believe that more cross-cutting measures across industries are necessary and so is the reduction of frictions between the businesses and government players. This will help us to cover more ground in fulfilling the mission of making India a high-value, innovation economy.
Overall, Union Budget 2020 does reflect the Government’s keenness in improving the ease of doing business but considering that the lofty goals we have set out to achieve, good intentions and keenness do not suffice. These must be augmented with robust policy changes, as well as, swift and decisive action to strengthen and accelerate the startup ecosystem.
India is at a crossroads and must decide how she is going to traverse the next decade and champion the change the world needs. It reminds one of Robert Frost, “Somewhere ages and ages hence:
Two roads diverged in a wood, and I—I took the one less travelled by,
And that has made all the difference”