Budget 2017 Will Signal Another Eventful Year For Startups

2017 started off on a shaky note. With the effects of demonetization still lingering around, coupled with the lower forecast of GDP, the startup ecosystem should definitely gear up for an interesting ride ahead. There is also the black cloud of lack of VC funding looming around. Hence, the upcoming Budget of 2017 is crucial for both the Indian economy and the startup ecosystem. We are hoping that this Budget will kickstart definitive actions in the right direction.

Having been closely involved in setting up businesses in the US and now in India, I would really want to see our governments create a culture more welcoming to startups, as that’s the way forward to a bright future. A strong startup ecosystem, similar to the one in Silicon Valley in the US, is imperative to India’s growth as the epicentre for power and innovation. Despite a lot of discussions by our government over the years, we haven’t really seen any concrete steps being taken to improve the startup scenario in India. Some of the key expectations that startups normally have from the administration are:

1. Ease of starting
2. Ease of compliance
3. Infrastructure and policy support
4. Ease of exit

Despite immense changes in the process of setting up businesses over the years, there is a lot of room for improvement when it comes to ease of compliance, policy and infra support and ease of exit. We cannot expect FDI to keep flowing into the country unless we diminish the dangers for foreign investors, have a culture that is business-friendly and permit financial specialists to move capital freely across borders. Here are a couple of things expected from this Budget to make headway in this direction.

Startup hubs

Startup hubs are the need of the hour and the government should actively endorse more startup hubs, or take steps to create a mega startup city where all new businesses would co-exist in an environment that’s supported by extraordinary infrastructure such as high-speed internet, consistent power, blockage free streets and great roadside cafes. Support functions such as legal counselors, chartered accountants, logistic companies and venture capitalists too are vital to building a startup hub. Such an establishment could incredibly enhance the prospects of new businesses, help them thrive in a cost-effective manner, and help them grow faster.

Differential policies for startups

Currently startups in India are stifled by a number of prohibitive policies by the government, and introduction of differential strategies for startups and grown up organizations can help lift the pressure off startups. For instance, free movement of capital within and across borders, relaxed transfer pricing regulations, permission to take FDI, regardless of the fact that they are doing retail business, and relaxed labour laws can go a long way in improving the startup scenario in India. Once the startups have grown, they can be put under existing policy limitations. These differential approaches could be a real shot in the arm for startups as these will allow them to play with business models that are not restricted by government controls.

Easier mergers and acquisition policies for startups

The startup world is always in a state of flux, and often the best way to go forward is to merge with another startup or obtain one. The government should exempt any profits made on such transactions from tax and make paperwork minimal. There should be dedicated efforts by the government to create a sound and robust support system for startups where simple and frictionless exits could invite more venture capital funding.

There couldn’t be a better time to introduce these changes than 2017. Though India has the potential to become becoming one of the top three economies of the world, it cannot be a reality unless we make noteworthy changes in our business policies. Let the new year be one that heralds the dawn of a new era for startups in India.