Entrepreneurship and job creation: A conundrum

It is true that successful entrepreneurs can build large corporate businesses. But only 5 percent of the startups can become such companies. Does the government know these risks?

There is a burden on India. 300 million young people need jobs by 2030 and at the current rate of job creation there will be many people being unemployed. According to MeritTrac, the skills assessment company, there is a need to increase certification of existing employees and graduates to be employable over a life cycle. The central government is weary of the fact that it stands to lose the tag of being a progressive government if it does not make jobs become a reality.

In order to stay relevant the Modi government is in the cusp of introducing a Startup Bill in Parliament to push for self employment. One must remember that in the last budget Rs 10000 crore was announced as a Venture Capital fund for startups, which is in limbo with at least three government departments grappling with who takes ownership of the fund. It’s a merry-go-round between the Finance ministry and the Ministry of Small and Medium Enterprises. There is no fund manager employed to disburse these funds too.

So is the Startup Bill another political shenanigan? What is real is that a startup listing policy on the bourses will become a reality. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) are working closely with the Tax department to figure out the tax implications (currently capital gains tax is at 22 percent) for an investor exiting when the company lists on the bourses.

However the Startup Bill is shrouded in a cloud of mystery. Although announcements are welcome the impact remains staggered in many cases where the government has taken exposures in the private sector.

What should the government do?

1. Get the Bill passed in both Houses.
2. Appoint fund managers.
3. Announce sector wise exposures.
4. Create an exit route for founders and investors and provide tax clarity (either listing or through sale of of equity)
5. Make sure that the fund takes meaningful exposures than being misused by officials.
6. Link Aadhar database for social sector startups.
7. Make Goods and Services Tax a reality.

If these are stalled by the opposition then even they stand to lose in terms of reputation because providing 300 million jobs by the private sector will not be a reality unless many Indians become entrepreneurs.

Manufacturing companies can no longer be the milch cows of employment. In several automobile companies jobs have been provided on the basis of sops provided by the government. It is an unwritten rule that every time a large manufacturer sets up shop in India they are to provide a certain number of jobs or they will not get the necessary tax breaks.

However with the rate of job losses happening in StartUps there is little that the government can do. It should not confuse jobs with startups because intrinsically startups are small lean teams and at best can employ 15 members, provided its product is being tested by a few clients. The startup story in India has to be about building technology that can be deployed to enable efficiencies and in creating databases of utilisation and consumption. If the story is to provide jobs then the objective of building exemplary companies will be lost.

At least there needs to be clarity on the future of making entrepreneurship a reality.