As India faces the impact of COVID-19 on its Gross Domestic Product (GDP), which shows a historic low, India’s finance minister, Nirmala Sitharaman, has an uphill task indeed. Faced by the challenge of restoring growth in the ecosystem and boosting the job market, while facing pre-COVID problems as well, all eyes are on her as we await the budget on February 1st.
What is the startup ecosystem expecting from the budget this year?
In the aftermath of an unprecedented year for businesses, the government has a great challenge at hand to help businesses cope with the after-effects of the pandemic, scale up employment, and improve the macro-economic growth factors to put back the economy on the growth path.
The Tech Panda gathered a few opinions and expectations from the government in this year’s budget from the startup ecosystem.
Power to Homegrown Solutions for Aatmanirbhar Bharat
Balkrishna Hari Singh, Founder and CEO of Frenzi, a single window search and recommendation app for all streaming content, says the startup ecosystem is going to be the biggest contributor and greatest enabler to tackle unemployment and economic growth.
“The pandemic has considerably helped the digital adoption across lengths and breaths of the country. We have a much more digital-ready consumer ecosystem than before. Adoption of digital payment solutions, media consumption, communication, ecommerce, telemedicine, education, and just about every business,” he says.
The budget should specifically cater to catapult the startup ecosystem at the centre stage of the Aatmanirbhar economic growth
As Indian consumers become digital ready and growing, he says, businesses have to cope with the sudden change in environment and reach out to digital consumers.
“To make the government mission of Atmanirbhar Bharat a reality it’s important we have our own homegrown solutions and entrepreneurs catering to this market demand,” he adds.
Many innovative business solutions, partnerships, and collaborations are emerging as a result of the massive changes last year. Several young entrepreneurs are coming up with practical business solutions. However, to make it a sustainable effort, says Singh, it’s important that these innovations are rightly capitalized.
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“Aatmanirbhar Bharat would be not be possible without timely infusion of seed funds to these emerging business solutions. The budget should specifically cater to catapult the startup ecosystem at the centre stage of the Aatmanirbhar economic growth,” he says.
His list of wishes from the budget include an Innovation fund for each sector and the creation of PPP institutions to upskill small and micro business owners to be able to take their businesses from offline to online mode.
He also adds that opening up the capital market to the startup and SME sector and GST waiver or reduced tariff for early stage start up on setup costs will be welcome.
Action Oriented Support for Startups
Dr. Gaurav Hirey, Founder and CEO of GoEvals, an HR Tech startup, says without help from the government, there is a risk that startups might shift to profitable shores.
“Startups will play a key role in the Indian economy, but the COVID-19 crisis has been a hard time and is literally challenging their survival, and surely has limited the growth. It is becoming clear that if the powers don’t support startups at this critical stage, then many of them will flee to other shores in search for what they need to survive and grow,” he says.
Government must provide on ground support in terms of extending short term liquidity and availability of funding
“No matter what we hear, the fact is that startups are facing an enormous challenge in terms of financial stability and growth. The broad classification that the government has taken on startups may have held true before the pandemic, but now it really does not meet the needs of the micro or small enterprises, many of whom have either shut shop or have precious little time left,” he adds.
He hopes the Union Budget plans special initiatives to ensure survival of the micro and small enterprises, many of whom are bootstrapping and will need more time to raise funds to support themselves.
“Government must provide on ground support in terms of extending short term liquidity and availability of funding. This needs to be more action oriented than what it has been so far. They must focus on removing barriers and providing incentives to startups who have the potential to grow,” he says.
Simplified Compliances for Startups
A startup takes anywhere from one-three years to transition from the seed stage to a growing company. Hirey says the number of compliances such small startups have to adhere to are often unreal and unnecessary. He explains with an example,
“A seed startup that is yet not generating a revenue, is still expected to follow compliances that a medium or large company is expected to do. This is totally unreal and puts unnecessary burden on possibly the founder or the core team to manage the compliances or adds cost if outsourced. This needs to be made simple as it diverts energy from the core focus to non-value adding activities,” he says.
It would really help if there is a proactive attempt to help startups and small businesses by educating them more intensely and supporting them on the ground in real terms, by putting manpower on the front to do this.
He also states that over-communication of government programs, where details are not always clear, must change.
“If a startup needs help or assistance, there is a process of discovery, then understanding, and then maybe implementation. Instead of this lengthy process, it would really help if there is a proactive attempt to help startups and small businesses by educating them more intensely and supporting them on the ground in real terms, by putting manpower on the front to do this. It would help more startups to survive and grow. Today, real on-ground assistance and support is absent,” he explains.
He emphasizes that the government needs to realize the difference between a startup, a small business, and a large company, where not enough has been done to enable startups to flourish.
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“Instead, at the moment, it feels as if they are punished when they register and comply through fines, and processes are such that divert their focus from their core to administrative and compliance tasks,” he adds.
While these points may not be significant compared to other challenges the government is facing, they surely are critical to ensure that more people are encouraged to launch companies and provide employment instead of being burdened by taxation and compliances that take away valuable time and resources.