Union Budget 2015 draws a blank for startups

Published: Mar 3, 2015

Author: Amit Banka

2015 Union Budget is a mixed bag. It doesn’t talk about many lofty dreams, and one can only hope the points announced are implemented fully. The fact that startups found a good mention in the Budget is quite heartening, but there is no plug-and-play measure available for startups in this year’s Budget. I cant see any of the schemes announced to be really of help to the start-ups, and what the Government has promised to work, looks very difficult to implement.

The direct announcements made in the Budget for startups include:

A. Rs 1,000 crore allocated for SETU (Self Employment and Talent Utilization) fund – however how this initiative gets rolled out and how the money can accelerate startups remains to be seen.

B. To support 5.77 crore small business units in the country and to encourage entrepreneurship, the FM has earmarked Rs 20,000 crore in the form of Micro Units Development Refinance Agency (MUDRA) bank and a credit guarantee corpus of Rs 3,000 crore. The MUDRA Bank will work in tandem with the Pradhan Mantri Mudra Yojana, with an aim to boost entrepreneurship, bank the un-banked and fund the un-funded. Whether any of this Rs 20,000 crore comes to startups is not sure, or will this fund only be for the use of existing SMEs is unclear.

Besides the direct announcements, fund allocations made for certain macro economic areas are also opportunity for startups that either operate in the space already or intend to come in. Some areas where startup action already exists include:

C. The JAM Trinity – Jan Dhan, Aadhar and Mobile, is a step in the direction of cashless transactions. Startups working in the space of mobile payments should understand the fine print of this announcement to be able to take complete advantage.

D. Another announcement about cashless transactions is the establishment of electronic Trade Receivables Discounting System (TReDS) -- also an opportunity for startups working in the e-payment space.

A number of initiatives have also been earmarked to be completed by 2022, the 75th year of India’s Independence. Although the Amrut Mahostav vision statement talks about many capital intensive areas, some areas that startups could look closely as opportunity include:

E. Good health – healthcare is already being tapped by a number of startups. It would be good to look closely if there is a way that startups can be part of the Mission 2022 programme of the Government. There could be any incentives that the Government may roll-out to enable faster pace of work in view of Mission 2022, this could in turn help accelerate growth for startups who are on a look out for a ways to take their venture forward.

F. Education and skill development – E-learning and education is another space that many startups have found attractive. While the Budget announcement speaks of setting up schools, there is an opportunity to introduce ideas for enhancing skills among the youth. If tapped intelligently, this space can also reap good benefits.

G. Agricultural productivity – Different ways and means to improve agricultural productivity that improves efficiency of farmers is an opportunity. Value-added agriculture products like organic food are another opportunity that can be tapped by startups.

H. The FM also pointed out the need to provide Physical Aids and Assisted Living Devices for senior citizens who form a sizeable chunk of our population. This is an opportunity for technology startups who could look at creating good quality medical devices that can address the needs of approximately 10.5 crore population of our country.

I. The FM has proposed increasing countries that get Visa on arrival to 150, from the existing 43 countries. Startups that operate in the travel space should look at this opportunity closely to create product/service offerings which can be marketed to a larger tourist population that comes in as a result of this policy.

J. Alongwith these specific measures, there is also an opportunity for startups to leverage the Make in India programme, that the Government is pushing aggressively. Manufacturing products in India to be supplied within the local Indian markets is worth thinking.

H. To facilitate inflow of latest technology into new startups and ventures, the FM has reduced the rate of income tax on royalty and fees for technical services from 25% to 10%.

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