Come February 1, India expects a lot from Finance Minister Arun Jaitley. 2016 saw two major economic decisions by the government; one was the Goods and Services Tax and the other, demonetisation. While people are still uncertain about the impact of both decisions, the pre budget expectation is high and how it turns out will determine the government’s way of dealing with the situation.
After the recent ban on high value currency notes, India is making good steam as a cashless economy. Apart from popular pre budget expectation that the government will address the problems caused by demonetisation, the two other issues the Union Budget 2017 will witness are the merger of the Railway budget with the Union budget, and the change of date of the budget from end February to February 1.
Let’s Look at the Top Pre Budget Expectation:
Online Aggregators and E-Commerce
The major pre budget expectation among online logistics aggregators that the government will announce measures to ease the friction experienced by users while executing digital transactions. Many an e-commerce startup looks forward to receiving some more clarity on FDI in B2C e-commerce through an automatic route. Quite a lot of entrepreneurs are awaiting the implementation of GST at the earliest. The last couple of months have definitely created an impact for most e-commerce stakeholders. The government’s digitisation route is the main pre budget expectation for many.
“I think current government should think about foreign direct investment in inventory based e-commerce companies. Goods and Services Tax should be implemented in a proper manner across India. This budget should promote cashless transactions and encourage consumers to choose online or digital payments. India needs better digital infrastructure and high bandwidth to promote digital payments. E-commerce industry also needs better infrastructure in tier-2 and tier-3 cities and towns in-order to reduce operational cost, timely delivery and expand the customer base”, says Mr. Ameen Khwaja, Founder & CEO, LatestOne.com
The Taxes Game
Last financial year was tough for Indian startup ecosystem. To make the situation better, the pre budget expectation of the Indian Startup Space is to have Employee Stock Ownership (ESOP) Plans taxed at the time of sale which would help in paying their taxes as they would have greater liquidity and the instruments could also get a fair valuation. The talk of the town is that the Government should announce a series of initiatives to support the startups, including widening of the tax-free regime to five years from three years and faster procedural clearances.
“The startup community is in much anticipation of the upcoming budget. Things like service tax waiver, easier NSDC accreditation process, allowing subscription based payments will really help. These are the pre budget expectation for startups that aim to bring accessible, affordable, engaging, and highly effective quality education to the world.” says Vikalp Jain, President and Co-Founder, Acadgild.
India as a Digital Economy and a Startup Hub
A popular pre budget expectation is for the budget to focus on shaping the IT infrastructure and the government providing easy short-term loans for retailers, for working capital requirement. This will further help the industry make improved technology more accessible to the Indian market to fulfill government’s push for a digital economy. A startup hub, India is currently home to the third largest number of technology driven startups in the world. The previous year witnessed multiple markdowns in the country’s startup ecosystem. The pre budget expectation from the Indian Startup ecosystem is that the PM’s flagship ‘Startup India’ project will receive an impetus in the upcoming budget.
The government has to carefully re-monetize the economy to return to high GDP growth while maintaining cost competitiveness. Another pre budget expectation is the rising optimism towards the government’s vision of ‘Digital India’. More entrepreneurs in the ecosystem will drive sustainable economic growth and generate more job opportunities.
“After a rattling year for startups and unique macro level intervention towards the end of the year via re-monetisation, the startup community’ pre budget expectation is the resumption of focus on entrepreneurship. Also ecosystem support via greater academic investment, incubation support, low cost debt funding, and international partnerships would significantly bolster the fortunes of entrepreneurs in India in 2017.” says Amit Sharma and Nilesh Aggarwal, Co-Founders, eMediNexus.
India’s Trot to be a Manufacturing Hub
Given India’s medium to long-term prospect as a manufacturing destination, the manufacturing sector is foreseen to be a key contributor to India’s GDP in the coming years. Hence, a reasonable pre budget expectation is the promotion of manufacturing in the country. Players offering niche solutions – such as smart manufacturing and industrial automation – that help India achieve global standards of manufacturing and be recognized as a strong manufacturing hub, should be provided regulatory encouragement. Most companies in this space are very young and therefore, there should be public spending to develop the right infrastructure for such companies to grow. Tax Holiday could be an effective incentive by the Government to encourage young companies with high potential.
“A much theorized pre budget expectation is the Government’s roll out of measures for international collaborations and initiatives where knowledge transfer can be facilitated between Indian players and global counterparts. Especially in areas of Design and Technology, where India still has to cover a lot of ground. Such collaborations can bring in the required expertise and resources to make it happen in India. And now the focus should be shifted to Tier-2 cities for boosting innovation and creating better design infrastructure.”, says Mr. Harshit Desai, Chief Operating Officer, DesignGild
The Educational Sector
Access to basic quality education is still a big challenge in India, especially in rural areas. With digitization and innovation seeping in to bridge this gap, there is still room for financial and statutory incentives from the government to motivate private organizations to invest their efforts and time into it, apart from money. A pre budget expectation is that education loans will be made more student friendly to ensure that access to higher education is not lost due to affordability issues.
The Government should incentivize knowledge centers to create globally competitive work force. This is essential if India’s goal is to become a preferred education hub in time to come. Private-sector education has definitely given more choices and flexibility to the youth. However the pre budget expectation from the sector is for specific incentives to those adopting cutting edge technologies for learning and development. Another pre budget expectation from the sector is for digitization of proctoring and virtual labs, and investment of serious money to bring out augmented and virtual reality based content.
“India and the world is looking forward to a budget that will support the education/knowledge management sector, which has the task to create India’s future. Imparting incentives to an education ecosystem that fosters creativity as much as mind development, must be mandatory That is the only way high-income economy will be created based on evolution of knowledge and innovation” says Mr. Rishi Kapal, CEO & Global Strategist, Edugild.
Last year the Sixth Economic Census released by the Ministry of Statistics and Programme Implementation had revealed that women constituted only 13.76% of the total 58.5 million entrepreneurs. Despite these low figures, ABI is hopeful that slowly but surely these numbers will improve in the coming years. Unless the Government continues to step in and is highly committed to creating an ecosystem that nurtures and supports women entrepreneurs, all efforts such as ‘Startup India’, ‘Make in India’ and ‘Stand-Up India’ will not achieve the desired goals that implied empowerment and financial stability for women.
All things considered, the stage is set for the Union Budget to sweep the people of India off their feet. Let’s wait and watch whether the final say is as expected.