The government will soon introduce a tax regime for startups to foster innovation and create a conducive ecosystem entrepreneurs in the country, Finance Minister Arun Jaitley said on Saturday.
Dropping the first few hints of what the Modi government’s action plan for startups could look like, he said, “We have already worked upon an entrepreneur-friendly taxation regime. There are some steps which can be taken by notifications, which would be taken forthwith. Other require legislative provisions which can only come as part of the Finance Bill when the next Budget is presented.”
Jaitley was speaking at the inaugural session of the ‘Startup India, Standup India’ campaign, organised by the Department of Industrial Policy and Promotion (DIPP), which was also attended by Minister of State for Commerce Nirmala Sitharaman and World Bank’s country director Onno Rühl.
Assuring minimum interference from the government, Jaitley said that the Centre will only play the role of a “facilitator” for startups. “It (government’s startup campaign) is going to be the eventual freedom from the state that Indian entrepreneurship will now enjoy. It will only be limited support of the state in terms of its programmes so that there is an easier availability of Capital. A friendly tax regime will be available to ensure there is an unleashing of the energies of an Indian entrepreneur…”
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The Centre, he added, will provide startups with an “ultimate break from License Raj” and, in return, hope that young entrepreneurs will emerge as an alternate engine of growth at a time when the global economy posed several challenges.
As proof of the government’s intention to play the role of facilitator, Jaitley listed a bunch of achievements since 2014. “I find that the traffic of industry visiting North Block as almost ended. There are no piles of FIPB (Foreign Investment Promotion Board) clearances which are pending. There are no files to be pushed. Amitabh (Kant) is being repeatedly called an evangelist becasue the DIPP was the corridor that most people visited to have their proposals supported by government. Its role is now of a campaginer and an enabler.”
Will join the programme to commence the #StartupIndia movement this evening. Looking forward to interacting with start-up entrepreneurs.
Jaitley assured that both the banking system and the government will make resources available to them.
Besides Start Up, the Finance Minister said the government will launch Stand Up India scheme under which, bank branches will lend to entrepreneurs belonging to SC/STs and women.
“On Independence Day Prime Minister (Narendra Modi) announced the Stand Up India scheme. The Stand Up India would be separately launched. It is a programme, which envisages women entrepreneurs and entrepreneurs belonging to the SC, STs (to get funding from banks). These were the segments which were not throwing up entrepreneurs.
“Each bank branch, public sector or private sector, would actually adopt one in the SC/ST category and one in the women category. So they will adopt two such entrepreneurs and fund them to set up establishments,” he said.
By funding trading or manufacturing establishment of this segment, almost 3,00,000 new entrepreneurs over the next two years will be created, he said.
Emphasising that the government has limited potential to create jobs, Jaitley said, the private sector has its own challenges.
“The private sector own expansion itself is throwing up a challenge because they have over-stressed themselves and their stress in turn gets reflected on our banking system, something which the RBI and the govt working in tandem, and over the next few months are going to add to the bankers ability to improve and be able to lend with a greater amounts,” he said.
Under these circumstances, the government had to explore new areas and it is among those newer areas that it conceived of the MUDRA scheme.
Pradhan Mantri Micro Units Development Refinance Agency (MUDRA) Yojana that government conceived of, is intended to target 25 per cent of the bottom part of India’s population.
“So people get loans from refinance agencies, public and private sector banks and other agencies. Earlier, they were being exploited by lenders at very high rates and now they get at bank rate and I must say the programme has been reasonably successful. In the last 4-5 months, almost 1.73 crore entrepreneurs have been enabled with loans,” he said.
He expressed hope that the figure would be significantly higher by the end of this financial year.
“We are going to roll over that programme year after year and smaller entrepreneurs are being created by that process,” he added.
On the economy, Arun Jaitley observed that India has its own challenges despite being the fastest growing large economy in the world.
“Unquestionably, the world economy has slowed down. Now we can take a limited satisfaction that even in a crisis like situation in the world, we are growing much faster. The world recognises us as probably the fastest growing among the major economies, but then we are not without our own challenges,” he said.
“We are fully conscious of the adverse situation in which we are. We are struggling to keep respectable growth rate (despite) certain advantages like we have a booming services sector, we have a manufacturing sector slowly growing, we have increased our public spending, we have opened our doors wide enough and foreign investment is coming in a big way, at least in the urban areas we can see an increasing demand,” he said.
These are the engines that are keeping this growth rate alive, he said.
Talking about headwinds to economic growth, the finance minister said, slow agriculture production due to weak monsoon and subdued private investment are a few challenges.
“If you look at the direction in which the conventional global economy is moving today, we almost are moving from a crisis situation literally by the day. Nobody really can envisage looking down the tunnel as to what the situation of the world economy, one year or two year from now is going to be. Nobody can seriously predict as to what the emerging challenges down the few months are going to be,” he said.
“Earlier crisis like situation came once a decade, today it may emerge twice in a day. You may have the impact of Chinese economy and their currency on one part of the world and you may have the oil prices striking you at the other part of the world and you will have a global impact simultaneously of these challenges,” he added.
The day-long event is being attended by close to 40 top CEOs and startup founders and investors from Silicon Valley, some of whom will also participate in panel discussions. Some of the big names include Masayoshi Son, CEO, and Nikesh Arora, President and COO, SoftBank, Travis Kalanick, Founder, Uber, Flipkart founder Sachin Bansal, Snapdeal’s Kunal Bahl, and Oyo Rooms’ Ritesh Agarwal. The event will conclude with PM Narendra Modi launching his ‘Action Plan’ for startups.