Union Budget Unveils Measures to Boost Startups
Kochi: Union Finance Minister (FM) Nirmala Sitharaman in her debut budget has unveiled a slew of incentives which is expected to encourage the ‘entrepreneurial spirit’ in the IT and startup ecosystems across the country.
Some of the major announcements made by the FM for startups include relaxations in angel tax, easing of rules governing foreign direct investments into startup segments like grocery, e-commerce and food delivery, a host of encouragements to the digital payment ecosystem that would help fintech startups, incentives for electric vehicles to help EV startups, and a TV programme exclusively for startups.
Incentives to startups announced by Nirmala Sitharaman, Union Minister for Finance, are expected to provide a major boost to entrepreneurship
Experts close to startup circles in the State believe that the budget proposal to relax angel tax will benefit the startup ecosystem in the State, especially ‘Kerala startup fund-of-funds’ using which Kerala Startup Mission (KSUM) is raising capital for investing in new companies.
The minister announced 100 per cent Foreign Direct Investment (FDI) in single-brand retail and proposed curbing of norms stipulating 30 per cent local sourcing. The move is expected to benefit startups in the FMCG sector. Besides, she has also proposed 100 per cent FDI in insurance intermediaries, a proposal which could spur startups in the insurance sector.
Sitharaman’s budget also promises to set up 80 ‘livelihood business incubators’ and 20 tech business incubators in the current financial year. According to the government, the incubators will help create 75,000 skilled entrepreneurs in various sectors.
The Union Budget has also announced several measures to streamline labour laws, education and rental housing segments. The Finance Minister said labour laws will be modernised into a set of “four labour codes” in order to “standardise registration and filing of returns and reduce disputes”.
The ‘Stand Up India’ scheme, launched in 2016, to support entrepreneurship among women and marginalised segments of society, will be further extended during the entire period of 2020–25. “To further encourage women entrepreneurship, Women SHG Interest Subvention Programme will be expanded to all districts of the country,” the Minister said.
In a stimulus to the Electronic Vehicle manufacturers and dealers in the country, Sitharaman proposed a reduction in goods and services tax (GST) and income tax rates applicable to electric vehicle manufacturers.
In her budget speech, she also added that startups will not be subjected to unwarranted scrutiny in respect to share value premium. A mechanism will be implemented for e-verification of startups. The budget also proposes to exempt startups from justifying fair market value of shares issued to investors including Category-II AIF funds and funds for distressed assets, sheilding such funds from I-T scrutiny.
Following a press meet after the Union budget presentation, the Finance Minister highlighted the role played by Thiruvananthapuram-based startup, Genrobotics, in helping put an end to manual scavenging. She said the government would provide financial assistance for acquiring robots to stop manual scavenging, and Genrobotics, which is the only manufacturer of manhole-cleaning robots in the country at present, will stand to gain much.
No measures to promote hospitality and tourism, says E M Najeeb
According to E M Najeeb, MD, Airtravel Enterprises India, rationalisation of Goods and Services Tax (GST) rates in hospitality and tourism sectors would have boosted domestic and inbound tourism and generated multifold employment. "Tourism and hospitality industry had various points in the wish-list for inclusion in the Union Budget 2019. The industry has been demanding a rationalized single GST rate for Hotel and Tourism sectors. The industry also expected higher allocation for the Tourism Industry, and a declaration of Infrastructure Status for hotel sector. Now there are three layers of GST rates for hotels, of which the rate for the 4 & 5-star hotels are much higher, and they are losing out to the 3-star hotels," Najeeb observed. The higher GST, according to experts in tourism and hospitality sectors, is making India an expensive destination.
"A single rationalized rate is the need of the hospitality and tourism sectors," Najeeb added. He also holds that if the hospitality industry is given infrastructure status it could reduce the cost of funds for investors. “But these support measures were not included in the budget. Though the industry is a foreign exchange earner contributing largely to the GDP of the country, the demands of the industry were not considered,” he said. Meanwhile, he observed that liberalisation of Foreign Direct Investment (FDI) will attract more investments in the tourism, hospitality and aviation industry.
E M Najeeb, Senior VP, IATO & MD, Air Travel Enterprises India
Union Budget 2019-20 to Stimulate Economic Growth: FICCI
In a post budget analysis meeting organised by Federation of Indian Chambers of Commerce (FICCI), Dr.RudraSen Sharma, Dean, Indian Institute of Management Research, observed the union budget 2019 has got the ability to stimulate economic growth. However, on the flipside he noted there is much more to be done to become a $5 trillion economy. The event was co-organised by HDFC Bank, Spectrum, Geojit Financial Services and Capitaire Consultants
“The budget proposals to increase the country's growth rate are largely effective. Encouraging investment in different levels of society will help to drive growth. While the measures to reduce the enormous fiscal deficit are commendable, there is concern that there is no proposal in the budget to address the revenue deficit,” Sen said.
Further he added that reduction of interest rates can boost domestic income and savings, mainly to help increasing private capital and investments in various industry and service sectors.
“The Budget has measures to make the investment climate of the country more attractive. While the budget has measures to encourage small and medium enterprises (SMEs), it is not sufficient to help the MSMEs grow into large enterprises,” he said. It is speculated that the maximum investment allocated to the education sector will be utilized for more reforms in the education sector of the country.
The IIM dean also observed that subsequent budgets and economic reforms have failed to address the widening gap between the haves and the have-nots in the country.
Union Budget 2019 Elicits Mixed Reactions from Kerala
Finance Minister Nirmala Sitharaman’s budget is dubbed as one which is targeting growth in various sectors. Here are the reactions from Kerala
Pinarayi Vijayan, Chief Minister of Kerala
The Union Budget 2019 does not address the real issues of the people or the needs of the country. The budget has displayed severe neglect towards Kerala in all sectors, which becomes evident when we look at some of the key sectors related to Kerala. The Sushil Kumar Modi Committee's proposal that states affected by natural disasters should be allowed to draw more loans has not been considered in the case of Kerala. Kerala has for long been trying to set up an Ayurveda institute of international standards. Not even a single penny has been set aside for the institute, which aims at the preservation and promotion of our great therapeutic heritage and indigenous medicines.
Dr. Thomas Isaac, Finance Minister
Union budget is very disappointing, especially regarding Kerala. None of the State’s demands have been addressed. The State’s demand for permission to borrow more against the backdrop of the recent devastating floods has been ignored. The budget presented is insufficient to ensure the growth of the economy. There has been an increase of only 13.4 per cent in public expenditure.
Ullas Kamat, Joint Managing Director, Jyothi Labs
It is a good budget as a lot of thinking has gone into it. The Finance Minister has done her bit in the shortest possible time to address some of the key issues, be it in the social sector, farm sector, rural sector or the ones pertaining to the middle class. I am a little disappointed because there was no mention of job creation. Massive employment generation is possible only if new manufacturing facilities come up for which capital is required. How that will be managed in the short term is not very clear. My view as an FMCG player is that we are not seeking any freebies. What we are asking is simple; the government should ensure that the consumer has money to spend.
Porinju Veliyath, Founder & CEO, Equity Intelligence India
This budget will eventually unleash the animal spirits. Better enforcement, ease of doing business, credible finance, everything will get an impetus. Statements, merit-based banking and deeper financial markets to take both GDP and market cap beyond $5 trillion in next few years!
Raman Roy, Founder, Quatrro & Co-Founder, Indian Angel Network
The e-verification mechanism proposed by Finance Minister NirmalaSitharaman is an enabling one for both startups and angel investors. This, coupled with the exclusion of startups and investors who file requisite declarations from tax scrutiny, is an uplifting step taken by the Government.
S N Raghuchandran Nair, Former Chairman, CREDAI Kerala
Affordable housing to the middle class segment which so far has been a neglected lot is one of the key points of the budget. Other main benefits include concessions on capital gains and owning a second house. Hence, the budget is poised to revive the real estate market in the coming months. One more reason why I am positive about it is because the interest rates are also coming down Once the Reserve Bank of India slashes the interest rates, according to experts in the real estate sector, there could be an influx of people from other segments to make investments in the real estate sector.
K. Paul Thomas, MD & CEO, ESAF Retail & Chairman, CII - Kerala Council
Overall, the budget focused on growth and development is very good. NBFC guarantee fund will ease the current liquidity crisis. Focus on loans to SHG members and interest subventions for MSME and electric vehicles (EV) will help boost the economy. Proposal to set up social exchange will be a breakthrough for social enterprises and voluntary organisations for raising funds.