[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]P[/dropcap]rime Minister Narendra Modi has just announced a slew of incentives for start-ups. While we are eagerly waiting for them to come into play, we came up with a few more incentives that would really help the start-up community go a long way. Budget and startups is a relatively new synergy which is critical for India in the era of Fourth Industrial Revolution.
Although, all the big news in investing and start-ups is in the digital/ e-Commerce space, one factor that can’t be ignored is the problem of bad infrastructure in India. We need bigger and better roads, bigger ports, better logistic facilities, and a good transport system. E-commerce firms depend on good infrastructure for the last-mile delivery.
Income Tax and Capital Gains Break Should Be Extended From Three Years to Five
Assume an entrepreneur started his company in 2012, after the Great Recession had passed us by. By the end of 2015, global headwinds had turned south again. Today, oil is at an all time low, Brazil, Russia and China are facing severe problems and India is not growing. The entrepreneur would have barely made any profit (if any) in these four years. And he is already facing a hard two years. Treating him on the same level as established companies doesn’t make any sense. IT companies got tax-sops for a decade at least. This should be extended to all start-ups.
Sign Taxation Treaties with USA and Japan
Japan and the United States are two of the biggest investors in the Indian market. Japan’s Softbank alone has invested over $2 billion in 2015 in Indian companies. Signing taxation treaties with these two countries will help investors avoid the problem of double taxation and will generate more interest in India.
One Single Bankruptcy Law:
Winding down a company in India takes ages. We don’t yet have a bankruptcy law/code. All we have is an assortment of laws pertaining to insolvency. Current insolvency laws are a throwback to 1920 when the British first brought them to life. Some of these laws don’t allow creditors to take action against defaulters until a restructuring plan is in place. This stalls them for a long time. Case in point: Kingfisher Airlines.
A bankruptcy law is essential for start-ups. This enables start-ups to fail fast, entrepreneurs to move quickly and limit damage. If declaring bankruptcy enables an entrepreneur to sell off assets, pay off creditors (maybe with a haircut) within six months of declaring bankruptcy, it is a good thing. This means the entrepreneur can move on with his life.
Make It Easier For Foreigners to Start Up Companies
This is a controversial point. On one hand, it can be argued that expats don’t need special treatment in India and it is time to promote Indian entrepreneurs. However, a lot of expats have been doing some great work in India (most of it in agriculture and sustainable development) and that should be encouraged. We need more companies like Fab India that engage the rural population or Good Juicery that works with farmers in and around Pune.
There have been similar requests from other sites such as this one.
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