Hits & Misses of Budget 2019
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Amidst the hoots of ministers present in the parliament, Union Minister Piyush Goyal proposed the budget for 2019-20 on Friday. With his fiery speech claiming, ‘We are moving towards realizing a New India’, he won over the citizens who were eagerly waiting to see what the government has in store for them.
Not surprisingly, NDA brought forth its ace game to woo the voters before the general elections 2019. From proposing pro-farmer initiatives to raising the threshold for taxable income to INR 5 lakh and launching a pension scheme for the unorganized sector, the budget was structured to cover one and all, at least that is what the government wants to believe.
Sure the start-ups received a mention and MSMEs were talked about at length, infrastructural welfare and matters of internal trade were discussed, but which budget has ever been considered ideal? None. So, it won’t be too. While some sections of the economy were happy, others were not. Here is what the government missed and achieved with Budget 2019:
Start-ups: A Mixed Reaction
During many occasions in the past, Prime Minister Narendra Modi has exhibited value for revolutionary business ideas that emerge from the unconventional establishments like startups. Much like last year, this year’s ‘populist’ budget did mention the term but the josh seemed low, working as a dampener for the startup ecosystem.
Shocked by the lack of initiatives to uplift startups in the country, Deep Malhotra, Co-Founder, BECKFriends.com exclaimed, “Looks like the government doesn't realize the potential of growth that startups can contribute to the overall economy and the jobs creation situation in the country. Ignoring the pain areas for startups and the ecosystem is sending wrong signals to the youth of the country.”
Goyal mentioned that India is the second largest hub for startups and the government treasures the innovative approach they use to solve problems that exist in a diverse nation like ours. However, there are more steps needed to be taken to create a trusted and safe space to empower the Indian youth to come forward and be more open to taking risks and experimenting, believes Tanul Mishra, CEO, Afthonia.
In a welcome move, the government raised the threshold limit for presumptive taxation of business from INR 1 crore to INR 2 crore. The step is sure to provide a boost to emerging entrepreneurs. India is taking long strides towards Vision 2030 of becoming a modern, technology-driven, high growth and transparent society. The new national scheme announced by the government on Artificial intelligence would further empower the ecosystem.
“The government’s efforts in providing the necessary AI support required by startups further emphasizes the role that new technologies will play in the development of the economy,” expressed Rajnish Kumar, CTO & co-founder, Ixigo, adding that the goal of establishing 1 lakh digital villages in next 5 years will significantly increase the adoption of digital platforms across the masses.
According to Avishkaar’s CEO and Founder, Tarun Bhalla over 200 AI start-ups currently innovating AI-based solutions in the country and the launch of National Artificial Intelligence Portal is a clear signal that the government is willing to invest in the technology. “Artificial Intelligence (AI) is here to stay and will play a significant role in the future of the country.”
To the disappointment of startup founders and investors, there wasn’t a single mention of angel tax. Time and again, entrepreneurs have demanded the abolishment of the ‘Draconian’ Angel tax. The tax which was initially meant for the fair analysis of investments made into the budding start-ups has eventually worked to hinder their steps towards success. Along the way, many powerful voices have joined the chorus to fight the ‘flawed’ thesis.
The startup industry is highly distressed with no exemptions on angel tax being announced in the interim budget. “Angel tax exemption is a necessary need for at least 30 per cent of the startups today, who are in the early stage of business and are paying the tax even before really starting. No exemption will also impact angel investors who don’t want to bear this cost,” said Shekhar Purohit, Founder and MD, First Mumbai Consultancy.
MSMEs: The Happier Sect
Unlike startups, the medium, small and micro enterprises appeared cheerer due to the favourable policies that were announced during the budget. While Goyal boasted of the loan sanctioning scheme of up to INR 1 crore in 59 minutes for MSMEs, he also introduced 2 per cent interest rebate on the incremental loan of around INR 1 crore for GST-registered SMEs, much to the sector’s delight.
“The smart gesture to encourage MSMEs to register as a GST taxpayer leverages benefit for both the parties. This is a huge encouragement for MSMEs growth surge,” expressed Rama Krishna Kuppa, Founder & CEO, ONGO Framework. He further stated allowing businesses with less than INR 5 crore of annual turnover to update quarterly return eases up business processes.
In a bid to benefit traders, manufacturers and service providers, Goyal proposed the plan of involving around 25 per cent of MSMEs in government projects sourcing, at least 3 per cent of which would be reserved for women owners. “Make in India with transparency in policies will tremendously help in ease of doing business, and will be hugely beneficial to small businesses or start-up enterprises operating from an urban or a rural setting, across the country,” stated Ameen Khwaja, Founder & CEO, LatestOne.com.
The budget paid an instrumental role in highlighting the government’s commitment towards rapid digitalization, online economy and simplification of tax procedures which should further improve ease of living and ease of doing business in India. MSMEs seemed quite happy with the announcements but it is an implementation that they worry about. It would be interesting to see if NDA would be able to walk the talk.
A Digital India
Ever since coming into power, NDA has emphasized transforming India into a “Digitally Empowered Economy”. While presenting the budget, Goyal stressed that India’s digital infrastructure and the economy will be built on the work done in digitization of government processes and private transactions by 2030. In a step towards Digital India, monthly consumption of mobile data has increased by over 50 times in the last five years, he enthused.
Higher data consumption and increased mobile phones penetration over the past decade have contributed highly in shaping India’s economy digitally. “The steps taken by the Government in this Budget will encourage enhanced consumption of technology-based consumer products that will lead to the increased scope of business for online and offline enterprises like ours,” opined Khwaja.
Apart from digitizing the tax transactions to facilitate transparency, the government has implied digitalization of export and import transactions to streamline the fragmented industry. Abhik Mitra, CEO & MD, Spoton Logistics said, “The 2019 budget seems promising as Indian customs is introducing full and comprehensive digitalization of export/import transactions and leveraging RFID (radio-frequency identification) technology to improve export logistics.”
Though the budget announcements reaffirm government’s commitment towards creating opportunities for small scale Indian businesses, their take on e-commerce is sceptical. “The decision to bring changes in the FDI policy for e-commerce platforms was to level the playing field for small scale sellers, the interim budget announcement comes bearing more favourable news,” Anuraga Avula, Co-founder and CEO, Shopmatic.