budget 2019: Budget 2019: Did it address the key concerns of MSMEs and startups? – The Economic Times

While the goodies extended by Finance Minister Piyush Goyal this time, did warm the sector a bit, many industry stalwarts highlight the key aspects neglected in his budget speech.
MSMEs and startups – represent the two critical segments of Indian economy. The segments are always abuzz with economic activity. While the former is considered to be the backbone of a developing, the latter, in recent times, has provided a new identity to dozens of country’s new-age entrepreneurs, who, while actualising their million-dollar ideas, and transforming them into financially viable business models, have scripted numerous success stories.

Let’s look at what the industry leaders from these two important domains have to say about interim budget 2019. Did Prime Minister Narendra Modi’s last budget before Lok Sabha election meet their expectations or not?

A tepid response from startups
While the goodies extended by Finance Minister Piyush Goyal this time, did warm the sector a bit, many industry stalwarts highlight the key aspects neglected in his budget speech. Take for example — the elephant in the room – the angel tax. Now consider the anomaly here, while on one hand, the Finance Minister, though touted India’s startup ecosystem, as “the second largest in the world”, the government, as per a recent PTI report, has reduced the funds allocated to government’s ‘Startup India’ programme by Rs 3 crore.

Further, as per Indian Private Equity and Venture Capital Association (IVCA), more than 2,000 Angel investors’ funded startups have received notices under the angel tax. Certainly, such an over-hawkish approach by the tax department is doing no good to the sector. A reported dip in investment inflow to the sector is a testimony to this fact. Further, with many firms mulling shifting bases elsewhere, industry experts have even gone to the extent of saying that India might soon lose its sheen as an ideal startup global destination.

Highlighting this anomaly in the budget, Siraj Dhanani, Founder, InnAccel Technologies, says, “The budget failed to address the biggest issue facing Startup India – the dreaded angel tax. It was hoped that this budget would decisively address this perverse tax on startups receiving funding from Indian angel investors, which is effectively a penalty for investing in Indian innovation. Hopefully, this issue will be resolved soon, and with retrospective effect, so that start-ups can continue to get funded as they seek to transform India.”

While calling the budget 2019, “a poll-targeted move”, Vinay Singhal, Co-Founder & CEO, Vatsana Technologies (WittyFeed’s parent company), maintains that the budget has few important measures that show that the current dispensation is laying out the vision for the most important dimensions for the next 10 years to make India a $10 trillion economy. Anurag Avula, another industry stalwart, and cofounder and CEO of Shopmatic, a Singapore-based e-commerce platform, feels that the 2019 budget announcements reaffirm the government’s commitment towards building a Digital India and creating opportunities for small scale Indian businesses for running successful e-commerce businesses.

Concurring with Avula’s views, Shrini Viswanath, CTO & Co-Founder, Upstox, a Ratan Tata-backed new-age online broking company, states that the proposal in the interim budget to initiate a National programme on Artificial intelligence (AI) and establishment of a National Centre on Artificial Intelligence are visionary decisions that will go a long way in spreading the benefits of emerging technologies for the betterment of human lives. “Technology and Artificial Intelligence have a big role to play in financial inclusion and getting people, especially those who come from backward and remote areas.”

On the same note, calling out government to help create an enabling business environ for startups, Aakrit Vaish, CEO and Co-Founder of Haptik, a leading conversational AI platform, maintains that the announcement of National Artificial Intelligence portal by the FM does indicate that the country is well poised on its path of leveraging advanced and disruptive technologies for economic prosperity.

According to Abhishek Dubey, Founder & CEO, Muskaan Dreams, the government focus on addressing the fundamental needs of education in India and bridging the rural-urban gap can be helpful. “A budget of Rs 38,572 crores in BE (Budget Estimate) is allocated for National Education Mission. 10% reservation in educational institutes and government services for the poor has been implemented, to ensure that there is no shortfall of available seats for any class, and uplift the backward classes. India is amongst the most youthful nations in the world, and through policies focused on the youth of the nation, like Pradhan Mantri Kaushal Vikas Yojana, great economic development can take place,” says Dubey.

Structural issues galore on the MSME front
Akin to the startup sector, industry stalwarts from MSME sector, whose growth in recent times did nosedive due to twin disruptions – demonetisation and a not-so-smooth GST implementation, while acknowledging the positives of the budget, do highlights what they consider its key weakness i.e, it does not adequately address sector’s long-established Achilles’ heel – access to credit. The gravity of the situation can be well gauged in the light of a recent survey by Omidyar Network and Boston Consulting Group that reveals that across the country, roughly 40 % of MSME lending is done through the informal sector, where interest rates are at least twice as high as in the formal market.

Highlighting interim budget’s apparent silence on this anomaly, Sai Pattabiram, CEO & Founder, Shree Sai Aerotech Innovations Pvt Ltd, says, “SME’s being the largest employment generators could have been supported by enhancing the current limit from RS 2 to Rs 3 crore under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme for loans without collateral given the higher bank liquidity by way of recovery from large borrowers.”

Lauding the government’s decision, whereby government units, henceforth, will source 25% of their requirements from SMEs via Government e-Marketplace (GeM), Saahil Goel, CEO & Co-Founder, Shiprocket, says, “ the budget clearly recognises the strain on the economy, particularly in the MSMEs along with the technology sector, and 2% interest subvention for MSME’s loans with ticket size up to Rs 1 crore is a good decision that will go a long way in easing financial woes of MSMEs.

Voicing the view of the fintech fraternity on the same issue, Lizzie Chapman, CEO & Co-founder ZestMoney, opines that, with the increase in consumption of mobile data and the number of people who have joined the formal financial system, the country is on the cusp of a promising future where the financial inclusion for everyone is not far.” With AI and financial solutions that address the capital requirements of every Indian, we can make India a financial powerhouse,” contends the chief at India’s largest digital consumer lending company.

Sameer Vakil, co-founder & CEO, GlobalLinker, an India-based MSMEs’ Networking platform, expresses that the budget has a positive and business-friendly tone, with a strong message of reliefs to the middle class, which makes up a big part of SME workforce.

“We are particularly pleased about the 2% concession on interest for SME loans upto Rs 1 crore for GST filing SMEs. This will provide a significant boost and encourage entrepreneurship, whilst helping widen the base of taxpaying firms. Also, very happy to see that businesses with less than Rs. 5 crore annual turnover, covering nearly 90% of GST filing companies, being allowed to file quarterly GST returns. This will be a huge relief to many SME firms,” asserts Vakil.

Terming it as populist, Chiranjiv Patel, Managing Director, PC Snehal Group says job creation, adoption of technology, relief in tax burden to entrepreneur, focus on unrecognized work force and farmers were the highlights. “As expected the boost in technology and innovation will help in generating numerous startups creating millions of jobs in this eco-system. This gives us a hope that India is slowly and steadily marching towards the development.”

via budget 2019: Budget 2019: Did it address the key concerns of MSMEs and startups? – The Economic Times

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