The barriers to every reforms is incumbent systems dependent on status quo. This is why the biggest opportunity in the startup mission unveiled by the government is not just to think about how to drive entrepreneurship in the country but to drive entrepreneurship in bureaucracy too.
I am not too enthused with the Rs 10,000 crore fund the government is planning set up because the government is never efficient in allocation of growth finance. It neither has the expertise nor is it the job of the government to do so. We have seen the experience of SIDBI venture fund and others in the past.
The government has to look not at allocation but system and environment for startups. Prime minister Narendra Modi and his team need to see how the action plan for startup is used n such a way that it can improve executive decision making within the bureaucracy.The spirit of entrepreneurship needs a boost not just through the minor tax adjustments. If the spirit is imbibed well it will do wonders for job creation, the holy grail for political leadership.
The spirit of entrepreneurship is all about a government babu seeing an entrepreneur as a key driver of growth and jobs creation. I am not talking about a big business man who is either looked as a cash cow or fawned upon for his wealth even seen as powerful.
I am talking about the small guy -- the one who walks into a government office for work or clearance. What he wants is a chance in attitude towards him. He is the one who needs a boost -- a play in the government purchase system.
Currently he is looked upon with suspicion because he is small. He is not looked at as a guy who is trying hard to realise his wonderful dream. There is little admiration for his efforts. He could have been job chaser, pen pusher, but he will be the job creator given a chance. Increasing his chances to survive is what is needed.
And capital formation here is important one of the best way is to give direction to existing capital not start another fund.
Channelling capital gains into startups is an innovative way of doing it. Most global venture funds are adopting circuitous routes to avoid their capital gains from being taxed. Even the wealthy find ways to avoid paying capital gains. In the startup action plan, the government has indeed taken this route as it has proposed that the capital gains if invested in startups would be exempted from tax.
However, it has limited it to funds of fund recognised by the government. Instead it should have been for venture capital firms registered in the country. This would have helped increase local funding.
For large businesses it could be if they put it in a particular geographical area. As otherwise all capital investment may get classified as startup funding. A number of Indian businesses and businessmen have sold companies and parked their wealth abroad.
It may also help in getting these funds back into India if these capital gains are exempted if invested in backward areas. This is something for the Finance Minister to consider and incorporate in the budget 2016.
Coming back to entrepreneurship within the government, the startup mission should be used as a project to build a team of young bureaucrats who will help in implementing the promises made in the action plan. If this team of bureaucrats can understand that execution and completion is important, they will help transcend the current morass of non-performance.
K Yatish Rajawat is a policy commentator and Business Strategist based in New Delhi he tweets @yatishrajawat
Published Date: Jan 18, 2016 10:58 AM | Updated Date: Jan 18, 2016 10:58 AM