Baby step towards creating more jobs: Modi govt sets up a ministry for entrepreneurship

While the business community cheers the ascension of Narendra Modi as Prime Minister of India, entrepreneurs are elated for an entirely different reason. For the first time in the country’s history, there is a minister for entrepreneurship-Sarbananda Sonowal.

Karthik KS, founder and CEO, Avagmah, an online education company said that in nations like Israel, US and Hong Kong, strong government backing has created an ecosystem for entrepreneurship to thrive, thereby making entrepreneurs accountable for the largest amount of job creation. “I am hopeful this will be replicated in India,” he added.

Wish lists galore

Expectations, not surprisingly, are multi-fold. Topping that list are friendlier tax structures, foreign direct investment (FDI) and incentives for angel investing. Current tax laws, said Bala Parthasarthy of seed fund Angelprime, are designed to avoid money laundering and tax evasion - all important but don’t encourage small companies to try new things.

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According to Divya Jain, CEO, Safeducate, a skilling company for truck drivers, the solution is simple tax structures. “This will foster enhanced business, increased foreign investments, smoother supply chain and secure eco-systems.”

Karthik of Avagmah, meanwhile, wants tax breaks to be extended to all stakeholders in the education segment- both private and public sectors. “The ministry should formulate rules that make it incumbent on organisations to partner with companies that will ensure inclusion across the board, so benefits reach the remotest corners of India.”

Start-up woes

The immediate areas of improvement, said Sameer Guglani, co-founder, The Morpheus-a startup incubator, are simplification of regulations around starting a company, including licences, permissions, compliances and easier venture capital regulation processes.

“Continue to move government processes online. Consider providing tax incentives to early stage start-ups. With the new company law, things are complex for new firms and must be corrected,” said Guglani.

Other hindrances are a lack of a proper framework under which angel funds, accelerators and incubators can be set up quickly, as well as a scarcity of infrastructure and resources for entrepreneurs.

Setting up of societies, where entrepreneurs get funding and access to mentors will address these problems, felt Karthik. Guglani wishes to see large office spaces and business parks, where start-ups get subsidised infrastructure.

For the newly emerged segment of social enterprises, life is equally tough as they struggle with similar issues. Scaling-up thus is doubly tedious. Sectoral restrictions, like the one on foreign funding for low-cost housing, are additional pin-pricks.

P R Ganapathy, Chief Operating Officer at Villgro Innovations-an incubator for social enterprises, feels the need is for increased funding for incubators and more impact funds. “The Technology Development Board and Department of Biotechnology have some good programs for entrepreneurs and these should be scaled and expanded to other sectors,” he stated.

The government needs to make it easier and faster to set up a Category 1 Alternate Investment Fund (AIF) and reduce the minimum commitment required to set up one, Ganapathy added. Currently, social funds come under Category 1 AIFs that include venture capital funds, SME funds, infrastructure funds and other AIFs as prescribed.

“Exits,” Ganapathy added, “have been a problem. The government should allow flexibility in the use of funding instruments, including self-liquidating instruments that generate exits for investors as the social enterprise begins to succeed without an acquisition or IPO.”

It should also encourage banks to create debt instruments to help with working capital needs and make it easier for social ventures to sell to the government. Procurement policies are inclined towards large companies, Ganapathy noted. “For social entrepreneurs, government remains the biggest market and best way to scale impact,” he pointed.

Sonowal’s success?

While suggestions are plenty, a crucial question is, can Sonowal deliver? Admittedly, many don’t know enough about him to comment, however, the general consensus was positive. Sonowal is perceived as ‘young’ and ’energetic’.

“Sarbananda Sonowal seems to be pretty focused in his approach, as it is believed he left the previous party keeping interests of people of Assam in mind,” said Jain.

No doubt, larger expectations are on Modi himself to undo some damage such as uncertainty and fear over retroactive taxes and foster a friendlier start-up environment.