Budget 2015: Address issues of entrepreneurs and startups; they create jobs and wealth

If economic growth is the objective, if job creation and making India an attractive investment destination is the goal, if harnessing the energies of one of the world’s youngest nations is the political agenda, finance minister Arun Jaitley’s Budget 2015 is a no-brainer. It needs to address two constituencies – middle to large entrepreneurs on one side for job creation and start-ups on the other for wealth creation through ideas. With Make in India gathering momentum, one slow step at a time – see Deepak Parekh’s optimism-laced concern here – Jaitley needs to look beyond luck and convert the idea into reality. Falling oil prices will definitely help ease the contours of fiscal burden. But Make in India needs more. “How long can we hold on to hope?” a small businessman asked me in Goa last week. Fiscally, Jaitley has an opportunity that no other finance minister in the past decade has had: he can reduce government borrowings and help ease the flow of finance to entrepreneurs. This would trigger another fall in inflation and inflationary expectations, which, in turn, would nudge Reserve Bank of India governor Raghuram Rajan to cut interest rates. [caption id=“attachment_2030177” align=“alignleft” width=“380”]  Thinkstock images[/caption] The benefits of such a cut would flow into companies raising money for project financing immediately. What Jaitley and Rajan would have to ensure, however, is that the benefits also reach home owners, with a commensurate cut in their interest rates on home loans as well – else, as we have seen in the past, it would end up as a subsidy from households to companies. On its part, large and organised industry seeks lower taxes. But here, Jaitley need not tinker unnecessarily. Businesses create value out of existing infrastructure, policy and market gaps. Lower taxes is not the reason why they do business. If the revenue-expenditure equation can sustain it, cutting income taxes would deliver political ‘shabashi’, while reducing corporate taxes would push industry associations to give Budget 2015 a 10/10 – a score that’s as meaningful as star ratings on the latest film release, nothing more. These fiscal demands and benefits come from the corporate end of Modi’s Make in India initiative – crucial for job creation and making India a global manufacturing hub. A scale as large as this requires fiscal interventions and the wrestling between industry and Jaitley will continue, as it has in the past. Most tax sops are a bad habit of the previous, control-and-command regime. They work when a nation seeks to offer opportunities in areas such as solar energy. They can also work in the short term by nudging investments into a particular geography or in a new sector such as defence. Beyond that, tax policy is merely a tool for traders – get cheap land, use tax sops and exit and so on. For a fresh approach to Budget 2015, Jaitley needs to examine and serve the other end of the entrepreneurial landscape – that of startups. His budgetary intervention must be in creating an ecosystem that supports new ideas, converts innovations into value, and harnesses the energy of the young. These first-generation value creators, many of whom I work with closely at the GenNext Innovation Hub, live in a world that has nothing to do with tax benefits. Their universe, though small, is deep and in mission-mode. Subhasish Sircar, a PhD in material sciences, and Founder and CEO of Health Vectors, wants to use data analytics to measure and improve health. Varadharajan Kumaravelu, who has come down from Singapore offers safety, entertainment and ecommerce to in-taxi consumers. There are hundreds and thousands of such entrepreneurs, in every nook and cranny of India, thinking, offering and creating products, jobs and wealth. None of them seeks any tax sops or benefits. All they want is an environment that supports creativity and enterprise. For them, even the ease of doing business, where India stands at an abysmal 142 out of 189 economies according to World Bank, is meaningless. “It doesn’t take 30 days to start a business,” an economist-entrepreneur said in a closed-door ‘Indian Economic Policy Strategy’ conference organised by NIPFP and Department of Economic Affairs Research Programme last month. “It takes less than an hour.” Clearly, the government can’t match that velocity of converting ideas into products, products into businesses, businesses into wealth. But surely it can remove administrative hurdles and get out of the way from a rising community of aspiring and inspired citizens who, instead of seeking jobs are creating them. Jaitley can tweak policy by classifying incubators as ‘infrastructure’ and creating hubs across India that encourage the development of startups with knowledge, experience and access. The previous regime has done enough in wealth distribution. Jaitley’s Budget 2015 must lead India towards wealth creation.