Rahul Gandhi's promise on ease of doing business is election rhetoric at best; implementation is key, say industry experts

The startup sector is happy that it has been acknowledged by political parties when Congress President Rahul Gandhi announced a slew of proposals for the industry in an interview on Thursday.

If the Congress party is voted to power, Gandhi promised to remove the existing 'angel tax' imposed on start-ups. Angel tax is levied on investment in start-ups. Currently, angel tax is charged at a maximum rate of 30 percent. Incidentally, it was introduced by UPA-II to curb black money. It has its origins in the Finance Act, 2012 piloted by the then finance minister Pranab Mukherjee.

Poll rhetoric on caste and class division are now seen as just that when political parties indulge in it on the eve of polls. Seen from this perspective, it is refreshing said some experts for the industry as a sector and start-ups, in particular, being noted and recognised by political parties.

That both the BJP and the Congress have spoken about the industry in their election speeches is welcome, experts said. “We have seen startups and entrepreneurship getting attention and that is welcome. Political parties realise that real job creation will come from startups and not the old economy as it is heavily into automation,” said Ganesh Krishnan, social entrepreneur and promoter—consumer internet, healthcare, education and tech companies.

There are blue collar jobs being created by new age industries like Swiggy, Ola; packaging and logistics jobs created by Big Basket; among others. During the period 2011-12 and 2017-18 unemployment among the educated increased sharply across males and females in both rural and urban areas, said Business Standard, quoting NSSO data. The ratio of unemployment more than doubled to 10.5 percent and 9.2 percent for males in rural and urban areas respectively and was at 17.3 percent and 19.8 percent for females respectively in rural and urban areas.

File image of Rahul Gandhi. Twitter @INCIndia

Gandhi said promoting domestic industry will be a key priority for the Congress and it will ensure that all new businesses are freed from the clutches of red tape to give a boost to the economy. The complaints of industry against a slew of measures brought in by the government are many. Think demonetisation, GST, angel tax among others.

In a bid to promote new businesses, Gandhi said, "For the first three years of setting up a new business, we are going to free you up from red tape. You will not need to ask for permission for anything.”

Sanchit Gogia, chief analyst and CEO, Greyhound Research said while the intent is right, the execution of such schemes is the hard part. Businesses in India today need help with aspects like further simplification of the GST process - currently whether or not a business gets paid in time, it is expected to deposit GST within one month of raising the invoice, he said. This is a real struggle for smbs that are perennially stretched on cash flow. Like TDS, GST can also be collected at source so that small businesses are shielded from the burden of paying GST from their pockets and in advance, Gogia added.

Some were skeptical by Gandhi’s charter of proposals as they wondered if these could be effective when implemented. For instance, the Congress chief said: Don't bother about anything, there is no permission you need. Start your business, get to work.

Nowhere in the world can a business be started without government permissions. Arvind K Singhal, Chairman and Managing Director of Technopak Advisors, a management consulting firm, said the statement coming from the Congress showed that they were removed from reality. “How can anyone start a company without government permissions,” he asked.

Singhal said that registration is not a hassle at all. Instead, what is required, he said, are the many small things that encourage the sector like infrastructure, uninterrupted foreign capital, research and development laboratory, among other things like what California has done or even Shenzen in China, he said. “Abolition of angel tax is not a requirement. Instead, making it discriminatory would help,” Singhal pointed out.

All the promises made by Gandhi seem encouraging and noteworthy. But implementation is the key. “Ease of doing business was good under the UPA and the present government was supposed to make it much better, but nothing much came of it”, said Paul Mariwala, Founder/Co-President, Stanford Angels and Entrepreneurs India MD, and director, Seedfund Advisors.

Mariwala said the fact that political parties are taking cognisance of industry ensures that they will work towards easing some of the issues that the industry faces. “A lot of what is being said is electioneering and poll rhetoric, but there is hope something will be done,” she said.

Regulatory challenges and poor access to the banking system is a big challenge for start-ups and young businesses. The current banking system is not favourable to start-ups. Angel tax is restricting the investment from alternative channels. Any initiatives towards addressing them without any conditions can be a big boost. Investment in start-ups will also propel job growth. Investment in start-ups can have multiplier impact as well as create comparatively more jobs, said Ganesh Rewanwar, co-founder, Freightbazaar.com, platform for facilitating truck hiring and improving transportation processes for small, medium and large enterprises.

The industry is in a wait-and-watch mood. “It is election time, after all. Let’s see what comes after the dust of the elections settle down and a government is voted to power,” they said.