Offer large companies tax benefit for biz with startups

Dr. Joseph Rasquinha, Co-Founder and CEO, Blueleaf Cyberspace

Startups are firmly ensconced in the Indian ethos, and are poised to make a major impact on India’s economy. If India needs to become a 5 trillion economy in the future, startups can contribute to a major part of this success. This is not fanciful thinking. Microsoft, Google and Amazon together alone are almost a trillion dollars. If we get our startup industry on track, we will not only achieve the 5 trillion mark in a few years but exceed it.

The Government of India has already made tremendous progress and improved the startup ecosphere by leaps and bounds. In fact the encouragement, benefits and other efforts from the Central Government and State Governments on behalf of startups have been nothing short of Herculean. It is hard to imagine that Governments can be so proactive with regards to startups, but that has been in case from the central government to a myriad of state governments. These efforts have paid off and made India one of the largest startup hubs in the world after the United States. 

But Alas! The efforts though commendable, are just not enough. We desperately need out of the box thinking in the new budget for startups. The problem with the present initiatives are though they are all done with excellent intentions, they have not been able to prevent over 95% of startups failing. Tax benefits are no use to startups who don’t make much money and startup funds shortlist criteria are too stringent to take advantage of. The enormous numbers of mails that startups get today from agencies affiliated to Startupindia and NASSCOM 10,000 are wonderful, but they target a few industries like Fintech, Electric mobility, the environment and smart cities. These are good to have sectors, but we are losing out on the must-haves sectors! The must haves are the 90% of the startups who are doing good work in different areas which are not as fashionable, but as important to India’s economy.

Uber is a great product, but where would Uber be without the cab drivers who are a vital part of their success. Flipkart is another great product, but where would they be without the huge number of small shops who stock and supply a lot of their products. Uber and Flipkart are good to have products, but the drivers and shops are must-haves. If the shops close down and if Uber drivers move into another profession, these products will die.

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It is the same case with the 90% of startups failing who are in the must-have group. They are the bedrock of the startup exosphere, and if they start failing it is not a good portent for the future. Budget 2019 can help alleviate this. Obviously, a large number of startups will fail. We just cannot afford 90% of them to fail.  If the right moves in the budget are able to save 25% of these startups, it is a huge plus for the country.

So what can the budget do? It can take a leaf out of the agriculture sector and farmer loans and provide soft loans to startups at 2% or lower. To prevent misuse of funds, Startup india can be a good platform to disabuse funds and they have over 11,000 startups who have been shortlisted. One more leaf we can take out of the the US economy is the example of a few years ago the the US threatened to levy a tax on US companies who outsourced to India and regions outside the US. We can adapt this by offering large Indian and Indian-based companies a tax benefit if they do business with startups recognised under the Startup India scheme. This would be a win-win situation for both.

These are just 2 simple but powerful initiatives that we can suggest to help the startup industry. It will definitely reduce the closure of startups. Today it has been statistically proved that startups are creating more jobs than any other industry. If the budget recognises this, it can dramatically alter the very fundamentals of the Indian economy with the startups acting as an engine to deliver growth. Lets hope it is so


The author is the Co-Founder and CEO of Blueleaf Cyberspace.

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