Dr. Ashwani Mahajan
Prime Minister Narendra Modi unfolded its government’s ambitious Start-Up programme on January 2016, before the nation especially to youth. According to the programme, Government would provide a series of incentives. No tax for 3 years, relief in tax on capital gains, self certification in compliance of labour and environment loves, no inspections for three years, on-line registration, no turnover and experience criteria for start-ups bidding for government contracts, 90 days window for start-ups to close businesses, 80 percent concession in registration of patents etc.; are some incentives included in the programme. A fund of rupees 10,000 crores would be created for new entrepreneurs, namely start-ups; and a new credit guarantee scheme would also be started.
For new entrepreneurs, it is like dream come true, that they would not only be liberated from the web of laws; will get liberal finance as well. They can get new patents registered at merely 20 per cent fees, can participate in government contracts, without having any handicap of past experience or turnover condition. There in hardly any doubt that India is a nation of entrepreneurs. According to government, data there were 4.8 crore small entrepreneurs in the country in 2013-14, providing employment to 11.14 crore people and exports worth Rs. 8.5 crore. One distinguishing characteristic of small enterprises is that they are decentralised and bring about balanced growth. Big industries cause inequalities, whereas, small entrepreneurs reduce inequalities.
Indian small industries have been facing huge problems in the past more than one decade due to unequal competition from the China on the one hand and global recession on the other. Web of legal hurdles and frequent visits of inspectors, make life difficult for small entrepreneurs. India is much behind many countries in terms of ‘ease of doing business’. Last year, India was at 142nd position in the list of 189 countries. According to recent report released by World Bank, India has moved 12 ranks up to reach 130th position. According to World Bank, this could happen because of two reforms in Delhi and Mumbai; namely, to do away with the minimum requirement of capital and also pre-condition of certificate to start on business. Apart from this, due to establishment of Debt Recovery Tribunal, cost of credit has come down. Now it is much easier to get electricity connection in Delhi and Mumbai. Though, in terms of ease of registering purchase of property, India is at 183rd position globally. In term of implementation of contracts, India is still at 178th position. In nutshell, plethora of laws has been making business difficult in India.
For new start-ups companies new endeavour may prove to be a milestone in providing a better business environment in terms of ‘ease of doing business’ and India may improve its ranking further. Interesting thing in start-up campaign is that even staunch opponents of the government are not able to find fault in this scheme; and they are only saying that how in an atmosphere of intolerance, this scheme can take off. However, we must understand that solution to the social evils etc. can also be found in economic development. Some opponents, though favouring steps to facilitate business are critical of the scheme as they say government is ‘overreaching’; that is, government is becoming extra liberal for ‘start-ups’ and this may end in to ‘infant industry’ argument of Nehruvian era. They believe that concessions to small scale industries in the past have in fact inhibited their growth in the past.
All said and done, youth entrepreneurs are overwhelmed by the scheme rolled out by the government; as they feel that now they can ‘fly’, with a support of helping hand, liberated from web of legal hurdles. They will be able get finance and in case they fail, there will not be any baggage with them, as they could now close their business without hassles. It seems that opponents of start ups are supporters of big business and they don’t mince words in conceding so, when they claim that if start-ups are let free without tax, the benefit of reduction in corporate tax from 30 percent now to 25 percent by 2019, would no longer accrue to corporate. However, this argument of the critics of start ups is not valid, as they are trying to compare start-ups with big corporate and competition between them. We need to think that big capital does not create much employment, however start-ups do. This has been said by prime minister also. History of big software companies of today is the history of start-ups. Today out of 1826 billionaires (those who own $1 billion or more) of the world, 90 are in India and interesting thing to note is that most of them are those who started their own enterprise and their parents or grandparents were not big corporate.
Start-up campaign can be praised for three reasons. One, resolve to make laws simple and holding hand to take start ups forward. Second, provisioning of finance and helping start ups to flourish. Third, partnership and co-operation between academics and the industry. These three steps are such that they have been tried partially in the past too; however, there has never been a campaign of the type, to adopt these measures in an integrated manner. We can expect that youth entrepreneurs will come forward and give a new boost to employment creation, taking benefit from this campaign. We need not worry about global recession, as Indian market itself is big enough to support our start ups. Yesteryears’ growth engine of the world, China is neck deep into trouble today. Our labour cost is lower than that of China, which can make us more competitive. Today, with changed atmosphere need of the hour is that youth reaches new heights.
(The author is Associate Professor, PGDAV College, University of Delhi)
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