Narendra Modi regime boosted entrepreneurial climate; final year must focus on further simplification of rules, say experts
The Narendra Modi government has every right to take credit for being open to business as they have done much more than any government has for business in India, say industry observers. Experts who spoke to Firstpost cited a slew of programs like ‘Make in India’, ‘Startup India’, ‘Stand-Up India’ and ‘Fund of Funds’ that have given a fillip to India Inc., especially the startup sector in what is now the world’s sixth-largest economy.
Speaking at a government-industry interface session in Lucknow, Uttar Pradesh (UP), Prime Minister Narendra Modi said industrialists too contribute to nation building and that it is not right to label them all as thieves; but those who do wrong “will have to leave the country” or live in jail.
“We are not the people who will be afraid of standing beside industrialists. You would be knowing some people (who are such) that you would not find a single photo of them with an industrialist/businessman. But there is not a single businessman in this country who would not have gone to these people’s places and bowed to them in reverence,” he added.
Agreeing with Modi’s statement, Adhil Shetty, co-founder & CEO, BankBazaar, said the government’s schemes, over four years, have helped financial services, for instance, develop in tandem with e-commerce growth. India is now one of the key markets for fintech firms as a result of the huge demand for services.
“There’s strong support from the government by way of initiatives such as the Jan Dhan financial inclusion program, the biometric-based Aadhaar initiative that aims to give every Indian a unique identification number, and the Unified Payments Interface (UPI). Policies such as ‘Digital India’ have also made the average Indian more confident about transacting online. This has created a market for fintech companies,” Shetty said.
Analysts, investors, and experts singled out the importance given to the startup sector. “By recognizing startups as a sector, the government has given wings to entrepreneurial dreams,” said one analyst who requested anonymity.
“The government is quite pro-business and has been doing a lot to help startups,” said Anil Joshi, managing partner, Unicorn India ventures.
An April 2018 government press statement stated that some 7,968 startups received recognition in the financial year 2017-18, as against 797 recognition in fiscal 2016-17. Furthermore, it said that a total of 8,765 startups have been recognized by the Department of Industrial Policy and Promotion (DIPP) since January 2016.
“Five years of UPA-II against four years of the NDA government and the latter has done well not just for the startup sector but also for micro, small and medium enterprises,” said Arvind Singhal, Chairman, Technopak Advisors.
The BJP government is pragmatic and acknowledged the role of business in the country, said Singhal, who, referring to GD Birla, JRD Tata and others who made a significant contribution to business and to nation-building, posed a question,”What is the point of demonizing the business community in the country?”
It was Congress President “Rahul Gandhi [who] did a lot of damage by calling this government a ‘suit-boot ki sarkar’,” Singhal opined. Just as there are rich and poor farmers and good and bad ones, the same applies to business. “For every Mehul Choksi and Nirav Modi, there is a Ratan Tata, Kumar Mangalam Birla, Adi Godrej, Sanjay Lalbhai and Mukesh Ambani – Ambani is investing his money in his ventures and isn’t asking for government loans,” Singhal added.
The government has given the term ‘businessman’ a good image. Earlier, if someone said he was doing business, it was seen as something seedy or crooked, said Devangshu Dutta, Chief Executive, Third Eyesight, a consulting firm focused on the retail and consumer products sector. The word ‘businessman’ is not abusive anymore and the credit for that should be given to this government, he added. While the government has provided a climate for entrepreneurship, there is still a lot to do like simplifying complex rules that govern business and ensuring those rules are implemented, according to Dutta.
To be fair to the government and to the prime minister, Modi has constantly talked about investing in India in any international fora or country he is invited to. Foreign direct investment (FDI) in India increased by about three percent to $61.96 billion in fiscal 2017-18 on account of steps taken by the government to improve the business climate, and owing to liberalized norms. FDI inflows stood at $60 billion in the previous fiscal. The figure includes equity inflows, reinvested earnings and other capital.
But the picture is not all rosy. Take the angel tax, for instance. It is a tax on capital that is raised by unlisted companies by issuing shares in excess of their fair market value. The number of angel and seed funding deals halved to 435 in 2017 from 901 in 2016, according to a report in VC Circle. The total disclosed value of these deals also fell sharply to $245 million from $374 million.
The recent update by the Central Board of Direct Taxes (CBDT) that coercive measures would not be taken to recover outstanding dues still does not address the root cause of angel tax, said entrepreneurs. Paula Mariwala, Partner, Seedfund and co-founder, Stanford Angels, termed the government’s actions with regard to angel tax as ‘completely bizarre’. She said the government has no business questioning the valuation of a start-up that basically has no revenues.
While agreeing that the angel tax needs clarity, Joshi of Unicorn India Ventures said these issues would take a while to be cleared up. There is clarification on the definition of startups, for which one must give this government credit, he said. “No one can expect wonders in a four-year tenure. But, the reactions have been positive as far as this regime is concerned,” he added.
Issues that businesses face in India must be addressed immediately and India Inc. shouldn’t focus on what a political party is saying. “Political parties have a job to do and we should not hold politicians to task. There is no end to name calling and it is unproductive,” said Sairee Chahal, Founder and CEO of Sheroes.in, a website that focuses on women and the career space.
Emphasising that the focus needs to be on whether there has been any real growth on the ground, and also if the industry has met the goals set by the government be it GDP, forex or financial services, she said industrialists are not a constituency at all. “Industrialists are rich and industry will find a way to get its work done no matter which government is in power. What is important is if we have better results as a country in terms of the basics like electricity, infrastructure, human development, among other things.”
The Modi-led government is seen as doing more, but I don’t know if it is doing more, Chahal added