Start-ups, MSMEs get a boost in Budget 2015

Promising Acche Din for budding entrepreneurs, the Modi government announced a slew of initiatives to foster a healthy ecosystem of start-ups in the country. In a bid to allow greater access to new technology for their business, Finance Minister Arun Jaitley has slashed royalty tax paid by entrepreneurs from 25% to 10%.

“This is certainly a move in the right direction for fostering a sound startup ecosystem in our country. Any assistance from the Government would be a shot in the arm for startups & small businesses. With support towards the ‘self-employment’, being a start-up we comprehend the importance of any kind of support and when it comes from our country’s government, we truly wish to deliver the best for the country and make a difference at large,” said Toshendra Sharma, founder and CEO of Wegilant, a cloud based mobile app security start-up.

Addressing the credit availability challenge faced in the MSME sector, the Centre has announced to set up a Microfinance Unit Development Refinance (MUDRA) bank to tackle the issue. “I propose to create a micro units development refinance agency, Mudra Bank with a corpus of Rs 20,000 crore and credit guarantee corpus of Rs 3,000 crore," said FM Jaitley in the Parliament.

However, the bank is especially aimed at promoting entrepreneurs from the reserved classes in the country.
Several entrepreneurs in the MSME sector have often complained about lack of finances to run their business. Often, while applying for loans, these companies are asked for large collaterals by the banks, which made their business unsustainable.

“These measures will greatly increase the confidence of our young educated and skilled workers who are able to become the first generation enterprises, and existing small businesses will be able to expand their activities. Just as we are banking the unbanked, we are also funding the unfunded," added Union Minister Jaitley.

The government has also announced to launch an incubation centre in order to create opportunities for self employment and new jobs. The Centre has allocated Rs 1000 crore for this purpose.

Commenting on the issue, Alan D Souza, CEO, Vavia Technologies, said, “The government seems to have spoken of another Rs 1000 crore startup fund with no news about the previous Rs 10,000cr startup fund that was announced during the budget last year. Rather than announcing such funds, more focus needs to be given on how utilization of such funds have impacted job creation and then additional support that can be provided for the same.”

Apart from tax reduction and allocating additional funds, the government also reduced the corporate tax from 30% to 25% over the next four years.