Letter from a young-at-heart entrepreneur to Arun Jaitley

Dear Mr Jaitley,

When several of my missives to Shri Narendra Modi went unanswered, I was genuinely concerned. But when I heard your pre-budget interviews, I realized that my letters had been marked to you.

It is with great hope in my heart that I then write to you directly, asking for thank you in advance for extending some incentives to the entrepreneurial community and offer the following prayer sharing some of my hopes and dreams for the new financial year.

Let 10,000 start-ups bloom. It is extremely gratifying to know that you have recognized that entrepreneurial activity can provide a long-term solution to the employment needs of the country. The technologies that come to us from the developed world, do indeed provide jobs, but no longer in the numbers that used to as recently as thirty years ago. Manufacturing now comes loaded with automation, so while this is still good for “making in India” the jobs are unlikely to take care of the number of people who need employment. May I suggest 1,000 incubators.

Repeal S56(2)vii of the income tax act. Shri Narendra Modi has already budgeted a much welcome Rs 10,000 crores towards entrepreneurial activity. But before that, we need to shift S56(2)vii an absurd act insisting that shares issued by companies above book value are treated as income, and are therefore taxable. It is difficult enough today for entrepreneurs to raise capital without an act contra-raising capital. How grateful we would be if you repeal it in this budget.

Create a niche for the retiring professionals in your economy. All over the country, thousands of “young” men are retiring after 40 years of professional life. This talent aged a mere 58 to 60 years retire with a decent amount of savings, and with very limited ideas as to how this can be invested. I suggest creating incentives for these individuals to invest as “Angels” in startups. This can go a long way in alleviating the unmet financial needs of entrepreneurs around the country. In addition, these “young” men will be mobilized to play the role of investors and mentors. Their vast experience will prove invaluable to the startup and to the nation.

I am pleased to see that the standard deductions for individuals permits investments through recognized Angel groups (with of course a ceiling in any given year). This would attract a huge amount of investment into startups, accelerate the birth of new Angel groups, bring enormous talent that would otherwise get lost and permit those 10,000 startups to bloom.

Open paperwork channels for company closures. I have been an entrepreneur for several decades now. I am still trying to wind up companies that I started in my misguided enthusiasm of youth. Even where BIFR has ordered the winding up of one of the companies that I promoted, it was next to impossible to complete the paper work. Starting the company was difficult, does it also have to be equally difficult to close? Let the entrepreneur decide when he wants to start and when he wants to close down. Please Mr Jaitley. You appear like a sensible person when I see you on TV. It would be good to see that translated into action. Thank you, Sir.

Service Tax holiday is a good idea. At least for a while and during the early days, our startups can be competitive.

Let us exempt startups from income tax for a period. I recollect in the early 80s, the utter skepticism among people that our software industry would come good, if we supported them. But somewhere out there, there was a sensible man like you around, Mr Jaitley. And he understood the need for our software industry to be globally competitive. And so, Income tax was exempted for software for several decades and their accomplishments were stunning. Sir, let us create the conditions for startups to repeat that over the next 30 years. Let us exempt startups from Income tax for a period of “n” years. Believe me, Mr Jaitley, it is not easy to make a profit during the first 5 years of startup in this country. And if somebody does do that, then he should be rewarded.

Create a transparent labour policy that facilitates hire and fire: Mr Jaitley, late coming to work, time pass at work, low value addition at work: all these have become the identity of the working Indian. If we are to bring about behavioral change, then can you create conditions for me to fire people who are inefficient? Should I be worrying about whether to recruit or not, because I don’t know how I will get rid of them later? Should I be trying to figure out innovative ways of doing economically superior activities or should I be trying to figure out the meaning of forms in legalese that ask for information that can be put to no productive use? Please sir, create a transparent labour policy that allows me to hire when I need people and fire when I don’t. And sir, can you find some other vocation for those pesky labour inspectors who come to the offices and seek “compensation for hard work”?

Reform the banking climate to encourage risk. Sir, you need to knock some sense into the heads of these bankers. The bankers I am referring to freely give away thousands of crores to large enterprises who misuse the funds and seem to get away scot-free. On the other hand, young entrepreneurs are sanctioned funds with great difficulty providing they provide collateral for the borrowing. Sir, in our efforts to spur and accelerate entrepreneurial activity, if some entrepreneurs fail, let us not penalize them and make them feel like criminals. They have already lost money. Let us permit the initial loan to be given without any conditions, and without collateral. Sir, I am aware that this instruction may have been passed to our bankers. But they continue their old ways, and continue to demand collateral and personal guarantees etc. Share with your bankers a vision for a banking climate that encourages entrepreneurial risk. A child falls repeatedly before learning to walk. Our entrepreneurs need sympathy and support when they fail and support for their learning. No entrepreneur likes to fail.

Let us not add to their misery. Let the talented and the driven, come to the fore and take the kind of risks that will foster innovation and increased productivity. Of course, there will be some abuse of this facility. Let it go, sir! Let it go! Since Independence, we have let so much go unproductively.

Sir, never before in the last 45 years, has the future looked so bright for India. You can be the forerunner of a new India that is optimistic and world class. Thank you for listening.

~A young-at-heart 69-year-old entrepreneur turned angel investor and member of The Chennai Angels (R. Narayanan) ~ With some prodding from fellow angel investor (V Shankar)