Startups need to take advantage of Budget proposals

Jul 21 2014, 09:24 IST
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FM Arun Jaitley announced a startup programme for rural youth with a Rs 100 crore allocation. (Thinkstock) FM Arun Jaitley announced a startup programme for rural youth with a Rs 100 crore allocation. (Thinkstock)
SummaryFM Arun Jaitley announced a startup programme for rural youth with a Rs 100 crore allocation.

Finance Minister Arun Jaitley’s Union Budget spread cheer among the technology and entrepreneurial community, with the announcement of the Rs 10,000 crore fund to provide equity and soft loans to small and medium scale enterprises including startups. The country’s over $4 billion biotechnology industry is also likely to get a boost with the proposal to scale-up of two existing biotechnology clusters at Bangalore and Faridabad apart from establishing two new clusters in Pune and Kolkata.

The government has recognised the importance of software products for the first time in the Budget and has allocated Rs 500 crore for the same. Jaitley also announced a startup programme for rural youth with a Rs 100 crore allocation. Budget will also provide Rs 200 crore to encourage startups by SC/ST youths. Besides, a Rs 100 crore Technology Development Fund has been created. While acknowledging the role of incubators and accelerators, the minister said that infrastructure for these centres will be provided.

In his Budget speech Jaitley said: “A special focus will be on supporting software products startups. A national rural Internet and technology mission service in villages and training in IT...I have provided a sum of R500 crore for this purpose.” IT industry lobby Nasscom said that the Budget is promising and the implementation of GST will make it easier for startups to do business. It added that with wind-up made easier, entrepreneurs may be less nervous about starting out.

“The large quantity of funds allocated is an indication as to how the government sees this sector, besides a recognition of the importance of innovation in growth. This is a good boost to both investor confidence and entrepreneur confidence,” said Ravi Gururaj, chairman, Nasscom Product Council. He also noted that this was for the first time that software products were ever mentioned in a Budget speech.

Successful serial entrepreneur K Ganesh also welcomed the startup push in the budget and said, “The Rs 10,000 crore fund can spur the much needed new employment creation more than any other initiative. However, implementation will be the key. The government needs to move quickly to back up its plans with a time-bound action plan and view the needs of startups in a holistic manner.” He also suggested that IIMs can be made the nodal implementing agency to ensure fair selection, mentoring and effective disbursement of Rs 10,000 crore fund.

“The emphasis given to startups, entrepreneurship, innovation and incubation is also a welcome initiative to boost technology and product innovation,” said PM Murali, president of Association of Biotech-Led Enterprises (ABLE). “We welcome the focus on strengthening of institutions as Technical Research Centres as this will strengthen the skill gaps and boost productivity.”

“The development of biotech clusters in Faridabad and Bengaluru will be scaled up and taken to the highest international quality. This effort will include global partnerships in accessing model-organism resources for disease biology, stem cell biology and for high-end electron microscopy,” Jaitely said in his budget speech. He added that secondary agriculture will be a major thrust in the nascent agri-biotech cluster in Mohali, which would be scaled up to include plant-genetic and phenotype platforms.

“World-over, the growth of the biotechnology sector is usually through clusters and I think that is a sound strategy,” said

Vijay Chandru, chairman and CEO of Strand Life Sciences, adding that government has addressed at least two of the 20 pre-budget requests made by the industry. The sector has been saying that key issues such as regulation, gaps in technology transfer, higher education and taxation needed to be addressed in order to fuel growth.

The announcement to develop global partnerships at the Delhi component of the International Centre for Genetic Engineering and Biotechnology (ICGEB) was also a welcome move, he said. “The creation of biotechnology clusters will further spur research and development in cutting edge technology,” said Gyanendra Shukla, India Region Lead at Monsanto.

The Indian biotechnology sector, which is growing at an annual compounded rate of 20-22%, is largely concentrated in Bangalore and Hyderabad and the sector includes more than 350 companies working in the areas of vaccines and biopharmaceuticals, agricultural biotechnology, industrial biotechnology, bioservices, and bioinformatics, according to a recent report by ABLE.

The angel investor community, too, is

upbeat about the signals from the Budget. “The R10,000 crore fund to be set up for MSME sector was recommended by the Indian Angel Network (IAN). The special focus on technology product startups and the R100 crore investment in startup village entrepreneurship scheme will help a great deal in boosting and nurturing the entrepreneurial ecosystem in the nation,” said Saurabh

Srivastava, co-founder, IAN.

However, Srivastava said that the organisation was disappointed that the government has not dealt with the “Angel Tax” that prevents angels from providing the first tranche of funds to innovative startups before VCs get interested. He said: “We now have a piquant situation where startups in India can raise money from foreigners (who are exempt from Sec 56) but have to relocate overseas to raise money from Indians!” Last year’s Budget recognised angel investment, giving CSR status to tech incubators within academic institutions and providing a ‘pass through status’ for venture capital funds.

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