India’s job crisis: View: Budget done, creating jobs must be govt’s top priority now

Economy


By Kunal Bahl


Budget 2020 has been a thoughtful weaving together of specific proposals to tackle a wide range of issues. The startup community has welcomed the taxation reforms for employee stock ownership plans (ESOPs), which by their very nature offer returns that are indeterminate in time and quantum. The freshly introduced deferment of taxes for ESOPs is a welcome first step in aligning ESOP-related taxation to realised gains. Similarly, increasing the turnover threshold to Rs 100 crore for startups and extending the set-off period for carry forward of losses to 10 years, will allow startups to optimise their growth decisions in their formative years.

Another significant issue that startups face is the high incidence of long-term capital gains tax on the shares of unlisted companies. This tax is nearly three times the tax applicable on the sale of shares of listed companies. Liquidity of shares in startups occurs primarily through private secondary transactions for many years before they go public. This is because public markets prefer more predictability that startups can’t offer in their early years.

This high taxation on unlisted equities is a big disincentive for all members of the startup sector — employees, entrepreneurs, angel investors, domestic institutional investors (DIIs) etc., who take the risk and effort to collectively create successful startups. The startup community is hopeful this will receive GoI’s careful consideration.

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GoI’s move to boost access to finance for MSMEs through invoice-based financing, provision for subordinate debt, a proposed extension of the restructuring window via RBI are important measures. Increasing the threshold limit for audit requirements from Rs1crore to Rs 5 crore (subject to less-cash operations) will reduce the compliance burden for young firms.

At the same time, mandating a 1% tax deducted at source (TDS) under the Income-Tax (I-T) rules will increase complexity and reduce cash flows for online sellers. Already, ecommerce platforms deduct 1% tax collection at source as per GST requirements. A growing number of MSMEs now operate through ecommerce platforms as they pursue pan-India opportunities. It’s important that the inherent ease of doing business online is not encumbered by incremental complexities.

GoI’s commitment to increasing the use of technology in its working can yield big dividends in speed, savings and transparency. The success of Government e-Marketplace (GeM) illustrates this potential. The use of technology in measuring the efficacy of GoI’s growing social sector spending, detecting tax evasion through analytics, making taxation processdriven is already on the agenda. Technology can be transformative for government, too.

Proposed measures to simplify GST filings, steps to amend the Companies Act to prevent civil offences to be treated as criminal offences, strengthening of public sector banks (PSBs), schemes to boost domestic manufacturing of mobile phones and semiconductors address some of the immediate needs of the economy.

GoI has rightly flagged cheap, low-quality imports as major impediments to the growth of MSMEs. Today, online platforms offer enterprising domestic manufacturers a pan-India market for their products. However, the surge in cheap, subsidised imports has stymied such local enterprises. Low-quality, subsidised imports are not only an unproductive drain on the country’s forex, but they also limit India’s ability to harness its vast consumer spending to boost its own economic growth. GoI should effectively check such imports.

Budgetary measures and other economic initiatives need to be aligned with one single, measurable measure of success. For India, this is the number of new jobs created each year — in formal and informal sectors, farming and manufacturing, employees and entrepreneurs, startups and large MNCs, in metros and smaller towns. In her budget speech, Nirmala Sitharaman mentioned that the number of Indians between 15 and 65 is the highest ever. Let all our efforts and investments be knit together to deliver on just this one promise: more jobs, better jobs.


The writer is CEO, Snapdeal



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