Budget 2017: FM Arun Jaitley must help startups and SMEs adopt demonetization and GST
Union Budget 2017 should create favorable business climate for startups and businesses in India
This Union Budget 2017 depends on performance of SME sector due to the two big economic policy decisions taken recently: demonetization and GST.
The success of cashless drive hinges on SME sector as it forms backbone of Indian economy and employs more than 40% of India’s work force. They carry out the maximum number and most bulky of business transactions in day-to-day functioning. Thus, for a digital strategy to succeed, SME sector must see digital route as viable option. Also, technology to go digital will come at a cost: the SMEs will have to procure it.
There have been concerns small businesses have suffered due to demonetization. Consequently, the Budget must ameliorate concerns of traders, particularly those traders lower down the ladder. The Government must make concessions to ease difficulties of SMEs in India.
India has a growing and vibrant startup ecosystem—according to a NASSCOM report, number of Indian startups is fourth highest globally (3100); that number would increase to 11,500 by 2020. However, the trend is not sustainable: over 85% of startups and small enterprises fail. Such businesses particularly work on shoestring budgets and the recent cash crush could be a problem.
Moreover, Goods and Services Tax (GST) is looming on horizon and will bring radical changes in tax structure. Startups will be most affected as they are short on financial resources and shifting to a new tax system will entail financial cost. Plus, tax compliances have been tricky for them.
“Therefore, startups need to prepare for the GST shift. To ease the burden on small enterprises, the government could make GST-compliant software technology available to SMEs at subsidized rates; thus, ensuring that the technology to support the compliances are in place. For enterprises already using accounting software such as the ERP software, a number of modifications would have to be made. This process could also be facilitated institutionally,” said Shashank Dixit, CEO, Deskera, a global leader in cloud-based business software.
Overall, Budget 2017 should provide SME-friendly environment to help the sector already struggling with issues. The development of SME sector is must for inclusive growth.