India sweetens deal for SMEs

Bloomberg/New Delhi/Mumbai
Filed on January 17, 2016 | Last updated on January 17, 2016 at 07.08 am
India sweetens deal for SMEs
Travis Kalanick and Narendra Modi attend the Start-Up India summit in New Delhi on Saturday.


Government aims to provide a friendlier tax regime and reduce red tape.

India pledged to ease regulations to encourage entrepreneurs and fledgling businesses as Prime Minister Narendra Modi strives for the job opportunities needed in a developing nation of 1.3 billion people.

A friendlier tax regime is among the goals and the guiding principle is to reduce obstacles from complex rules, Finance Minister Arun Jaitley said at a government-organised conference on start-ups in New Delhi on Saturday.

"Our effort over the last few years has been to restrict the role of the state essentially as a facilitator," Jaitley said at the event, where billionaire Masayoshi Son, the founder of Japan's SoftBank Group Corp, and Uber Technologies CEO Travis Kalanick are on the guest list. Modi was due to speak there later on Saturday.

Asia's No 3 economy is in the midst of an Internet start-up boom that's lured billions of dollars and raised questions about whether valuations are becoming stretched. Much of the money is coming from foreign investors such as Son. A lack of tax breaks has curbed the involvement of local investors.

"About 70 to 80 per cent of the funding is coming from overseas," said Harish Visweswara, a partner at consultant Grant Thornton India. The government needs to reduce red tape and get rid of the numerous permits and licences required to run a simple business, he said.

Son said in New Delhi that he's pumped almost $2 billion into India in the past year, and that he'd likely scale up rather than cut back his investments if he were to reconsider his plans. The country is at the beginning of a "big bang" and the 21st century belongs to it, he said, while adding challenges include slow Internet connections and the need for more wireless spectrum to be allotted to mobile phone carriers.

SoftBank has invested in e-commerce provider and the ride-hailing service Ola Cabs in India, as well as the real estate website and hotel-booking app Oyo Rooms. The company is also part of a $20 billion solar power venture.

The World Bank ranks India 130 out of 189 economies for ease of doing business, an improvement from earlier years but far from Modi's goal of breaking into the world's 50 top business-friendly destinations.

The nation is revising rules to make company registrations easier, Corporate Affairs Secretary Tapan Ray said at the conference. Revenue Secretary Hasmukh Adhia signalled the budget due on February 29 may tackle the difference between the capital gains tax treatment of unlisted investments and the more favourable regime for listed securities.

The premier is trying to boost Indian growth beyond the current clip of more than seven per cent that's the fastest among major economies. One key reform, a landmark national goods and services tax that would try to make India more of a single market, is stalled. - Bloomberg

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