Why Union Budget 2015 is a mixed bag for start-ups, entrepreneurs

The Prime Minister's stirring speech in Parliament on Friday, where he claimed "sabka saath, sabka vikaas" as his vision, raised many hopes. Hopes that this would be a Budget that would ensure that acche din (good days) will come for all, and in substantial measure.

Has the Finance Minister delivered on the promise of sabka vikaas? From my prism of start-ups and entrepreneurship, the Budget has been a mixed bag. I believe he could have taken a quantum leap in promoting start-ups and start-up investors.

So, what was good and what was lacking?

1. The language: P. Chidambaram first used the word 'entrepreneurs' in his Budget speech - which was perhaps the first time in the history of independent India. It is very heartening that the current FM carried the tradition forward. He not only mentioned entrepreneurs but also the need for job creators over job seekers, and the need for building scalable businesses in India.
2. The Rs 1,000-crore idea: The fine print of the finance bill will hopefully clarify what the Rs 1,000 crore that the FM has allocated for start-ups will actually do and what it will mean for all entrepreneurs. He talks about creating world-class incubators - I sincerely hope the government will not start creating incubators and accelerators but rather will help facilitate the formation of such entities by people who know this business well. After all, managing incubators and accelerators is a highly specialised job.
3. The tax: The clarification of tax pass-through for investors who register as AIF1 / AIF2 category investors is a huge respite as this means the fund managers are not subject to tax terrorism or to the whims and fancies of local tax officials. This clarity will ensure that overseas investors will find greater comfort in investing in venture and private equity funds in India.
4. An important ingredient in creating a successful early-stage ecosystem is the presence of local Limited Partners (LPs) or entities that invest in venture and private equity funds. Currently, majority of LPs that invest in Indian VC/PE funds are overseas, which means that the Indian fund managers have to not only deal with sector risk but also country risk while marketing to overseas LPs. The FM could have taken a quantum leap in him imagination and converted his 1,000 crore for start-ups into an entity that would facilitate flow of domestic capital to Indian VC/PE funds.

(The author is Founder /Partner, Seedfund, an early-stage venture fund)