SHAPING INDIA'S ENTREPRENEURIAL LANDSCAPE: KEY INITIATIVES AND CHALLENGES AHEAD

THE Hon'ble Finance Minister made history in July 2024 by presenting her seventh budget, surpassing the record previously held by Morarji Desai. Beyond this historic milestone, the budget stood out for its trans-formative measures aimed at fostering India's entrepreneurial ecosystem.

- GOPAL SRINIVASAN

Two key initiatives, in particular, marked a paradigm shift: aligning the Long-Term Capital Gains (LTCG) tax rate for unlisted and listed investments at 12.5 per cent; and eliminating the angel tax for all categories of investors. These measures have opened new avenues for secondary funds, enabling liquidity and boosting confidence among early investors, thereby reducing reliance on IPOs, which are often subject to market cycles. The removal of the angel tax has also facilitated “reverse flipping,” as highlighted by the Secretary of the Department for Promotion of Industry and Internal Trade (DPIIT). However, significant challenges remain as the next budget approaches. Based on recent GDP advance estimates, economists are urging measures to stimulate urban consumption, which has experienced a downturn, slowing manufacturing growth. Despite the implementation of Production-Linked Incentive (PLI) schemes, capacity utilisation remains stagnant at 75 per cent, and manufacturing growth has declined from 9.9 per cent last year to 5.3 per cent this year.

The chief economic advisor estimates that “India’s gross fixed capital formation needs to go up from the current 28 per cent of GDP to at least 35 per cent on a sustained basis. Apart from human capital, which we have in abundance, the country will also need to ensure that it has the required financial as well as risk capital needed to grow at a real rate of 7-7.5 per cent per annum to reach this goal.” As a representative of the Indian Venture Capital Association (IVCA) and a long-standing fund manager, I believe that channelising domestic pools of funds into private risk capital through entrepreneurial ventures is critical for accelerating economic growth.