Wednesday, March 2, 2016

The Making of a New Business Eco-System

A bad system will beat a good person every time.  ~ W. Edwards Deming

Complexity, Opacity, Lack of Access is a barrier to the start-ups and small businesses, favouring the established and mostly the larger enterprises.

That’s how things have been for all this while. 

It is what the much celebrated ‘liberalisation’ of 1991 failed to achieve -  The democratisation of the business landscape. The complexities & limitations in the business environment continued to ensure that the established businesses got the bulk of the benefits. 

The big businesses continued to be seen as the engine of growth. With government policies and actions seen in the light of the impact it had on them 

The Modi government seems to be building out a new business eco-system. It is going bottom up. That’s why Budget 2016 must be read differently. 

Budget 2016 is another step in the direction of upending the established business eco-system in India. Will this be the beginning of the end of crony capitalism? I sincerely hope so. And I have good reasons to believe so. 

The little guys have been at a disadvantage as a result of lack of access to resources, poor infrastructure support, and a complex regime for doing business in India.

The established enterprise with their battery of lawyers and armies of accountants and clerks could navigate and maybe even thrive in a complex environment for doing business. Big businesses had enough resource to compensate (even build their own) infrastructure. Available resources were quickly hogged by those with the means (and ways) to access them. 

The little guy so far had been left to his wit and grit to pursue his enterprise.

To make it easy to understand, let’s look at the how this new business eco-system is  being built, from three different perspectives - Access to Resources, Support Infrastructure and Simplification of the Business Environment.

Access to Resources

Mudra Loans, Stand-up India Assistance, Start-up India Fund, New Bank Licences, Railways Start-up Fund etc. have the potential to giving access to resources to hundreds of thousands of entrepreneurs and small businesses...
Of course one can argue that not all these investment will end-up producing value or result in a sustainable enterprise but the seeding is wide enough and large enough to increase the probability of a substantial number of them making it through. 

Supporting Infrastructure 

While large and established organisations can create their own support infrastructure or build systems to compensate for it’s lack, it is severely limiting and detrimental to the growth of small businesses...therefore, ensuring availability and access to Power, expansion of the Railway Infrastructure, Reviving Small Airports, Rural Roads & Electrification, Improving Connectivity (WiFi at Railway Stations etc.), Expanding Skilled Manpower Availability (SkillIndia), Low Cost Life, Health and Accident Insurance,  Digital India (E-filings, E-Tendering, M-Banking, M-Governance etc.), EPF contribution by the government, National Scheduled Caste and Scheduled Tribe Business Hub, Tax Breaks for Start-ups, Lower Taxes for newer and Smaller Businesses (first)…are initiatives that will have the biggest positive impact for the small businesses & entrepreneurs. 

Simplification of the Business Environment

Ease of doing business matters more to the start-ups and small enterprises with limited resources...The New Bankruptcy Code, E-Filing of returns, a new Tax Dispute Settlement Mechanism, Transparency and Speed brought about by use of Digital Technologies in the tax compliance, Guarantee of Quick Tax Refunds, Simplification of Tax Compliance for small businesses, Freer Access to AgriMarkets, Opening up of the bidding for government business to smaller enterprises, Measuring the performance of the Centre and States for Ease of Doing Business across nearly 300 parameters...are all adding up to make for a less daunting regime for doing business in India.

Pardon my excessive enthusiasm but I see all this as addressing the maladies I have faced in my experience as an entrepreneur.  Things that increase the cost of doing business and odds of success. 

Taken together, it seems like, the Modi government’s effort towards building out a new business eco-system. Something that has the potential to completely alter the politics and economics of this country. It’s a deep democratisation of the business landscape, with potential for a deep impact on people’s psyche.  Stand-up India seems like the most appropriate slogan for it - people standing up for themselves and standing-up to change things around them, versus hankering for whatever dole they can bargain for. It’s a shift from dependence to taking responsibility. And it’s only fair that those who choose to stand-up for themselves and others, those who mean to contribute to wealth creation, get better (maybe preferential) treatment.

These initiative are pushing me towards unmitigated hope. Of course more needs to be done. Yes, implementation is important.  But that’s on going work.

Maybe I am imagining it all up.  But it is a vision worth pursuing for the government. It is a one that has the potential to do a lot of good all around. Also, hopefully Narendra Modi and his team will get enough time to realise the full extent of this vision.

So what do you think?

I would also love to hear from you of initiatives that I may have not listed here that add to this impact.

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