25 Feb 2016 21:24 IST

Time to focus on education and the rural economy

Angel investors could also be given tax leeway

Given the current economic scenario and emphasis revolving around ‘Make in India’ as well as ‘Make for India’, there is a clear need to provide industry-oriented higher education at an affordable cost and also foster and nurture a good business climate. In order to facilitate this, the Budget should aim at lowering interest rates on education loans for students.

Scrap tax on venture capital

Although there is much hue and cry about encouraging start-ups to complement the ‘Make in India’ initiative, the major underlying issue of raising venturecapital is to be addressed. The Budget may consider scrapping of tax on angel investments to encourage angel investors.

In order to encourage and protect the interests of venture capitalists and angel investors, a credit guarantee fund, or Venture Re-finance Scheme, may be introduced through the Small Industries Development Bank of India (SIDBI) for venture capitalists and angel investors, in the event of venture failures and bankruptcy cases. Tax holidays and incentives should be provided for micro, small and medium enterprises, especially those in the clean-tech and green energy sector.

Focus on the rural sector

There is also a need to increase consumer spending and savings in the rural sector. Specific investments may be allocated pertaining to the agro-processing and food processing sector, including agri-export zones in rural areas to generate more employment opportunities in the rural sector. The budget therefore, must earmark funds to strengthen the rural infrastructure, including setting up of large-scale, state-of-the-art warehouses, and cold-chain, among others. This would not only increase the slice of the price reaching the farmer, but also cut down on costs by reducing the length of the value chain.

Taxes and allocation of funds

In order to augment revenues to meet the fiscal deficit, the government may increase taxes on industries such as entertainment, hospitality, alcohol and tobacco that may not hurt the pockets of the lower and middle income class of society.

Taking advantage of the reduction in commodity prices, the government has to allocate funds towards improvement in infrastructure, especially in Tier-II and Tier-III cities. Investment in R&D in strategic areas such as defence, renewable energy technologies, healthcare and biotechnology may not seem to pay off quickly in the short run, but are quintessential for providing a solid foundation for nurturing economic growth.