FM Sitharaman announces stimulus measures for MSMEs, evoke mixed reactions from startups

The government's booster measures for MSMEs drew a mixed response from the startup community with many believing the package will benefit startups, even as others disagreed.

Raman Roy, co-founder of Indian Angel Network and founder of Quattro, said: "Today, the startup category was not covered".

"We hope that the government will take note soon and announce the necessary steps aimed at enabling startups to survive and continue operating in these challenge times," he said adding that the startup ecosystem comprises the key to unlocking the PM's vision of a self-reliant India.

Bhavin Turakhia, CEO and co-Founder of Zeta, echoed similar views.

"Startups will have an important role to play in this difficult journey and we are hopeful that the announcements that will follow over the next few days will address this constituent with the same generosity," he said.

However, Apoorva Ranjan Sharma, co-founder of Venture Catalysts, said the amendment of the old and archaic definition of MSMEs was long pending demand from different industry bodies and bringing in a new definition will further aid in the growth of these enterprises.

"...Since start-ups are a part of the MSME segment, we're optimistic that entrepreneurs will benefit directly or indirectly from these measures," he added.

As part of the Rs 20 lakh crore financial package announced by Prime Minister Narendra Modi, the government on Wednesday introduced the first set of measures aimed at helping MSMEs by providing collateral-free automatic loans and equity infusion via a Fund of Funds for such businesses, as well as revision in the definition of such enterprises.

Asked if the measures announced on Wednesday will have a direct bearing on startups, Nirupama Soundararajan, Senior Fellow and Head of Research at policy thinktank Pahle India Foundation, said: "not necessarily as MSMEs and startups are two different categories of business.

"However, startups will benefit from the TDS-related announcement today as it will free up more cash for them for working capital," she added.

Industry observers also maintained that the funding route availed by startups and MSMEs are different. While MSMEs access funds from banks and financial institutions, startups usually go to venture capitalists or angel investors who have a greater risk appetite.

Snapdeal - which has many MSMEs on its platform as sellers - welcomed the move. Snapdeal co-founder Kunal Bahl tweeted that MSMEs are India's backbone and the measures announced by the Finance Minister will help them get back on their feet. He noted that guarantee-free loans, equity funding options and e-market linkage would be strong enablers for MSMEs.

Sandip Chhettri, COO of TradeIndia.com (an online B2B marketplace) said collateral free loans will provide the much-needed boost to the already struggling MSMEs, and help fulfil the government's mission to be 'vocal for local', encouraging manufacturing and lessen reliance on imports.

The government has also announced slashing TDS/TCS rate for non-salary payments to residents by 25 per cent for the remaining months of the fiscal. E-commerce companies, which collect one per cent TDS from sellers, are yet to comment on the development.

Aakrit Vaish, founder and CEO of Haptik, said the reduction in EPF contribution will help employees increase their take home pay and provide relief to employers.

"With more cash in hand to the salaried employee, consumer spending is likely to improve. This is a much needed stimulus that is bound to jump-start the economic wheels and improve market sentiment," he added.