Startups urged the finance minister to take measures immediately to help businesses
Founders warned that if the government doesn't provide support then the progress made by them will go in vain
Startups also suggested some measures that the government take in this situation
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The coronavirus pandemic has hit India’s startup ecosystem hard. Many of them are not able to operate amid the lockdown while others are drowning in losses due to no revenue. Experts reckon that funding will be scarce this year. In such a situation, startups have urged the government to announce an economic relief package.
In a letter jointly written by many startups to the finance minister Nirmala Sitharaman, startups said that the Covid-19 crisis threatens to destroy all of the progress and future potential of the startup ecosystem in a few months. “Unfortunately, our startup companies across the nation are inherently young, less resilient, and most vulnerable. Many of them face likely devastation during this extraordinary economic downturn,” the letter read.
Appreciating Prime Minister Narendra Modi’s decision to impose a 21-day nationwide lockdown, the startups said the ecosystem is in dire need of a robust relief package. “Without the package, all the collective efforts of the past few years will go in vain,” startup founders said.
Further, they also highlighted that the Modi government’s ambition of new-age businesses contributing $1 Tn in the $5 Tn economy goal by 2025, which would certainly take a hit if necessary help does not come in on time. “Today, over 39K startups across India are instrumental in building a strong ecosystem conducive for the growth of the economy, driving sustainability, and driving the rapid expansion of employment opportunities across various skill sets,” the letter noted.
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What Measures Can The Govt Take?
Besides urging the government to come up with a relief fund, the startups also pointed out some suggestions for the government, which would help them sustain new businesses in these times. To start with, they requested the government to provide 50% of the salary bills and contract wage bills paid by the startups from April to September 2020. This will ensure that there are no job losses, the group claimed.
Additionally, they urged the government to pay any bills due by the central or state government to startups and MSMEs within 30 days of invoicing and clear all pending dues by April 15, 2020.
To help startups with fresh capital, they asked the government to come up with unique credit models. Some of the steps suggested were allowing banks to offer loan equivalent to 50% of the last year’s revenue or last two year’s payroll as a working capital loan with low-interest rates without collateral as well as allowing startups to avail interest-free loans secured by the income tax and GST refunds. They also urged the government to approve and disburse MUDRA loans for a specific time period like three to four days, and deferral of interest payment by 12 months.
Further, the government has been urged to release the total corpus of INR 10K Cr from the Fund of Funds (FoF). This money can be granted to venture capital companies which have committed investments in startups, provided that they infuse the money within 30 days of receiving it.
Besides these steps, the startups have sought expedited refunds for income tax and GST returns by April 30, 2020 for startups that have claimed less than INR 10 Cr. Further, the group said startups should be allowed to claim GST refunds on up to 50% of the accumulated GST balance in March 2020 for up to a maximum of INR 20 Cr. TDS deductions for services should be reduced to a flat 1% instead of up to 10%, said the letter, adding that there needs to be a moratorium on the deposits of TDS and GST until June 30, 2020.
Startups are indeed going through the toughest time right now. However, they are also coming forward in the fight asking the novel coronavirus. Startup founders, prominent venture capital funds, and advisors have come together to form the Action Covid-19 Team (ACT). They have together set up an INR 100 Cr fund to invest in startups with solutions having the potential to tackle coronavirus-driven problems.