Excerpts from the speech of President.
National Policy for Skills Development and Entrepreneurship in 2015
Vision:- “create an ecosystem of empowerment by skilling on a large scale, at speed with high standards, and to promote a culture of innovation based entrepreneurship, which can generate wealth and employment, so as to ensure sustainable livelihoods for all citizens in the country”
Excerpts:-
In India, we have a large eco-system of 4,500 start-ups – the third largest in the world. Even then, it is not easy to start a new venture in India. Access to funding and mentorship remains a hurdle. In key parameters such as ease of doing business and R&D investment, there is scope for much improvement.
To achieve centre-stage in innovation, we need to work relentlessly in aspects such as creation of a favourable business atmosphere; improving the quality of education and skills training; and expanding the IT infrastructure including high speed internet connectivity.
Our policies like Start-up India and Atal Innovation Mission are geared to support the start-up environment. The public and private sectors both have to play a catalytic role in further developing such an eco-system.
The investor community – the angel investors and venture capitalists – has a crucial role to play in the transformation of innovative ideas into successful business models. Every start-up may not turn successful.
Studies have indicated that ninety percent of new ventures that don’t attract investors fail within three years.
Investors prefer a proven business model before investing and scaling it up. Innovation-based projects have uncertain outcomes. Their returns are often skewed as they have to confront the “valley of death”.
It is that early phase comprising the ‘seed’ and ‘start-up’ stages in which: (i) a novel idea or a concept is developed; (ii) its technical feasibility, market potential and economic viability are determined; (iii) a product prototype is designed; and (iv) a formal business organization is established. These early stage activities involve sunk costs resulting in negative cash flows for the new firm.
Investors are often shy to fund innovation start-ups as they are not sure of their success. But one must understand that even though nine out of ten ventures that an investor may fund, may fail; still, the one venture that will succeed, will make good the loss incurred on the rest.
Such are the rules of the game. Our investors must have an eye for sifting the good ideas from the ordinary ones. They must have the risk taking ability and appetite to nurture innovative ideas into successful products and services.
Remember these words of the famous management guru Late Peter Drucker:
“In every success story, you will find someone who has made a courageous decision” .
Death Valley Curve
It refer to the period of time from when a startup firm receives an initial capital contribution to when it begins generating revenues. During the death valley curve, additional financing is usually scarce, leaving the firm vulnerable to cash flow requirements.
The name “death valley” refers to the high probability that a startup firm will die off before a steady stream of revenues is established. After a firm receives its first round of financing, it incurs a lot of initial costs. Offices are usually built, staff is hired and operating costs are incurred; meanwhile, the firm is not earning significant income. Unless a firm can effectively manage itself through the death valley curve, it will fall victim to negative cash flows.
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Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.