The Venture Intelligence Blog

How can start-ups complain when the Prime Minister makes the government machinery work on a  Saturday evening  to unveil plans for making the country more Start-up friendly? The media coverage had set expectations high. Lowering  of Capital Gains tax - including apparently plans to  do away with it . And the Evil Startup / Angel Tax was as good as abolished . Unfortunately, The Devil, as they say, lies in  The Details  (Page 33 onwards to be specific). Are you the founder of a company that's 5 years and 1 day old? Sorry old chap, your baby is no longer a Startup. Regardless of the age bias, it looks like most of the benefits under the #StartupIndia schemes will accrue only to companies that are a part of government supported / recognized incubators. Here's the extract from the official document: In order for a “Startup” to be considered eligible, the Startup should: • be supported by a recommendation (with regard to innovative nature of business),...

Writing in Business Standard , former chief economic adviser to the government Shankar Acharya has evaluated the notable economic and financial developments during the first six months of Modi Sarkaar. Extracts: Both the July Budget and subsequent developments have made plain this government's aversion to attempting "big bang reforms" through legislative amendments to populist entitlement laws (rural employment, food security, education), the onerous new land acquisition act, the Indira Gandhi vintage, job-destroying central labour laws or even the notorious, retrospective "Vodafone amendment". However, since the disappointing July Budget, clear signs of a pragmatic, incremental approach to policy improvements have emerged. ...Will incrementalism work? That's the big question. As Zhou Enlai reportedly said about the success of the French Revolution, it's too early to tell. One has also to ask whether there really is an alternative? The so-called ...

Dr. Ajay Shah has timely and extremely well argued post on the government's plans to subsidise LED bulbs costing Rs.400 to be sold for Rs.10! Hopefully the decision makers will take note and switch off this yet-another-money-sucker-in-making proposal before it, well, sees light of the day. Extracts from Dr. Shah's post: The guiding question, in all design of government, should be: What's the market failure? I am not able to see a market failure in the working of the market for LED bulbs. ...Energy efficiency is just one part of economic efficiency. An LED lamp is a big up front payment and then a stream of gains in the future. Whether the LED lamp is worth putting in depends on (a) The magnitude of each gain (i.e. how much you use that lamp) and (b) The discount rate. If the interest rate is high, it will make sense to buy a Tungsten bulb instead.  ...we should be hard headed in how we thinking about what government does. Most of what government in India does is not...

In a "shotgun wedding ", the long term ramifications of which were somewhat drowned amidst the Diwali break last week, the Union Government has ordered the forced merger of two private sector companies in "public interest": National Spot Exchange Ltd (NSEL) with its publicly traded parent company - Financial Technologies (FTIL) . Creditably, Mint had front paged a well argued opinion piece (by Mobis Philipose) titled "Order violates fundamental principles of rule of law". Extracts (emphasis mine): Here’s the main problem: the government is forcing a parent company to take on the liability of a subsidiary company, ignoring the fact the subsidiary was formed as a separate entity precisely so that the parent company’s liability is limited to the extent of its investment in the firm . ... who’s to say that the dues of investors in NSEL’s products serve a greater public interest than the interests of FTIL’s minority shareholders? An argument i...

The Hue and Cry over onion prices hitting Rs.100 pr kg, made me revisit this Economic Times feature (written on Oct 1, when the prices were Rs.80 per kg) which had some revealing details on why the License-Permit-IT Raid Raj is alive and well. Extracts (emphasis mine): As it is, the number of traders in onion mandis is not increasing. In important onion markets, it adds, most commission agents and traders have been there for 10-15 and only one or two new licences have been issued . "Such long presence with each other in the market has helped them to develop mutual understanding and gives undue advantage to these established trading firms in the onion trade," says the report. It's anomalous that though most of the produce enters the onion mandis between October and February, this is when prices are highest. This suggests, says the report, that "other exogenous factors like hoarding, market cartels, etc are influencing onion prices." According to Himanshu, sinc...

A new Grant Thornton report titled “ Global Private Equity Report 2012 " says "India is the most challenging market globally for this sector". Extracts from the Grant Thornton press release on the report : On the Fundraising Outlook The most dramatic decline in optimism from 2011 is evident in the BRICS: Brazil, Russia, India, China and South Africa. This year, 78 percent of respondents in these markets described the fundraising outlook as “negative” or “very negative”. In 2011, the figure was 39 percent. On Cross-Border Buyers ...Globally, China and Japan, Europe and North America are the regions from which most GPs expect non-domestic strategic buyers to originate. Regions as expected sources of non-domestic acquirers China, Japan, Korea 31% Europe 24% North America 22% South East Asia 11% India 10% MENA 1% Africa Less than 1% Latin America L...