The Government of India has embarked upon a project called "Digital India" to use Information and Technology to transform "India into a digitally empowered society and knowledge economy". Many people have commented on the opportunities and pitfalls related to the programme. Along with the Prime Minister's exhortation to "Start Up and Stand Up", there seems to be unbound opportunities not only for established software vendors but also for new entrepreneurs.
However, the current environment is beset with so many risks, I sincerely believe the government would do well to iron out the kinks as part of the programme.
Fixing Tenders/Orders
In my experience, most entrepreneurs start out to leverage connections they have in the government body floating the requirement. Though ethically questionable, this practice prevails across the country in mostly small and medium projects. A typical process involves the entrepreneur producing three pre-adjusted "competitive quotations" either from existing vendors or in some cases from phony ones. This "work-around", which in most cases doesn't involve any bribes, is resorted to as the vendor usually enjoys a high degree of confidence with the responsible officials. It does work in most of the cases, whereby the projects are indeed delivered. This process works mainly due to the reputation of both the officials and the vendor involved. Another reason would be the high degree of confidence enjoyed by the officials which percolates down to the officers, clerks and assistants.
The suggestion, this process understates, is that there might be some scope for the "proprietary tender" to be legalized. This could be accompanied with fixing higher levels of responsibility on the officials involved and mandatory audits.
Tax me not
Small time software vendors typically hire freshers, train them and get work done by them. And very soon these employees - now with some experience - leave to join some MNC or a Big Services Co for a huge hike in their salary. The entrepreneur is short-changed in the process. She has to repeat the cycle yet again. Hire, train, lose employee to yet another big services companies.
Though it can be argued that this is a market-driven phenomenon and the government cannot do much, it is to be noted that the entrepreneur is fighting a highly asymmetric battle. Most big service companies and MNCs benefit out of the large tax exemption schemes, land leases for pittance and easy access to funds. However, the entrepreneur - typically, a lone ranger - not only needs to comply to ridiculous amounts of regulations, but also pay taxes through his nose. A case in point is the rule to remit VAT/Service tax right after invoicing, though the actual realization may happen after a certain period of time especially with government organizations.
If such SMEs (not only software) are exempted from various taxes or even moved to a different but easier slab, the savings would not only mean better incentives for the employees but also a brighter future for the entrepreneur to graduate her venture.
Also, in conjunction with the Skills development mission of the government such ventures could be identified as Skill development centers and employees be awarded relevant vouchers/certificates.
Digital India is certainly going to contribute to a qualitatively better, corruption-free and dynamic society. And investing in entrepreneurs to help achieve the same will go a long way.
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