How Budget 2022 can supercharge startups & small businesses? Meesho’s Vidit Aatrey explains

A lot of things can be done to make a start-ups a better and more preferred place to be for talent including reducing tax on ESOPs, says Vidit Aatrey, Founder & CEO, Meesho.

We are hearing about a slowdown in the smaller sectors, in the rural economy. Hindustan Unilever is talking about it. What is your experience?
Our vision at Meesho is to enable hundred million small businesses to succeed online and everything and anything that we do on a daily basis is how we can do more and more for the small businesses that are there on the platform already. If you look at the overall economy, obviously the pandemic has affected a lot of them and since very few percentage of small businesses were digitised before the pandemic, they were dependent only on the offline channel, they have been affected in a big way over the last two years. But all of this was expected.

Some of these indicators are always lagging but I do not think anyone would be surprised. But what we are seeing by the way on our platform, especially over the last one-and-a-half years, is that most successful small businesses have been the ones who have made this transition from only offline to now being available online as well. They had invested in the capabilities to go online and they have been able to not just maintain or sustain their business, they have been able to even grow their business over time because now they can access pan-India distribution, can serve anyone and everyone whereas before the pandemic, it was only local.

I believe the best way to answer this question is what can we do for the small businesses so they can thrive again so that the overall India economy which is 85% dependent on small businesses can start to grow again. We have to do a lot more in helping and enabling all kinds of small businesses to come online very easily. This is something that we have talked about even earlier.

If you look at the policy today and if you are not registered with GST, you are not allowed to go online and sell your products. Even less than 10% of all small businesses have GST registration. So practically 90% of small businesses in India are not allowed to sell online at a time where people are not going out and buying products offline. I would say that is a very big limiting factor. We see that a very small percentage of small businesses which come up and register on our platform are able to sell because they do not have GST registration.

The question that you will have is why don’t they also get GST registration? But in order to get a GST registration, one needs to file returns every month and for that, one needs to get the help of a CA and how many of these small businesses in India can afford all of these things? Very, very few and we have seen this to be a big problem.

In the offline world, if one does not have GST, one is allowed to sell, but not in the online world. We have heard some really positive news from some quarters that the government may consider solving this very soon but I really feel that this is one of the biggest blocks stopping small businesses from really going online and becoming successful.

On the behalf of the micro sellers, the SMEs which are now on platforms like Meesho, what else can the Finance Minister Nirmala Sitharaman do? Would you have any tall expectations from the Budget? I am asking you first on their behalf and not about the startup ecosystem?
What do small businesses want? They want a policy that can remove all the obstacles that they have in the businesses right now. One big thing that I talked about is they cannot go online and sell at all. And by the way, this is not just for the existing small businesses, I am including all the small businesses that no one captures in their numbers because they are not visible.

Let me take an example of women entrepreneurs who are on our platform. Most of them are homemakers and are not classified as formal businesses anywhere. But if you are a lady who is knitting sweaters at home during this very hard times and really want to sell those sweaters online and make some money for your household, you are not allowed to do so for the same problem. So it is not just for the existing small businesses that people can recognise and the 60-70 million that all of us talk about. There are a lot of these micro entrepreneurs across the country who are also not allowed to sell. So I would say this is a very big problem.

What else does a small business need? Small businesses need access to capital. There also, certain steps can be taken which can help solve the access to capital for these small businesses. If something happens in that direction, I would say that would be a boost as well. These are the few things which if solved can unlock the small business economy in a very big way.

Since the pandemic, the excitement in the economy has been thanks to the new economy, the start-ups, the unicorns and the gig economy. Coming to that, what can the Union Budget do? As a leading member of this ecosystem, what would be your suggestions to the finance minister?
If we just talk about the start-up ecosystem, I would say there are lots of possibilities. I will first look at just solving the shortage of talent. A lot of money is coming into this ecosystem but obviously the talent has not grown by the same amount. If you ask any entrepreneur in the tech ecosystem, they will say the access to talent is tough and tough and it is getting tougher every day. And there are a lot of things that can be done to make a start-up better and more preferred place to be for talent.

For example, today there are certain policies that prohibit the attractiveness of ESOPs, the amount of tax that is levied. ESOPs are basically stock options, they are not stocks. One has to exercise them first and then pay taxes. Most of these people pay much higher taxes than some of the publicly listed companies. So, there is a differential in between. If that parity can be solved, that would make it much easier for all entrepreneurs and tech companies to attract talent.

Second, a lot of things are already happening. Over the last two years, the government has been acknowledging the contribution of the tech ecosystem into its overall growth. Recently our prime minister also talked about the National Start-up Day. That is also driving the right conversations. When going to the very remote parts of the country, people do not feel that start-ups are risky. They think that these are things that we need to do.

India has always been an entrepreneurial nation but directing that energy now towards the tech ecosystem is happening because start-ups are getting more and more mainstream. A few of these things can happen where some of these policies are dated and can be more modernised to make parity between what existed in the existing traditional sector and what now happens in the tech ecosystem.

Outside of creating more talent what about ESOPs which is of course the currency of the start-ups, that is how you lure talent, when you are a start-up saying if we do well you are going to get so much richer, on that front?
Yes, so I will repeat the same point which is around ESOPs so you are exactly right. Why do people who are coming out of colleges today or are with traditional, conventional companies going to come to start-ups because they want really see a lot more growth than they would see in their existing opportunities which they today consider as less risky so they would come to the tech ecosystem not because of cash, a lot of these companies can give them cash maybe more than us but they come because if this company grows really fast you would be able to share on to that growth and that essentially happens through ESOPs, the employee stock options. So I think they can be made more attractive that can definitely happen and that can happen by bringing more parity into the taxation of ESOPs for like private companies as well as public companies. So I would say if that happens it becomes much easier and I would definitely recommend that if that is something that the government considers I think that would really help tech ecosystem grow for the same reason.