Rajan: Make it easy for start-ups, they can create jobs

Reserve Bank of India Governor Raghuram Rajan on Monday batted for creating easier business environment for start-ups but also cautioned against the existing discounting model being followed by most online retailers.

Delivering the Y B Chavan memorial lecture organised by the Indian Institute of Public Administration (Maharashtra Chapter), Rajan said, “Start-ups are closing because they are not making money which suggests that the business model needs to be rethought. If the only reason you are making revenue (not profits) is that you are giving 50 per cent discount, it can’t be viable in the long run.”

“All these businesses are trying to establish viability. Some are still being financed in a big way. After the initial entry, people try to establish a business model, some work, some do not,” Rajan added while acknowledging that the sector has huge potential to create new jobs.

He advocated lighter regulation for start-ups so that they could have a better environment and a level playing field to grow big.

Rajan also had something to say on the real estate sector. The RBI Governor hoped that prices adjusted in a way that encouraged people to buy. He added that the process of access to land, process of buying land besides the process of construction had to be made more transparent that would help. The biggest concern he said, was on ‘can we track the flows properly, can we know who is financing the project and where the money was flowing.’ An increase in transparency on these counts will increase access to funding he said adding that townships were receiving funding in certain ways.

He said that RBI’s move to give licences to small finance banks would enable financing of micro and small enterprises including start-ups.

He also said that three competing exchanges (tradexes) -where firms could trade their receivables from large corporates was also on the anvil and would help in financing the working capital of these small companies-would be set up in the near future.

He observed that an exit policy for firms was already being worked out by the Centre in the form of a bankruptcy code.

He observed that firms should fail not the people and mooted a safety net in the form of unemployment insurance for employees who are laid off due to firm closing operations, besides health insurance and pension for those on the verge of retirement.

Finally, he urged the bureaucracy to be more sympathetic while dealing with the common man who came to them for several clearances saying that “we come to understand of the common man’s problems only post retirement.”

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