In last few years, India has witnessed boom in the etail or ecommerce sector. Thanks to the startups which manifested risk-taking ability and defied the tradition by adopting innovative ways to run business. Because of their unprecedented feat, India could surpass China for the first time in the race to garner the Foreign Direct Investment (FDI). Ecommerce is one part of the story which certainly boosted the morale of several individuals to experiment. As a result India has seen a wave of startups in many areas. Until now startups took the risk on their own, with little help from the government. Of course, venture capitalist have begun to invest and promote Indian startups. Largely young entrepreneurs have embarked upon the entrepreneurship on their own. However, it is important that this culture is preserved, prevailed and promoted. There is no one better than the government to do so.
The Startup India – a visionary program of the Narendra Modi government – can succeed in giving the much-needed boost. The Startup India includes new policies and initiatives that are aimed at making it easier for investors and startup founders to incubate their venture in the country. It is expected that the initiatives can bring a wave of innovative startups in the country.
Removing Financial Hurdles
The Startup India has excited the startups in the country as it contains a lot of visible benefits for budding entrepreneurs especially the financial benefits which often bar young entrepreneurs from experimenting and taking risks. However, the time will tell if this really sparks animation in the market. Dataquest received a tsunami of opinions from the companies on the new initiatives. With the Start Up Action plan, it is expected that more young entrepreneurs will take the risk of starting their own venture and building innovative solutions to solve meaningful problems for Indian as well as for the global audience. The Insolvency and Bankruptcy Bill that will allow startups to exit faster, within 90 days is a great step towards encouraging more people to take the plunge of starting a new venture, without the fear of failure, shares an expert.
Excited on the launch of Startup India program, LD Sharma,Group Vice Chairman, Shoogloo said, “Liberal economic policies relating to taxes and foreign investment proposals will redefine the dynamics of startup India. PM Modi’s initiative will not just ascertain stability but also long term planning for sustainable startup India this year and beyond. We believe in delivering pure performance and see the same being initiated by our PM for the nation.”
The industry has has welcomed the move by PM Modi of opening 7 research parks in different IITs with a Rs 100 crore backing each. “Exposure to a facility like the research park facilitated many a budding entrepreneurs and friends with funding and guidance. Scaling it to seven other institutes would definitely help the budding startup enthusiasts right from their first day in college, and that’s really paramount to their future success. One has to start early and fail early to really learn the intricacies of scaling a company, college students should welcome this move with open arms” added Mohit Mittal, founder and CEO of Voodoo, who started up his first company in his college days at IIT Madras.
Most of the startups and companies applauded the relaxation of the financial norms which often deter new companies from growing. “I am extremely excited about the Atal Innovation Mission, this will help foster innovation at a grass root level among students in schools and colleges, which will in turn encourage more youngsters to enter the field of entrepreneurship and innovate and create some ground breaking products that will be used by people around the world. India is already a leading startup hub and I am convinced that with the right support from the government, it can rapidly become the innovation hub of the world,” opined Shashank ND, Founder & CEO, Practo.
Aspirations vs concerns
While the Startup India has attracted appreciation, the initiative does not answer all concerns. There are people who have mixed comments to make on the program.
“On these initiatives, Government will be as successful as it was with the 100 smart cities concept. However, the concern of taxation on VC funding has not been spoken about, which still remains a roadblock,” said Prashant Rai, founder and CEO, OneTimeJobs.com. At the same time, there are a few entrepreneurs who are skeptical about the definition of a startup. “I wholeheartedly welcome Prime minister’s action plan. These policies should be applicable to all startups including MSMEs in manufacturing, trading, retailing and services sector. In sync with Modi, I believe that the Startup definition must include every new business generating employment in any sector,” said Dinesh Agarwal, Founder and CEO, IndiaMart.Com.
Although doubts persist, the Startup India has drawn appreciation from all corners, especially the startup community is thrilled and wants to exploit the benefits for their growth. “This initiative of PM Modi is the right step in making the environment friendlier for entrepreneurs and thus encouraging them to start up. We will wait for the fine print to understand exactly what the next steps will be. However, I can only say that outcome will be in the positive direction and we are very excited,” said Raghav Chandra, Co founder, Urbanclap.
“Encouraging privatisation will speed the pace at which India is developing and we will become a developed country soon,” added Shaifali Agarwal Holani, Founder and CEO, EasyFix. “A business friendly tax environment for would be promising for creating an organised market from a highly unorganized market,” stated Debadutta Upadhaya, Co Founder, Timesaverz.
A sound and sustainable start-up eco-system looks possible after the government has introduced an array of benefits for start-ups including simpler compliances, easier access to investors, tax incentives for start-ups and tax credits for investors, low corporate tax, zero capital gain tax and grants for research. “Tax relief for investors on exits from start-ups should be a special provision that needs to be introduced in the blueprint. Treating start-up investments on the same footing as sunrise industries for tax holidays may in the best interest of the ecosystem. Start-ups can also heavily benefit from relaxed
FDI norms and easy listing norms which would in turn encourage startups to be domiciled in India as opposed to other regulation-friendly countries such as Singapore,” said Neha Khanna, Director and Co- Founder, Enablers.
While private equity has nurtured new businesses in the country, it does not promote all kinds of businesses which can complement India’s future growth. Given the scope and need for focus on ignored verticals, the Startup India can work wonders. “The private equity generally rushes in one direction but for the country’s perspective this should be seen differently. The government initiative should be to promote all round entrepreneurial development in support to start-up ventures that comes from different diversified fields which is huge in numbers; especially when we talk about agriculture, food and clean energy. Also, banks are not taking position to support early stage projects hence only areas of interest to VCs/ PVT Equity are seeing growth in startups. If government ensures a frictionless access
to early stage capital to young entrepreneurs, we will see many more startup’s in areas of priority for country’s overall development,” said Pramod Saxena, Chairman Oxigen Services.
Complementing ‘Make-In-India’ The Modi government has tried to promote manufacturing in India through its ‘Make-In-India’ program. While it has begun to see results, the Startup India is expected to boost the ‘Make-In-India’ drive in India. It will allow manufacturing oriented startups to focus on making products in the country.
India Electronics and Semiconductor Association (IESA), the trade body representing the Indian Electronic System Design and Manufacturing (ESDM) industry, has applauded the pro-startup initiatives. IESA has witnessed a huge turnaround in the electronics manufacturing landscape with “Make in India” campaign. The association believes ‘Startup India’ will soon replicate a similar success. Initiatives like Electropreneur Park, which aim to create 50 ESDM startups and at least 5
global companies over 5 years with a focus on IP creation and Product Development, are the proofpoints of government’s noble intention.
MN Vidyashankar, President, IESA said, “With focussed campaigns, we are gradually moving towards developed economy by creating manufacturing opportunities, bridging India’s digital divide, and now, promoting the entrepreneurial spirits with ‘Startup India’. Today, India is among the priority nations for any commercial transaction and thereby indicating the country’s steady economic importance in the global landscape. Our entrepreneurs are bound to be benefitted from the nation’s economic upliftment and soon we will witness an entrepreneur in every home.”
Undoubtedly it would be premature to say whether or not the program will succeed. But this will give an early and much-needed platform to young and budding entrepreneurs to give shape to their ideas.
Startup India: 12 Big Announcements
Here’s what stands changed after the Startup India has been launched.
1) A Rs. 10,000 crore fund for startups: The government will set up a fund with an initial corpus of Rs. 2,500 crore and a total corpus of Rs. 10,000 crore over a period of four years, which will be managed by a board with private professionals drawn from industry bodies, academia, and successful startups. The fund will participate in the capital of SEBI registered venture funds, and invest in sectors such as manufacturing, agriculture, health, and education.
2) A single point of registration for startups: The government will launch a mobile app and a portal on April 1, which will enable startups to register their company in a day. The portal will also serve as a single point of contact for clearances, approvals and registrations, and for companies to apply for schemes under the Startup India Action Plan.
3) A simplified regulatory regime based on self-certification: To reduce the regulatory burden for startups, the government will allow startups to self-certify compliance on nine labour and environment laws through the startup mobile app. No inspections will be conducted in case of the labour laws for a period of three years.
4) A fast-track mechanism filing patent applications: Another landmark announcement is that the Central Government shall bear the cost of patents, trademarks and designs for a startup, with an 80% rebate to encourage the creation and protection of its intellectual property. This move is going to kickstart a culture of innovation in the country.
5) A credit guarantee fund for startups: The creation of a credit guarantee mechanism will help startups raise debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI, which has an annual corpus of Rs. 500 crore for the next four years.
6) Three year tax exemption: Aimed at facilitating growth and help retain capital, startups will be exempted from income tax for a period of three years. However, the exemption shall be available subject to non-distribution of dividend by the startup.
7) Startup India Hub: The Startup India Hub will serve as a single point of contact for startup ecosystem players. The hub will assist startups in obtaining financing, and organize mentorship programs to encourage knowledge exchange.
8) Relaxed norms of public-procurement: The Central Government, State Government and PSUs will exempt startups in the manufacturing sector from the criteria of “prior experience/ turnover” as long as they have their own manufacturing facility in India, and have the requisite capabilities and are able to fulfill the project requirements.
9) Faster exits for startups: Startups may be wound up within a period of 90 days from making of an application for winding up on a fast track basis, as per the recently tabled Insolvency and Bankruptcy Bill 2015, which has provisions for voluntary closure of businesses. This process will respect the concept of limited liability.
10) Atal Innovation Mission: The Atal Innovation Mission will establish sector specific incubators and 500 ‘Tinkering Labs’ to promote entrepreneurship, provide pre-incubation training and a seed fund for high-growth startups. Three innovation awards will be given per state and union territory, along with three national awards, as well as a Grand Innovation Challenge Award for finding ultra-low cost solutions for India.
11) Encouraging Innovation among students: An innovation core program targeted at school kids aims to source 10 lakh innovations from five lakh schools, out of which the the best 100 would be shortlisted and showcased at an Annual Festival of Innovations, to be held in Rashtrapati Bhavan. A Grand Challenge program called NIDHI (National Initiative for Developing and Harnessing Innovations) shall be instituted through Innovation and Entrepreneurship Development Centers (IEDCs) to support and award Rs 10 lakhs to 20 student innovations. Uchhattar Avishkar Yojana, a joint MHRD-DST scheme has earmarked Rs. 250 crore annually to foster “very high quality” research amongst IIT students.
12) An annual incubator grand challenge: The government will identify and select ten incubators, evaluated on pre-defined Key Performance Indicators (KPIs) as having the the potential to become world class, and give them Rs.10 crore each as financial assistance to ramp up their infrastructure.