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Made in India Magazine | January 19, 2021

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CAN INDIA EVER BECOME A STARTUP NATION?

CAN INDIA EVER BECOME A STARTUP NATION?
Divya Mangal

Silicon Valley is often called the startup capital of the world. Under the Prime Ministership of Narendra Modi, India hopes to harbour a few capital cities of its own in a few years that will answer to that flattering call. In his Startup India Initiative, Narendra Modi outlined his vision to make India a startup nation. The article below has the details.

Innovation: the one word that is perhaps the most used (or is it abused?) by corporate organisations and governments alike. To fester an atmosphere of innovation and problem solving, Indian Prime Minister Narendra Modi has in January unveiled the Startup India initiative, whose goal is to one day make India as fearless as the United States when it comes to starting up businesses that make lives of Indians better.

In his action plan for the Startup India initiative, the following key takeaways were featured:

1. Red tape will be removed
One of the biggest problems startups face in a country like India are the bureaucratic regulations that take months and months to finish when done right. As part of Startup India, though, all businesses that are young enough to be added under the umbrella will be allowed a self-certification process that will allow them to hit the ground running.

2. Simplifying the process
A startup will be able to be set up just by filling an online form through a mobile app in the future. A mobile app will be launched in May through which companies can be registered in a day. There will also be a single point of contact portal for clearances, approvals and registrations that generally act as hindrances.

3. Government-supported fund
One other area in which most startups struggle is funding. The government has decided to tackle this problem by setting up an initial corpus of 2500 crores and a total corpus of 10,000 crores over the next four years. The fund will be managed by private professionals, and LIC will be a co-investor in the fund.

4. Tax breaks
Capital Gains tax will be written off for startups, and so will income tax for the first three years. Currently, investments made by venture capital funds are exempt from capital gains. Now the same exemption will be extended to investments made by incubators in startups.

5. Setting up of research parks
The government has greenlit the establishment of seven new research parks – six in IITs, one in IISc with an initial investment of 100 crores each. In addition to this, grassroots national institutions are being targeted, and 35 new incubators and 31 new innovation centres are going to be set up at national institutes.

6. Innovation to be introduced in schools
The Indian school education system prides itself in producing worker bees. While that was the right strategy in decades gone past, now with India setting foot in a new economic age, innovation and entrepreneurship will be introduced as subjects of study and discussion in as many as 5 lakh schools across the country.

Here are some of the reactions from the business community about the Prime Minister’s Startup India initiative:

  • Co-founder and CEO of GREX Manish Kumar said that the new policy had few important and measurable benefits that the startups could gain. Most importantly, the prime minister outlined a change in the principle approach of the government towards the economy. So far, all the governments of India have adopted a controlling approach to the economy, aiming to have their hands on all the reins at the same time. But the Narendra Modi government is showing signs of allowing capitalism to allow markets to find their own niche, which is a welcome move.
  • Himanshu Meena, founder of Dropbase Software Private Company Parsel, felt that the most refreshing aspect was the prime minister’s pointed emphasis on minimum government intervention and his promise to ease bankruptcy laws. This indicated the government’s willingness to provide space to entrepreneurs for experimentation, without worrying too much about archaic legalities. Existing frameworks ought to be re-thought and re-planned with newer business models coming to the fore, he said, and the government seems to have understood this very real problem of many startups.
  • Kandadai Partha Sarathy, managing director of Hyderabad-based Madhyam Communications, however said that the prime minister did not touch on several issues that were affecting the startups in the country. Twenty years ago, even though he had the appetite for being an entrepreneur, he was not given the requisite loans from the banks to start his own business, and he claims that the Prime Minister has not given any bandwidth to ease of procuring capital form banks, which is another sore point for many startups that don’t go the venture capital route.
  • However, India Red Ribbon Asset Management CEO Aditya Kanoria sees a ray of hope. ‘The best of concepts failed due to lack of funding and the initiative would motivate more and more investors to invest in startups, solving the issue forever.’ The fact that the government has made investing in startups such a lucrative idea for high-net-worth individuals means that more of them will enter the startup investing space, and the funding problem will essentially ease over a period of time.
  • Joint managing director of Bonita India, Umang Srivastava, echoed this hopeful sentiment and said that startups in the country will usher in a new era. The fundamental idea of reducing government interference to improve the ecosystem is itself revolutionary thinking. Another heartening message has been that the government wants the startups to not only focus on IT but in other areas as well. These effects on the larger economy will be apparent in a few years, Srivastava said.
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