A Critical Analysis of ‘Start-up India, Stand Up India’ Campaign

May 17, 2016

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In this blogpost, Abhishek Khandelwal, Student, Institute Of Law, Nirma University, Writes about, a comprehensive understanding of the ‘Start-up India, Stand up India’ campaign by discussing how the fledging Start-up ecosystem of India has given hopes to the government as well as the entrepreneurs, the policies that form the backbone of this campaign and loopholes that need to be plugged seeing the market responses.

Introduction

On 69^th Independence Day of India, standing at the historic Red Fort, Mr. Narendra Modi announced the much needed ‘Start-up India, Stand up India’ campaign which is being welcomed by conglomerates like Soft Bank by identifying it as the beginning of Big Bang for Indian Start-up ecosystem. Does claims like this have any basis in reality ? Give 2 minutes to this blog post and you’ll form an opinion of your own.

What is Start-up India, Stand up India ?

A start-up ecosystem comprises of entrepreneurs, different kinds of financial support such as debt financing, equity investments, grants, and non-financial support including incubation, acceleration support, mentoring and technical experts. It also includes the government policies and programmes relevant to start-ups, academia and other organisations and firms that in different ways interact with or support start-ups. The kinds of new start-ups that offer an opportunity for growth and employment generation are considered to be those that are innovating, driven and looking to scale. Cash flow, creating a capacity to scale and finding the right people have always posed to be major challenges for India start-ups and these are the issues that ‘Startup India, Stand up India’ campaign is aimed at addressing.

The event that witnessed the inauguration of this scheme by Mr. Arun Jaitley on 16 January 2016 was attended by top notch 40 CEOs, start-up founders and investors from Silicon Valley, including Masayoshi Son, CEO of Soft Bank , Sachin Bansal, founder of Flipkart and many others. The event was a huge success as it was for the first time when two lakh passes were sought to attend the Start-up India workshop at Vigyan Bhavan, New Delhi which has a total seating capacity of only 1,350 individuals.

According to the scheme that is announced, a start-up is an entity that is headquartered in India, which was opened less than 5 years ago and have an annual turnover less than Rs. 25 Crore (US $ 3.7million).

Primarily, ‘Startup India’ campaign is based on an action plan aimed at promoting bank financing for start-up ventures to promote entrepreneurship and encourage start-ups with jobs creation whereas ‘Stand up India’ initiative is aimed at promoting entrepreneurship among SC/STs, women communities.

If we look back to the times before liberalisation, there was no such climate for a startup ecosystem to thrive. Even after the establishment of National Science and Technology Entrepreneurship Development Board (NSTEBD) in 1982, there was no such ecosystem even in a far sight. It was only in 1995-1996 that the startup ecosystem started to develop. It was possible because India started gaining a lot of experience and expertise in IT sector as more and more young boys and girls started moving to U.S and Europe as IT professionals. That’s how sometimes the evil of ‘brain drain’ helps in disguise.

Major Action Plan

Prime Minister, Mr. Narendra Modi while addressing the first conference of start-up entrepreneurs introduced the action plan to foster the new start-ups. Here are the major key points of that action plan aimed at reviving the ecosystem of Indian Start-ups:

To reduce the regulatory burden on start-ups, self-certification option will be provided, and it will apply to laws like payment of gratuity, contract labour, employees provident fund, water and air pollution acts.
Creation of start up India Hub for easy access to knowledge and funding at one spot.

3.Ease of registration by filling up a short form through a mobile app.

4.Legal Support for fast-track patent examinations at lower costs. ( 80 % rebate in fees for filing patent applications)

In order to provide the infant start-ups with funding, the government will set up a fund with an initial corpus of Rs. 2500 crore and a total corpus of Rs.10000 crore over four years. This credit guarantee fund for start-ups would help the flow of venture debt from the banking system to start-ups by standing guarantee against risks.
Exemption from Capital Gains Tax on investments made by incubators in start-ups.
Income tax exemption for first three years.
Innovation core programmes for students in 5 lakh schools
The launch of Atal Innovation Scheme for encouraging innovation among people.
Establishment of 35 incubators and 31 innovation centres at national institutes on PPP model.
Establishment of 7 new research parks with an investment of Rs.100 crore each.
Promotion of entrepreneurship in biotechnology by establishing 50 bio-incubators, 150 technology transfer offices and 20 bio connect offices.
Faster exit option for start-ups in the case of bankruptcy or closure (within a period of 90 days).

Possible Hiccups

Although the scheme looks promising for the initial boost, still there will be some hindrances which should be looked into. In India, Startups have always faced snags like corruption and government indifference, and the fear of giant corporates that might oppose or kill the start-ups which challenge them. The author is of the opinion that as far as government indifference towards policy making in this regard is concerned, the clouds seem to be clearing but the blight of corruption, and anti-competitive practices still looms over the budding saplings of start-ups. The setting up of ‘inter-ministerial board’ led by the Department of Industrial Policy and Promotion to decide on the ‘innovative nature’ of a enterprise in order to qualify the same as a start-up is also not a laudable step under this scheme because it is quite evident from past experience that the direct involvement of government is not desirable for the unbiased growth of start-up ecosystem. The author would like to recommend that it is a regulation which must be done away with if the government doesn’t want new start-ups to register in a foreign land like Flipkart ( a company whose founder is an Indian citizen) did in 2007 by registering itself in Singapore.

Conclusion

The action plan unveiled by Mr. Modi is a wave maker, but to make it a radical stimulus for the growth of start-ups, it is very much necessary that the power to decide the viability and existence of start-ups is taken away from the ‘inter-ministerial board.’ It is recommended that instead of ‘inter-ministerial board,’ a board of ‘professional experts’ should be set up to decide on the viability of start – ups. Further, to make sure that this board of ‘professional experts’ takes unbiased decisions on the applications received, a conclusive set of regulations should be made to regulate its conduct while making any decision on the ‘existence and viability’ as well as ‘eligibility for tax benefits’ of new start-ups. In the case of any conflicts arising out of bigoted decisions, one should be given an option to approach the Indian Judiciary.

Other than this board of ‘professional experts’, we need some effective structural reforms that permit free and fair competition’. For example, Net neutrality is a policy requirement that will determine the future for tech start-ups or any other startups which want to float themselves on the net. The author is hopeful that if the above-mentioned policy and structural reforms are done, then this campaign of Government of India will prove to be Big Bang for the Indian start-up ecosystem.

If anyone wants to assess the current ‘Net Neutrality Status’ of India after the TRAI passed its regulations on ‘Net Neutrality’ on 8^th February 2016 , read the blog post ‘Net Neutrality In India’ by the same Author at : http://blog.ipleaders.in/net-neutrality-india/

References

1 COMMENT

Nitin Gupta October 11, 2018 At 3:00 pm

nice article.

Reply