Why Startup India ?
In a very innovative move, the government has acknowledged the shift in economies by the startups and has launched ‘Startup India, Standup India’ to promote and motivate not only the entrepreneurs to venture out, but also the venture capitalists who have been the primary funding source for these ventures. With Startup India, there is an effort to make the legal, funding, taxation processes simpler for the entrepreneurs.
Are you eligible to avail benefits under the initiative ?
Government has been keen to promote the right talent for a better future, and thus carefully framed the rules under Startup India schemes, which states that the startups that are eligible under the initiative are as follows:
- The operational years should be less than 5 years
- Turnover should be less than 25 crore
- Potential and Commercial business plan
- Innovative Idea or development plan
And the same would be approved and certified by the DIPP via the inter-ministerial board before they can avail the benefits of startup India, which are
- Tax exemption for the first 3 years
- 80% reduction in patent registration for your business idea
- 2500crores of initial funds with the overall FoF being 10,000 crores
- Dedicated website and mobile app
In order to inculcate the spirit on entrepreneurship in India, the Government of India launched ‘Start-up India’ initiative on January 16, 2016. If successful, this initiative indeed would be a watershed in ushering the era of economic prosperity in India. The objective of this initiative is not just to create jobs for the youth but create an army of job creators through entrepreneurship. The major elements in this initiative are as under –
- Government will set up a corpus fund of INR100 billion that will fund the private venture capitals registered with Security and Exchange Board of India (SEBI) which in turn would fund the start-ups in sectors such as manufacturing, agriculture, education and health.
- In order to enable the start-ups to register within a day, government will launch a mobile app and portal on April 1, 2016. This app and portal will serve as a single point of contact for clearances, approvals and registrations, and for companies to apply for schemes under the Start-up India Action Plan.
- Start-ups will self-certify themselves on for compliance on nine labour and environmental laws. For three years, there would be no labour inspection. This would reduce the regulatory burden.
- Central Government shall bear the cost of patents, trademarks and designs for a start-up, with an 80% rebate to encourage the creation and protection of its intellectual property.
- If the start-up doesn’t distribute the dividend, it will be exempted from income tax for the first three years. Capital gains invested in venture capitals would also be exempted from capital gains tax.
- A start-up India hub will be set up which will assist start-ups in obtaining financing, and organise mentorship programs to encourage knowledge exchange. It will function as a single point of contact on hub and spoke model with participation of central and state governments, Indian and foreign venture capital funds, angel networks, banks, incubators, legal partners, consultants, universities and research and development institutions.
- For government procurement programmes, central and state government and PSUs will exempt start-ups 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 fulfil the project requirements.
- Start-ups would be able to wind up their business on a fast track within 90 days of making the application.
- A credit guarantee mechanism will help start-ups raise debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI, which has an annual corpus of INR 5.0 billion for the next four years.
The start-up India programme is different from erstwhile programmes in its very basic approach and objective. While the objective erstwhile programmes was to create employment opportunities for the youth of the country in different sectors, start-up India aspires to channel the energy of the youth in entrepreneurship which will create jobs. Thus the start-up initiative aspires to make the Indian youth not a job seeker but a job creator. If start-up India succeeds in what is expected from it, it would be a game changer for Indian economy.
However, the road for change is not very easy and there are many challenges. First of all, the basic objective of the start-up India initiative is to inculcate the spirit of entrepreneurship in common man. Like any other plan, this scheme also requires large scale people participation along with the supportive business policies. Historically, India was good at announcing the plans but poor at implementation level. If start-up India initiative fails at implementation level, it will have same fate as the erstwhile programmes.
Secondly, experts have criticised the income tax rebate for three years as it is very hard for a start-up to become profitable in three years. Thirdly, in order to get funding, unit had to avail a certificate from the Department of Industrial Policy and Promotion (DIPP) for innovation which is just an additional hurdle in receiving fund. Setting up of the corpus find of INR100 billion is also criticised as it will fund the private venture capitalists with tax payers’ money.
Nevertheless, Start-Up India is indeed new in its approach and its failure would be a severe loss to the country. Still a lot of work is required on the front of ease of doing business. If a person is made to run from pillar to post to get a government approval, it is unconceivable for a common man to engage in manufacturing activity. A suitable business environment, disappearance of red tape, proper infrastructure is crucial to involve the common man in start-up business. Authorities should make sure that spirit of entrepreneurship generate by this programme is not faded with time.