Effect of Government Policies on Startups in India

Article Reviews

1. India – The world’s fastest growing Startup Ecosystem.

NASSCOM head claims that, “The Indian startup ecosystem has really taken off and come into its own—driven by factors such as massive funding, consolidation activities, evolving technology and an burgeoning domestic market.” The numbers reveal in the article that —from 3,100 startups in 2014 to a projection of more than 11,500 by 2020, this is certainly not a passing trend. It’s a revolution, the author proclaims. And it’s going to change the way the markets are working today in India.

2. Main Problems Faced by Startups in India

Omid Sharifi & Bentolhoda Karbalaei Hossein, — PhD Scholars, Aligarh Muslim University and Jamia Millia Islamia University, respectively — examined in their research article named ‘Understanding the Challenges faced by Startups in India’, the factors that encourage graduates to do entrepreneurship and launch support for development of their own startups. The Imperfect education system and conservative lifestyle (Au & Kwan, 2009); lack of support networks; and entrepreneurship ecosystem were mentioned to be the prime hindrances for the young startups. Plus the Human talent. Micro startups — which when compared to large mature enterprises — are in an exponentially more difficult dilemma and encounter much severe challenges in recruiting due to the reason that they cannot pay high salary to the employees or offer any career development opportunities aside from building their business from the ground up. Also their research paper reveals that unlike the West, India lacks agencies to fund its startup culture. Nasscom Vice-President Rajat Tandon has been quoted on the serious lack of angel investors who could support the budding entrepreneurs from an early stage.

3. Here’s A Look At The Key Highlights: Start Up Revolution

The industry vertical of The Hindu in its ‘Startup India Action Plan: A good start, but Govt apathy, big corporates a hurdle’ revealed the key highlights on the startup revolution — flows with flaws. As reported by Rajeev Chandrasekhar, a Member of Parliament & a Tech Entrepreneur, income tax exemption, easing compliance through reduction of regulations and having fixed qualifications as to what a ‘start-up’ is, were expectations at the top of the entrepreneurial bucket-list. The bar was raised when 80% patent filing waivers were declared, the commitment of Rs. 10,000 crore fund-of-funds from the private sector was made, and money making arenas were left wide open. Other benefits were reverted towards the waiver from labour laws and environmental checks for 3-4 years (given the terms and conditions). Further, simplifying the registration process — as the author outlines — Start-up India Hub was developed too. Factors such as prior experience, innovation criteria, recommendations from incubators, and self-certifications were identified by the DIPP to promote the ‘real’ startups. Mr. Rajeev surveyed on the responsiveness to the PM’s call for innovation and reviewed it on a  positive side. “The Start-up India Action plan is a good start to this – but will need continued support and evolution to make this a true, deep revolution for the youth of India,” the author said.

4. Trigger for progressive change?

As proposed by PM Modi, and analysed by Inc42 along with Indianweb2, the scholars view the government policies with certain contradictions and flaws in them. While most Indian startups route their tax benefits from the Singapore model, the researchers claim that the policy applies to companies that will be registered from April 1st, 2016 onwards. Whereas the action plan document defines a startup as a company that has been in existence for less than 5 years and has a turnover of less than Rs 25 cr per year. Similarly, for attainment of the Intellectual Property Rights, it is unclear from where to  obtain the government certificates. Also, the winding up process under ‘The Insolvency and Bankruptcy Bill 2015’ is critically analysed.

However, influenced by the central government’s efforts, the state governments have also stepped up. Reports measured that Bangalore led the charts with $2.43 billion, followed by New Delhi at $1.43 billion, when examining the funding receipts. The reports detail the role of Karnataka government in setting up 25 tech parks, 2000 tech based and 600 product based start ups. With their policies, they are aiming to create around 18lakh jobs in the state itself.

5. Indian Startup Ecosystem Enablers:

TheNextWeb scholar, Gaurav Sikka, reveals in his article — India: The world’s fastest growing startup ecosystem — about the two main Indian Startup Ecosystem Enablers NASSCOM and iSpirt having an aim to provide funding and bring together key stakeholders. TNW recognises NASSCOM’s ambitious initiative called “10,000 Startups” that aims to scale the level by 10x. The program is supported by Microsoft, Google, Intel, Verisign, and Kotak. Also, iSPIRT — a think tank, non-trade non-industrial body — aims to replicate the successful Silicon Valley in India, lead by pioneers like Sharad Sharma. However, scholars debate on the fact that the average valuation of an Indian startup is $2.3 million as compared to $4.2 million of an American one. Gaurav Sikka focuses that with a 59 percent of B2C, 37 percent of B2B, and 4 percent  of B2C/ B2B startup base, the ecosystem has a lot of ground to cover in terms of securing funding.

6. PM Modi’s Startup India Launch: What startups have to say about the scheme

Nidhi Agarwal, Founder and CEO of a startup herself explains in her article that Prime Minister Narendra Modi started the ambitious Startup India Movement. The government programme aims to fill gaps in the economy for the growth and the development of startups and will aim to boost digital entrepreneurship at the grassroots. The government is expected to earmark around Rs. 2,000 Cr for the initiative.

This survey is done by taking interviews of the startup founders and their response to the benefits and disadvantages of the policy. We are elated by the fact the India has the largest number if start-ups globally. Amongst the various clauses of the policies, I would like to share my views on the legal support for filing patents at free of cost and 80% reduction in filing patent fee. This action would would bring out the confidence among the entrepreneurs to startup with hassle free process.

7. Development and Impact of Tourism Industry in India

In the article written by H.Lalmunmawia in Govt. T Romana College Journal explains that Today tourism is the largest service industry in India, with a contribution of 6.23% to the national GDP and providing 8.78% of the total employment. The Ministry of Tourism is the nodal agency for the development and promotion of tourism in India and maintains the “Incredible India” campaign. Some of the recent initiatives taken by the Government to boost tourism include grant of export house status to the tourism sector and incentives for promoting private investment in the form of income tax exemptions, interest subsidy and reduced import duty. After the introduction of the “Incredible India” campaign, the demand for travel and tourism in India is expected to grow by 8.2 % between 2010 and 2019 and will place India at the third position in the world. The introduction of government policies have a massive impact on the sectors they are introduced on.