Budget 2015: Rs 1,000 cr fund is a confidence booster but start-ups fear red tapism

The government’s much touted Make in India programme, the National Skills Mission would all get a shot in the arm with the government declaring its intent for the startup sector in the budget.

Sulekha Nair March 03, 2015 14:56:18 IST
Budget 2015: Rs 1,000 cr fund is a confidence booster but start-ups fear red tapism

The Rs 1000 crore fund set aside for IT start-ups in the Budget 2015 would pave way for entrepreneurs to explore opportunities in newer sectors, provided the proposed techno-financial, incubation and facilitation programme, or Self-Employment and Talent Utilisation (SETU) does not turn out to be a panel of bureaucrats giving rise to red tapism.

As per Finance Minister Arun Jaitley's budget, the SETU is aimed at supporting all aspects of start-up businesses, and other self-employment activities, particularly in technology-driven areas.

Though the Minister did not provide the details of the fund, the industry is confident that it will give a fillip to what some of the state governments have already been doing for this sector for some time now.

Taking the lead

The Kerala government announced a Startup Village in January 2013 that aims to launch 1,000 technology start-ups over the next 10 years and start the search for the next billion-dollar Indian company. It is India’s first incubator that is funded by the public and private sector and promoted by the Department of Science and Technology, Government of India, Technopark Trivandrum and MobME Wireless. Kris Gopalakrishnan, Co-Founder of Infosys, is the chief mentor.

A few other states like Madhya Pradesh, Andhra Pradesh and Chhattisgarh are looking to set up similar models. India is home to 3,100 startups, making it the fourth largest base in the world,  reveals the recently released Economic Survey. There is an addition of 800 startups in 2014 alone, according to a Nasscom-Zinnov survey.

If the landscape continues to evolve at this pace, then by 2020 more than 11,500 start-ups would be established in India, providing employment opportunities to over 250,000 people, according to the survey.

Nasscom estimates the revenue of the IT-BPM  industry grew 12 percent to $119 billion in 2014-15, with the export market alone making up almost $100 billion. Software products and services revenues for the next fiscal are projected to grow 12-14 percent.

Talking of the over Rs 11 lakh crore Trade and Repair Services Sector comprising 11 percent of GDP, the survey says that migration from traditional stores to modern retail continues, though the latter still accounts for only 8 percent of the total market. It points out that India’s e-commerce market is expected to grow by more than 50 percent in the next five years.

Boost for govt schemes

The Small and Medium Entrepreneurs, who are the chief beneficiaries of the start-up revolution in the country, employ close to 40 percent of the country’s workforce, contributing 45 percent to India’s manufacturing output.

The government’s much-touted Make in India program and the National Skills Mission would all get a shot in the arm with the government declaring its intent for the start-up sector in the budget.

Budget 2015 Rs 1000 cr fund is a confidence booster but startups fear red tapism

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The start-up culture thrives in India because of the enormous talent the country has. Around 65 percent of the country's population is in the 18-35 age category, local market opportunities are favorable and boundaries across the globe have shrunk with technology at its command, informs Kartik Anant, marketing manager, Zinnov Consultancy.

According to an RBI statement, the Bank credit availed by the sector in January 2014 was Rs 25 lakh crores against Rs 24 lakh crores  in January 2013.

Bengaluru and NCR are the leading two startup destinations accounting for over 50 percent of the startup base with NCR leading in the recent rounds of funding, according to the Nasscom-Zinnov survey. During 2010-14, close to $3 million is expected to have been invested in Indian start-ups.

Need of hour

What would really help small tech firms is if the government addressed the issues that really affect day-to-day operations of start-ups such as double taxation levied on software vendors, which significantly increases the TCO, explains Sanchit Vir Gogia, Chief Analyst and Group CEO, Greyhound Research. This has been pending since the UPA government regime and needs to addressed on priority basis.

Sixty two percent of the 5.77 crore small business units -- mostly individual proprietorship, which run small manufacturing, trading or service businesses in the country -- are owned by SC/ST/OBC, Jaitley said in his budget speech.

The start-up culture in India thrives despite no help from the governments, says Milind Kamble, founder president, Dalit Indian Chamber of Commerce and Industry (DICCI).

Bank lending norms are strict making it difficult for first generation entrepreneurs to provide collateral. Kamble believes the government funding will now give a boost to the sector enabling those in far flung areas in the country to dream of being entrepreneurs.

The start-up culture also will now be able to look at sectors hitherto closed such as defence, aerospace etc. With the government encouraging start-ups in these areas, it should bolster entrepreneurs to look beyond the spectrum they were focused until now.

Clarity of intent

Sachin Bhatia, co-founder, TrulyMadly, is of the opinion that for the scheme to be a success, the government should have tech experts on its panel. “If it is going to be a bureaucratic set-up, it is bound to mired in red tapism. Singapore for instance has a similar scheme but there is public-private partnership in the venture and so it is a win-win scheme,” he told Firstpost.

TrulyMadly, a dating website, recently raised Rs 35 crore in the first round of funding.

Would Bhatia have gone to the government for funding if he were to start up now?

“Of course, I would,” he states. “I would like to know how hungry and eager the government is to my idea and provide funds for it."

The ball is in the government's court then. Hopefully, they will set the fund rolling soon.

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