Despite Modi, start-ups move out of India in droves to escape hurdles

Seven months of Narendra Modi’s rule has not changed the ground reality in India for the business community and here’s the proof.

According to a report in The Economic Times, technology start-ups are moving away from Indian shores as regulatory environment in the country makes it difficult for them to raise funds.

The report, citing an estimate made by Indian Software Product Industry Roundtable (iSPIRT), has said that as many as 75 per cent of new technology ventures which plan to raise capital to start up this year will be domiciled outside India. Apart from fund raising, start-ups are also fed up of the laws governing mergers and acquisitions and taxes.

Analysing iSPIRT’s Software Product index (iSPIx), the report says nine of the top 30 business-to-business software product firms have moved to the US, Singapore and the UK. Further, as many as 54 percent of the technology firms that had raised funds last year have already left Indian shores.

“Every sale is becoming a nightmare for startups in India because of the regulations. Here they have to face harassment and corruption in the tax system,” Mohandas Pai, a former director of Infosys, has been quoted as saying in the report.

Pai was in the forefront in criticising the erstwhile UPA government’s indecision that had taken a toll on various businesses in the country.

Offering a contrast to the Indian situation, Varun Shoor, an entrepreneur, told the newspaper that when he wanted to move to the UK, the government there “was totally on the ball”.

The development is a damning one for the Modi government, given the BJP had rode to power on promises of easing the process of doing business in India. In fact, the start-up community was enthused after Modi set up a ministry to take care of entrepreneurship in India for the first time.

Karthik KS, founder and CEO, Avagmah, an online education company, had told Firstpost in May, soon after the government was formed, that he hopes the Indian government will replicate the governing models of Israel, the US and Hong Kong, where strong government backing has created an ecosystem for entrepreneurship to thrive.

Listing out the areas where immediate improvement is required, Sameer Guglani, co-founder of startup incubator The Morpheus, had urged the government to simplify regulations around starting a company, including licences, permissions, compliances and raising venture capital, and also the tax regime.

The government, however, seems to have failed to make any headway in some of these issues. (As far taxes are concerned, there has been some movement towards resolving the GST deadlock.) The start-ups’ plan to move away form India is an indication that the young entrepreneurs are losing their patience.

If the government indeed wants to make a difference, it will have to push ahead with more meaningful reforms - that too at the earliest.