Startup India: To transform India to nation of job creators, address these issues first

The government's Startup India initiative could not have come at a more opportune time. As entrepreneur Sony Joy said in an article in Firstpost, the attitude towards start-ups has changed in the country recently and it may not last for long. It is for the government cash in on this.

Aimed at boosting the entrepreneur spirit in the country, the government is today formally launching its Startup India initiative in Delhi.



As part of the initiative, the government is holding a day-long session on startups today in which around 2,000 new age ventures, 40 CEOs, and venture capitalists would participate.

The event will feature interactive talks with global leaders such as founder and CEO of SoftBank Masayoshi Son; founder of WeWork Adam Nuemann; and Uber founder Travis Kalanick, said a PTI report.

Google will be conducting an innovative session titled 'Laucnhpad Accelerator' which will involve live pitches being made by early state startups to potential investors. Whosoever gets into the accelerator will get $50,000 from Google as equity funding into their startups. (Yourstory has the list of five startups that are participating in the Google pitch. Read about them here.)

A question and answer session titled 'Face-to-face with Policy makers' is also being organized wherein secretaries of key departments will answer questions on how the government will be creating an enabling ecosystem for startups.

However, the highlight of the event is going to be the action plan to be announced by prime minister Narendra Modi in the evening. According to DIPP Secretary Amitabh Kant, the plan would help the sector penetrate tier-2 and tier-3 cities in sectors such as manufacturing and healthcare. The aim is to transform India into a nation of job creators from job seekers, he said.

You can read Insider View on startups here, here and here.

While, entrepreneurs are eagerly waiting for the announcement that will be made by the government at the event, here is a quick recap at the major issues startups in India face:

Ease of doing business: The government has to cut the processes and streamline the approval process for starting a new business.


Taxation: This is directly related to funding and ease of doing business. "The tax treatment and difficulties of doing business in India, as startups scale, has made many startups migrate to countries like Singapore where there are less difficulties in taxation. Around 65% of successful startups, that began in India, have moved out of the country," an article in Inc42 says. About 90 percent of Indian startups look to foreign venture capitals and seed funds for capital as funding from domestic investors are taxed as it is treated as income for a startups. The article says the government is now likely to ease this pain.

Funding: Apart from removing the uncertainty surrounding taxation, the government should also put in place a system to boost funding.
"...It is the non-conventional sources that have to be dipped into," Care Ratings has said. These include FDI, angel and PE investing and crowd-funding for which Sebi should act as a regulator. "As part of priority sector lending, banks could be asked to lend to a certain number of start-ups to ensure that these targets are met. A sub limit could be placed here – say 1% of credit," says Care.

Skills: Care Ratings notes that skilled manpower is required progressively to take a startup forward. "While the enterprise can start with friends and relatives it needs to be scaled up for which we must have well trained employees. Given that it cannot offer the comparable pay scales in the private sector, attracting talent is a challenge," the rating agency said in a note.

Mentorship: Care Ratings has listed this as the third challenge for Indian startups. This is important because the markets are fragmented with consumer behaviour being different in different regions.

Branding: According to Care, branding is key because there are many start-ups in the same field.

Upgradation: Start-ups have to reinvent themselves constantly with changing times especially so with the proliferation of competition across the sectors, says Care.

As this is the first times a government in India is launching a programme exclusively for startups, evidently expectations are soaring, especially on taxation issues. Over to PM Modi for now.

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Updated Date: Jan 16, 2016 10:50:49 IST

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