Government must nudge RBI to lend support to start-up ecosystem

India’s start-up sector is still at the budding stage. But like all other sectors, as soon as a new sector comes on the horizon, its gets populated very quickly.

By Anish Jhaveri

There are fewer and fewer jobs being created in India. This is one of the reasons why youngsters are choosing to become entrepreneurs. Another reason for this phenomenon was that the economy had slowed down during the UPA 2 era. People then decided to start up ventures. This, combined with the IT revolution and widespread broadband penetration, has led to the vibrancy of the sector.

India’s start-up sector is still at the budding stage. But like all other sectors, as soon as a new sector comes on the horizon, its gets populated very quickly. That’s what we have seen until 2015. We expect sanity to return in 2016.

India needs jobs and start-ups can create jobs. The key strength of the sector is that we are a young nation with 50 per cent of the population below the age of 25, a strength which we won’t have after two decades. So the time is now.

Indians have always been known for their entrepreneurship skills. The sector is expected to grow quite robustly in the coming years.

What we are seeing now is only a beginning point. India has the capability to be 10x the size of the US market. But to get there, the role of the government is crucial. We are the only country besides China to have sheer scale in terms of a large population at 600 billion with a majority in the age group of 25-35 years of age. Why should India be ranked third in the global arena of start-ups? We should be on the top.

The start-up ecosystem could have been much more vibrant than what it is today. Unlike the previous government who spent time in creating the biggest scams in the world, we can see an honest effort from this government.

PM Modi understands the importance of creating and enhancing the start up eco system. The government is very focussed on creating jobs. Skill India is one such marvellous effort which will start bearing fruits in the years to come..

This government is proactive and capable of thinking of a game plan that will boost the sector and its growth. The major focus of the government is tourism, infrastructure and start-up – areas that have huge potential of growth and creating more jobs.

To become the leading start-up nation in the world, we need to have educational institutes that are pro-active towards entrepreneurship.

The key challenge for the sector is greed and funding. Excessive greed can derail any commercial venture. Not all start-ups will make the mark but it is important to put in honest efforts with honest capital.

Funding is another key issue. The days of: I have an idea hence I will get funded, are over.

Start-ups don’t get debt. The Indian banking system does not lend to start-ups. For any business, it is a good practice to have a good mix of debt and equity. In our country, start-ups only get equity, no debt. That’s got to change.

The RBI has an old order mental process. This has to change. The start-up sector cannot get a boost unless the banking sector gets involved with it and gives loans. The government could set up body or association that recognises which start-up is worthy of being given loans. The government is willing to give loans to the agriculture sector, hold loan melas and eventually all the loans get written off; but not to the start-up sector.

It is time to get a proactive RBI and SEBI that will help the start-ups to flourish in India. The biggest job for the government now is to facilitate job-creating opportunities now.

The government has to get involved in this space and play the role of a facilitator. It has to ease up the start-up process, have fewer or zero compliances for start-ups until they achieve a certain size, make sure capital, debt and infrastructure is available for the sector.

Often, start-ups face local political/social pressures. The government must ensure that no political party or local goons are allowed to disrupt any start-up or any commercial enterprise.

I expect a simple road map from the Start Up India Stand Up India initiative on January 16, of how government will help the start up eco-system. There is no need for big speeches, just a simple road map.

The writer is Co-Founder, Oliphans Capital – an early stage investment firm.

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