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Analysis

Is Startup India Just What The Doctor Ordered?

Kartik Hosanagar
posted on 19th January 2016
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Startup India was launched with much fanfare this weekend. The Action Plan includes some amazing reforms and incentives for startup entrepreneurs such as a massive Rs 10,000 crore fund of funds that will invest in domestic VCs, who will in turn invest in startups. The government is also proposing to create a new category of business (“Innovative Startups”) with rules that will make it very easy to start and close these businesses; a mobile app will make it possible to register a startup in one day. A new tax regime for startups will include exemptions for three years and concessions on capital gains tax. Further, the government is planning to set up startup incubators and hubs in various academic institutions around the country. These sweeping changes acknowledge one simple fact. India desperately needs growth and jobs. Nearly one million people enter India’s labour force every month. It is pretty clear, by now, that the much-needed growth and job creation aren’t going to come from the traditional economic machinery. Enter Startup India. 

opinion piece on Startup India Policy-01

Brilliant But Not Novel

I have two main observations about Startup India. First, it is not just a PR exercise. The thinking that has gone into the action plan is impressive. The plan attempts to address exactly the right set of issues. Lots of successful Indian companies have been relocating to Singapore in the past few years because of the difficulty of doing business at home. If Startup India’s execution matches the vision, it will reverse this trend and be a huge catalyst for our entrepreneurial ecosystem.

Second, impressive as it is, Startup India is not novel in the global context. In fact, contrary to what many commentators feel, India is not competing with Silicon Valley in terms of innovation and global investor attention. Catching up with Silicon Valley is a distant goal. At best, India is playing catch up with other international startup ecosystems. The impressive Startup Chile, which provides equity-free investments to startups and visas to foreign entrepreneurs, attracts entrepreneurs from around the world. Startup Brasil is another similar programme. South Korea’s initiatives in the form of startup funds, visa programmes, tax incentives, broadband infrastructure, and government-sponsored incubators are simply unparalleled. Israel too has had similar programmes for several decades now. All of these countries are vying for the attention of global investors. India does too. And Startup India can finally make India truly competitive in the global tech and innovation scene.

What kinds of companies can Startup India help unleash? First off, the domestic market is huge, and we will have another wave of tech-enabled services companies emerge to cater to domestic demand. Second, we have a young labour force with lots of engineers. This will help feed into Software-as-a-Service (SaaS) companies that will leverage local talent to service global tech markets. A number of other sectors that don’t usually get the attention of VCs – such as manufacturing and agriculture – are also set to get a wave of support.

Execution is Key

With startups, the idea is often a critical input. But perhaps the more critical determinant of success is execution. Startup India will be no different. The vision is excellent, but the government’s execution of the action plan will determine its impact.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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