Economic Survey proposes ways to bring back Indian startups domiciled abroad

With easy access to capital from private equity and venture capital firms, more Indian startups are choosing to be headquartered in India than abroad, while those listed abroad are exploring a return home, according to the Economic Survey 2022-23.

For startups, domiciling abroad has been relatively more lucrative in terms of access to external capital, friendly tax structures, and not having to wade through complex and uncertain regulatory environments. The Economic Survey calls the movement of Indian startups abroad "Flipping".

However, more recently, the government has observed that Indian startups headquartered abroad are making a beeline back home thanks to the country's burgeoning PE/VC ecosystem and the support regulated bodies are providing the ecosystem.

To encourage more companies to "reserve flip", the Economic Survey lists a few things regulated bodies and other stakeholders can do, including simplifying ESOP taxation and other taxes, making capital flows easier, facilitating collaborations with established private entities, and developing the incubation and funding landscape for social innovation and impact investing.

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"With solution-oriented strategies, startups will continue to be the messengers of India’s entrepreneurial dynamism," the Economic Survey said.

Last year, Flipkart-owned PhonePe announced moving all of its business from Singapore to India. Co-founder and CEO Sameer Nigam recently revealed that its investors paid almost Rs 8,000 crore in taxes.