Two Years Of Modi Govt | Narendra Modi’s Startup Sapling Yet To Bloom

Addressing the nation on the 69th Independence Day, prime minister Narendra Modi announced the 'Startup India, Standup India' initiative on August 15, 2015, to give a new dimension to entrepreneurship in India and promote and nurture the startup ecosystem. Then, on January 16 this year, Modi announced an Action Plan for the startup India initiative which offers several incentives to boost startup ventures which are seen as key to employment generation and wealth creation. So, while Modi completes two years as the country’s prime minister on May 16, his Action Plan on startups which just completes four months, is still a sapling yet to bloom.

The Action Plan is divided across the following areas: simplification and handholding, funding support and incentives, and industry-academia partnership and incubation.

As part of the simplification and handholding, the action plan includes:

• Compliance regime based on self certification to reduce the regulatory burden on startups and allowing them to focus on their core business

• A startup India hub which will be a single point of contact for knowledge exchange and access to funding

• A mobile app and portal to serve as the single platform for startups for interacting with government and regulatory

• Legal support and fast-tracking patent examination at lower costs

• Relaxed norms of public procurement for startups

• Faster exit for startups with a 90-day window

As part of the funding support and incentives, the action plan includes:

• Setting up of a dedicated find of Rs 10,000 crore to boost the startup ecosystem with an initial funding of Rs 2500 crore. The Fund will be in the nature of Fund of Funds, which means that it will not invest directly into Startups, but shall participate in the capital of Sebi registered Venture Funds.

• To catalyse entrepreneurship by providing credit to innovators across all sections of society

• Tax exemption on capital gains

• Tax exemption to startups for three years

• Tax exemption on investments above fair market value

As part of the industry-academia partnership and incubation, the action plan includes:

• Organising startup fests for showcasing innovation and providing a collaboration platform

• Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Programme

• Harnessing private sector expertise for incubator setup

• Building innovation centres at National institutes

• Setting up of seven new research parks modeled on the Research Park Setup at IIT Madras

• Launching of innovation focused programs for students

Overall, Modi’s Startup India initiatives have been well received by the startup community. For instance, within just one month of the launch of the startup portal, over 200 people have come up for registration of their startups. The dedicated fund and the simplification of norms for both entry and exit of the startups will certainly be a big boost for the startup community. However, some of the incentives such as tax-free profits for the first three years seem relevant more in principle than in reality as most startups are hardly profitable in the first three years of operations. In the same breath, some venture capitalists have said there are no announcements that will encourage venture capitalists and other investors to invest more in Indian startups.

That said, Modi has managed to keep the momentum around his startup initiatives alive. On April 21, the Narendra Modi government launched ‘Twitter Seva’, a special Twitter cell manned by a set of dedicated officers of the Commerce and Industry Ministry. The cell promises to respond to queries from startups, exporters and importers, and other stakeholders within 48 to 72 working hours. Therefore, while the motives are encouraging, the extent to which the community is benefitted remains to be seen!