Prime Minister’s Startup India campaign celebrated its 2ndanniversary on 16th January. The initiative was launched two years back in order to provide a new dimension to doing business in India by simultaneously encouraging entrepreneurship and fostering innovation. It couldn’t have been launched at a better time given the current situation of Indian economy. Onone hand, India sits on a demographic gold mine where it could add about 2 percentage points per annum to its per capita GDP growth; but on the other hand, the dismal employment situation in the countrymight prevent the nation from yielding the benefits of the ‘demographic dividend’. In such a scenario, Startup India, was launched with a vision to ensure sustainable economic growth along with accelerating employment opportunities.
The government envisioned making startups a serious growth engine for the economy where they announced various benefits and incentives for startups such as a corpus of INR 10, 000 crores Fund of Funds (FFS), tax benefits, setting up of Research Parks and the largest business incubator in Lucknow. In order to provide easier access to funding, BSE launched the ‘Hi-Tech Startup and Other New Business Platform’ in 2016 which is a startup listing platform. Although, India has become the third largest country with startups, marginally behind the U.S. and U.K., the potential for this sector has not been fully realised. A number of loopholes still impede successful implementation of the above reforms and policies which, in turn, lead to a ‘startup un-friendly environment’. For example, as on 6th October 2017, only 5 companies established post-2006 have been listed on stock exchanges. Similarly, disbursement of FFS has been inconsequential along with insufficient tax exemptions and inadequate incubators to support the startups. Around 80% of the respondents in a recent survey of startups said that they haven’t benefitted from Startup India . Given the fact that the government has, for the first time in modern history, recognised the importance of startups, it is crucial to address the issues hampering its progress even after two years of its launch. First, incubators provide tangible as well as non-tangible benefits to startups, thus, ensuring their success over a long term. Presently, in India,each incubator supports around 42 startups which is substantially high in comparison to China, where each incubator supports 2 startups. Thus, it is of utmost importance to establish more incubators in metro as well as non-metro cities. Second, it has been empirically shown that startups that have strategic alliances with their potential rivals have higher chances of success. Thus, a formal mechanism, under the Startup India Action Plan, to encourage such alliances may generate greater success stories. Third, DIPP has already proposed to rank States on the basis of the implementation of their respective Startup policies. This needs to be expedited. The framework crafted by DIPP evaluates each State on the basis of employment created, geographical spread, number of incubators, accelerators etc. Such a ranking framework will enable different States to look atone other’s performance and learn from some of the good practices and correct their own shortcomings. Lastly, there is a need to adopt a broader approach to Startup India in terms of funding, cities and sectors. Policies must be reoriented in a manner that growth of startups take place across geographies and across all sectors. In addition, startups need to tap into alternative sources of funding (consumer crowdfunding, for example) instead of depending only on Venture Capital or Angel Funds since most of it is ‘hot money’ and thus not dependable.
Looking at the importance of startups for Indian economy and the potential they have for making a disruptive difference, if all or even some of the ideas mentioned above are accepted and implemented, Startup India will receive fresh impetus.