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  Age Debate: Starting up on reforms

Age Debate: Starting up on reforms

Published : Jan 21, 2016, 6:00 am IST
Updated : Jan 21, 2016, 6:00 am IST

The fact that India is the new land of opportunity cannot denied.

Ambika Sharma
 Ambika Sharma

The fact that India is the new land of opportunity cannot denied. Many professionals, both experienced and young, have identified the massive scope of business that the country offers with its diverse consumer base. They have taken the entrepreneurial leap. Driven by these new-age, digitally-powered business professionals, India has seen itself compete with and hold its own against traditional heavyweights such as the United States and China.

However, the playing field was not always level. Start-ups, which play a large part in India’s economy, have been encumbered by archaic business laws and policies. As an entrepreneur myself, I can attest to the challenges any new venture might face in trying to operate in the Indian market. Many start-ups, having succeeded in validating their business models, often shifted base to countries such as Singapore that offer a more conducive business environment.

The Government of India’s “Start-Up India, Stand Up India” initiative comes as a welcome step as it will help Indian start-ups grow and achieve success indigenously. Recognising entrepreneurs’ need for freedom from the state, Union finance minister Arun Jaitley says that “Start-Up India” will be the final break from conventional licence raj, and he is not wrong. Most of the current business laws and policy frameworks in the country are not just outdated, but also extremely inflexible. By identifying start-ups as distinct business entities, the government has streamlined the process of opening, operating and exiting new businesses.

As Nirmala Sitharaman, minister of state, commerce and industry put it, “The government will remove the clutter so that start-ups can focus on their core business ideas.” Consider the single-point registration that will be enabled through the Government of India’s mobile app that will be launched on April 1; or the fact that the regulatory burden on Indian start-ups has been simplified by allowing them to ensure labour and environment law compliance through self-certification. The Indian start-up sector needed such ground-breaking measures.

The move to simplify the tax procedure, ensure a more transparent tax regime and the tax exemption for start-ups will also find much acceptance within the industry. Start-ups, especially during their early stage operations, often look to minimise their gross expenditure. As such, the tax relaxation will come in extremely handy in retaining capital, which will, in turn, facilitate start-up growth.

The setting up of a Rs 10,000 crore corpus and incubators to drive growth for start-ups is also extremely encouraging. Start-ups often struggle for capital and support infrastructure in their early phase — having an extensive support infrastructure will ensure that viable business ideas do not die.

“Big things often have small beginnings” — this saying exemplifies the start-up sector in India. By launching the “Start-Up India” initiative, the Government of India is ensuring that big ideas get the support and encouragement necessary to make the country the start-up hub of the world. The beginning is certainly promising, and if the initiative delivers on all that it promises, India will soon fulfil its potential as an emerging economic superpower.

Ambika Sharma is the founder of Instappy, a startup launched in September 2015

$A small but promising start

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Historically, entrepreneurship has been integral to India, where various communities have been associated with myriad businesses. The announcement by the government on start-ups should further encourage entrepreneurship in the country. Tax holiday, patents, ease of closing companies, investment fund and a gateway for public procurement are multi-faceted measures that will definitely make it easier for companies to do business.

Nevertheless, thought and action are necessary to accelerate the start-up culture in India. A Rs 10,000 crore special fund, Rs 2,000 crore credit guarantee scheme, a package of incentives and eased public procurement norms for start-ups are steps in the right direction.

Such measures bring positivity. But the government and the industry want exponential growth in start-ups. Can these measures alone achieve that outcome

The attempt to end licence raj is very assuring, but it remains to be seen whether this will become a reality. For example, to get the “start-up” status a certification is necessary.

While there are authorities in addition to government bodies granting such a certificate, there lies a potential risk of misuse if the approval processes extend more discretionary powers, other than standard empirical procedures, to the authorities.

Similarly, the tax exemption for the first three years could prove to be a great scheme for a few start-ups, but not the majority.

A similar argument exists for funds. If executed properly, these funds could come to an entrepreneur’s rescue. But there are many things we don’t know. How will the funds be distributed Who will distribute them — Life Insurance Corporation or the Securities and Exchange Board of India Or will there be a new organisation There are a lot of questions that come up. The devil will be in the details.

Often there are many incidental problems that start-ups have to face. I was speaking to the founders of an education start-up, which is three years old. While they are excited about the way forward, they remain sceptical. The company has not been profitable since its inception and hopes to break even in the coming year. I learnt that smaller companies are always scared to file returns with losses, since this attracts the attention of the taxman who believes that losses are shown on account of income-tax evasion.

There are many such problems that an entrepreneur faces today on a daily basis. It often makes him/her fearful and creates inhibiting factors.

If start-ups have to grow exponentially as envisioned by Prime Minister Narendra Modi, India will need drastic steps. World-class start-ups require world-class infrastructure.

Look at the conditions of our “millennium city” Gurgaon and “I-T capital” Bengaluru. Pathetic roads, erratic electricity, poor Internet connectivity and high pollution levels require immediate attention. Corruption also needs to be addressed.

The unprecedented support shown towards the start-up community by the government is admirable, but it’s too early to say that “Start-Up India” will finally break from the conventional licence raj.

Sudhir Singh Dungarpur is partner, PricewaterhouseCoopers

$The devil is in the details

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