Startup India Action Plan: Key Takeaways

NEW DELHI, INDIA: In his op-ed on Middle East, ‘Two states for two peoples’, Shimon Peres, the then president of Israel highlighted his nations’ creative and innovative prowess in science and technology and how it transformed barren deserts into flourishing fields and pioneered new frontiers in various fields.

Today, Israel is known as the startup nation of the world and a high percentage of budgetary allocations are meant for R&D.

To bring India at the forefront of entrepreneurship another brand-new program – Startup India – is straight out of Narendra Modi’s hat and includes new policies and initiatives that would make it easier for investors and startup founders to incubate their ventures in the country. So, the startup ecosystem which witnessed a lot of action last year has received another “boost” from the Prime Minister.

Let’s have a look on the major announcements made at the conference:

10,000 crore Fund and Tax Exemption for Three Years

Under this plan the government will set up a fund with an initial corpus of 2,500 crore and a total corpus of 10,000 crore over a period of four years, managed by a board with private professionals drawn from industry bodies, academia, and successful start-ups. On top of this, the fund will participate in the capital of SEBI registered venture funds, and will invest in sectors such as manufacturing, agriculture, health, and education.

“An encouraging initiative...the business friendly tax environment for startups would be promising for creating an organized market from a highly unorganized one.”

- Debadutta Upadhaya, Co-Founder, Timesaverz  

“The right step toward making environment friendlier for entrepreneurs. We will wait for the fine print to understand exactly what the next steps will be. However, I can only say that outcome will be in the positive direction and we are very excited!”

- Raghav Chandra, Co-founder, Urbanclap

“The government has acted like a disruptive start up. The policies around cleaning the license raj will be a huge booster for Startup community while both setting up and dissolving a company. Other initiatives such as tax benefits and easy IPR regulations will go a long way in making India’s start up ecosystem super successful.”

- Radhika Aggarwal, Co-founder & CBO, Shopclues

A 20 per cent tax on capital gains made on investments by entrepreneurs after selling own assets as well as government-recognized venture capitalists will also be exempt to boost financing.

Self-certification Scheme

A self-certification scheme to ensure no inspection during the first three years of launch of the venture.

Patents Registry

Also, a liberalized patent regime is being brought to help startup businesses register patents, for which the fee will be slashed by 80 per cent.

“Most populated India has sharpest brains of all times and this initiative will give a platform to many enthusiastic but under confident talents to come out of their ordeal. Encouraging privatisation will speed the pace at which India is developing.”

- Shaifali Agarwal Holani, Founder and CEO, EasyFix

“It is exciting that the government is standing up and noticing the startup revolution in India and calling on the youth to be job makers and not job seekers. From a policy standpoint this is a welcome change.”

- Anurag Jain, Co-founder & COO, Girnar Soft

Startup India Hub

A single point of contact for the entire startup ecosystem to enable knowledge exchange and access to funding.

“I’ve started investing in startups. There are enough number of people in the market who are interested. I’m hoping that with time, we’ll have people raising $50M-$100M from domestic investors.”

- Sachin Bansal, Founder & Executive Chairman, Flipkart

“If you get too much funding, you lose financial discipline. We have seen this move before – we are in a bubble now, and it will be harder for India to recover than for the US.”

- BJ Arun, CEO, July Systems

Single Point of Registration

A mobile app and a portal will be launched on April 1 to enable startups to register their company in a day. The portal will also serve as a single point of contact for clearances, approvals and registrations, and for companies to apply for schemes under the Startup India Action Plan.

Public-procurement Norms

As long as the startups have their own manufacturing facility in India, and have the requisite capabilities to fulfil the project requirements they can participate in tenders floated by the Central Government, State Government and PSUs.

“In India, payments is very different, it’s a big area where we need to change the way we serve. The way we deal with that is to empower the local team to find the local solution.”

- Travis Kalanick, CEO, UBER

“We are excited to see the strong will and joint effort from government to make a decisive push to create growth-oriented environment for startups. It would be immensely helpful to have a central unified policy framework across India for budding entrepreneurs. Similarly, supportive and thriving startup ecosystem across all states would help entrepreneurs from every nook and corner of the country to have equal opportunity to be successful.”

- Vamsi Krishna, Co-founder & CEO, Vedantu

Atal Innovation Mission

To provide funds to a network of institutions to conduct research on innovations that can improve economic growth and job creation. The mission will also provide inputs to all central ministries on innovation and suggest a funding mechanism for target-oriented research.

Easy Exit

An easy exit option will be provided under the bankruptcy Act so that startups can exit within 90 days.

Innovation Programs for Students

This program aims to source 10 lakh innovations from five lakh schools, out of which the best 100 would be shortlisted and showcased at an Annual Festival of Innovations, to be held in Rashtrapati Bhavan.

A Grand Challenge program called NIDHI (National Initiative for Developing and Harnessing Innovations) shall be instituted through Innovation and Entrepreneurship Development Centres (IEDCs) to support and award INR 10 lakhs to 20 student innovations. Uchhattar Avishkar Yojana, a joint MHRD-DST scheme has earmarked 250 crore annually to foster research amongst IIT students.

Research Park

Modelled on the research park at IIT Madras the government will set up seven new research parks – six in IITs, one in IISc with an initial investment of ₹ 100 crore each. Apart from this, 31 centres of innovation, 13 startup centres and 18 technology business incubators in national institutions will be established.

Bio-tech Entrepreneurship

Five new bio clusters, 50 new bio incubators, 150 technology transfer offices and 20 bio connect offices will be established.

Annual Incubator Challenge

The government will identify and select ten incubators, evaluated on pre-defined Key Performance Indicators (KPIs) as having the potential to become world class, and give them  10 crore each as financial assistance to ramp up their infrastructure.

To Conclude…

When Muhammad bin Tughluq issued token currency he failed severely. Now, the idea of token currency was quite ahead of its time and similar experiments were also carried out in China and Persia. But, history tells us that Tughluq failed as people started minting their own coins. Also, the value of the copper coin was kept at par with the gold and silver coins, so once the scheme was called off people were paid in gold and silver for the fake coins.

This is a classic example of how any initiative can enter into doldrums with no proper planning ahead.

Startup India is a smart initiative by the government and let’s hope that it proves to be useful and not end up as another rozgar yojna and numerous schemes launched in the past after repackaging.