Role of Government in encouraging Start-ups in India By Roop Pratim Datta

‘Governments do not build economies, entrepreneurs and people do.’ – Grant Cardone

At the dawn of 69th Independence Day of the Republic of India, Prime Minister Narendra Modi made the declaration of ‘Start-up India’. In the first forty years of its existence, through its affair with a democratic government, dabbling now and then into a socialist mindset, was everything it was planned to be- a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC. But even when all of these were achieved in conjunction with food security, green and white revolution, a major section of the sub-continent was still found to be living in poverty, with no access to basic amenities, low literacy rate and unemployment. Our government looked into everything that tried to make India a better and self-sufficient nation, and yet something seems to have evaded the national leaders’ outlook to still not be able to make India a nation where all prospered, economically, physically and psychologically.

It took another decade for the Government to realize that one cannot expect the economic state of the nation to improve when too many sanctions strangle private business owners to start a new venture or expand their existing businesses. The economic liberalization introduced by Prime Minister P.V. Narasimha Rao’s government set the ball rolling for the development of privately owned businesses in India.

The liberalization was just the onset. One can say it was the causation for the global phenomena we today refer to as ‘Start-up India’.

This basic introduction takes us down the major turning points which paved the way for the advent and growth of start-ups in India. One may argue that things could have happened way before this timeline had some better decisions been made by the past governments. But I feel, it is better today, than never!
We took very cautious steps for the introduction of free market economy, which still is not completely mature. We were wary of the concepts of FDIs and SEZs. Most prominently, we were wary of introducing computers in the jobs way back in late 70’s, as the third front sensitized the masses by saying that the computers would eat their jobs away!
Taking all of these into consideration, we have come much far from where we had started.

So, what is the Government’s role in this revolution called start-up India? Is it economic liberalisation, lesser norms, easier entries, easier exits, lesser tax or a culmination of all of these in conjunction with many other?
This article probes into some of the major nitty-gritty’s to answer the question posed above.

  • The present government has promised : Single Window Clearance even with the help of a mobile application
  • 10,000 crore fund of funds
  • 80% reduction in patent registration fee
  • Modified and more friendly Bankruptcy Code to ensure 90-day exit window
  • Freedom from mystifying inspections for 3 years
  • Freedom from Capital Gain Tax for 3 years
  • Freedom from tax in profits for 3 years
  • Eliminating red tape
  • Self-certification compliance
  • Innovation hub under Atal Innovation Mission
  • Starting with 5 lakh schools to target 10 lakh children for innovation programme
  • New schemes to provide IPR protection to start-ups and new firms
  • Encourage entrepreneurship.
  • Stand India across the world as a start-up hub

Realization of all of these will go a long way to bolster the economy and welfare of the entrepreneurs, employees and the general citizens of the nation. But there are hurdles in the implementation of the same.

Some are too futuristic and some too big to be achieved right away. Some roles that I believe will help to overcome these hurdle in the near future and set the atmosphere for innovation, entrepreneurship and start-up have been discussed in the following paragraphs.

To begin with, I feel the Government’s first and foremost duty to foster start-ups in India is to create awareness about start-ups in India. The nation has immense talent with a strong technically educated workforce with an average age of twenty three years. Add to that the multitude of problems we face today, I am sure that many of the solutions to these problems will be provided by this youth. So the Government should make ample opportunities to help innovators and micro entrepreneurs realize that the Government is calling them to help build a better and economically stronger India.

The above stated requirement has been addressed by the present Government to some extent by making loans much more accessible for start-ups and MSME sectors, no taxation for the first two years, easier registration procedure for the start-up organizations and easier exits for start-ups that fail. This has definitely provided an impetus to many a start-up entrepreneurs to quit their 9-to-5 job and get down and dirty with building India!

But this is not all. These needs to be a far more robust introduction of Special Economic Zones in all the states. In the present scenario, only a handful of states enjoy SEZs. Most of the states in the north-east are still deprived of major industrial and technological goals.

The Government should also ease some of the export and import restrictions. Many economists and industrial veterans have said that one cannot just ride the IT outsourcing wave to make the economy grow. Rather a huge investment of resources needs to be made in the field of industrial and production engineering. During the first year of ‘Start-up India’, India has experienced huge growth in the number of the start-up in the services sector, but a similar growth is required in the heavy engineering sector as well.

Basic necessities like electricity, water, sanitation, construction should also experience an entry of major private players. Over the last decade, we have noticed some major improvement in sectors like electricity generation and distribution with the advent of private giants like Tata Power and Reliance Power. Learning from some patterns of petrochemical giants like Royal Dutch Shell and Schlumberger, or combat armament giants like Lockheed Martin, Boeing, Airbus, India needs to allow for the expansion of entrepreneurs with the necessary skills, knowledge and risk taking ability to venture forth in these sectors.

One very important mission that the Government needs to fulfil is to act as a liaison between the global markets and local markets. We have seen some of it take steps in the form of Gujarat Industrial Meet, Bengal First Industrial Conclave and similar models by Orissa and Punjab. This will not only encourage foreign investments but also help Indian start-ups meet potential customers.

Many initiatives like Nasscom 10000 Start-ups and Warehouse can be supported by the government to help early start-ups meet potential investors. With such initiatives, India will experience a surge in the number of angel investors and venture capitalists.

The Government should also encourage the building of cities like Bangalore and Gurugram all over the nation. The models should be utilized to help state Governments build similar cities that churn out start-ups and business growth at accelerated rates.

I personally feel one area has barely been addressed by governments the world over when it came to extending support to start-ups. Governments will provide immense support to home-grown firms if the laws of patents and intellectual rights are loosened a little. Moreover, declassification of some hi-end technology will allow tech start-ups to utilize that knowledge to leverage businesses.

Hence we see that the Government acts as an incubator and accelerator in the broader sense of the term. There is ample opportunity for the government to push the economic condition and general welfare of people to greater heights. And fostering home-grown businesses will solve the two-fold ailment of unemployment and poverty in India.

So we may conclude that the synergy results in not only growth for disruptive business in India but also provide and incentive for the Government to support these businesses. This barter makes quite some sense from an economic perspective,

Much needs to be seen as to where the next Google, General Electric, Ford, Facebook and Wikipedia emerge from this nation. All we may infer as analysts is the higher chances of becoming a better and stronger nation by having Government that supports the growth of start-ups in India.
I believe we are living in some of the most exciting times ever and the future holds much to explore and invent.

Keep innovating! Keep discovering! For the next discovery might be the next big billion dollar business that changes the world we know!

– This article is submitted by Roop Pratim Datta , IIM Kashipur

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *