Entrepreneurship Industry News

The Startup India Initiative ‘A History’ in making?

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Startup India initiative by Government of India has been a very ambitious project which can change the name of India from being a Software hub to Innovation hub. The intention behind the initiative has to be applauded as it aims at nurturing the entrepreneurs and also creating the local job market. This has quite a few advantages

  • Brain drain will be reduced to quite an extent
  • Creating jobs irrespective of location reduces the migration of people in search of jobs to metropolitan cities

Guidelines in the Startup India Action Plan

Recognising the Startups

Startup definition: An entity incorporated in India not more than five years ago with an annual turnover not exceeding 25 crores. These startups should be working towards innovation, development, deployment of new products, processes or services.

Startups believe that it is quite a tedious process to approach Government for recognition and rather focus on doing what they are doing. Unless they are generating the revenues they certainly would not like to be bothered about the recognition.

NIDHI

In September 2016 The Ministry of Science and Technology has announced National Initiative for Development and Harnessing Innovations (NIDHI), an umbrella program which aims to nurture ideas and innovations in the startup ecosystem. Ministry has announced 500 crores to this program in coming years to drive the startups.

The Focus is NIDHI is to have brought socio-economic development. It aims at creating new avenues to wealth and job creation.

PRAYAS (Promoting and Accelerating Young and Aspiring Innovators & Startups), is one of the components of NIDHI. The focus is mainly to encourage innovators in Fabrication Laboratory providing grant up to 10 lakhs. The seed support system is also provided up to 1 crore per startup and implemented through technology- based incubators.

Incubators

In 2005, Technology Development Board (TDB) took a proactive measure by starting Seed Support System by providing financial assistance for Startup incubators. The basic idea of providing assistance is to equip the startups with much need financial backing at the early stages based on the deserving ideas. This provides assistance to bridge the gap between development and commercialization of the technologies.

Taking this forward, Government has come up with public-private partnership mode for new incubators which are distributed all across India with 40% of funding support from Central Government

Funding

The 10,000 crore fund is managed by Small Industries Development Bank of India (SIDBI) was announced by Startup India Action Plan. SIDBI had chosen eight venture funds to invest in startups as defined in Plan and an announcement was made to support them with a corpus amount of Rs.428 crore. However, nothing concrete has worked so far regarding the fund flow to startups.

Tax Breaks

The Government status report states out of 1368 applications 502 have been recognized as Startups by Department of Industrial Policy and Promotion (DIPP) Out of all the applications received 111 was considered for tax benefits as they were formed after April 1, 2016. Only 8 startups have been approved for tax benefits by Inter-Ministerial Board.

Exit

Startups can close their operations within a span of 90 days after submitting the application for the Insolvency and Bankruptcy Code 2016 as long as no one on the board or company is in litigation.

Gaps in the Plan VS Implementation are:-

  • Approving the Startups for Tax benefits is right now coming under DIPP and also Inter-Ministerial Board
  • Will the Startups who are not generating revenues be recognized?
  • Clarity is needed regarding Capital Gains Tax and Credit Guarantee fund
  • ESOP’s and taxation needs more clarity
  • Incubation Centers though have been finalized are not functional yet

For Exit, Startups can close their operations within a span of 90 days after submitting the application for the Insolvency and Bankruptcy Code 2016 as long as no one on the board or company is in litigation. It is not clear on what is the process to be followed when there is litigation. Laws are not clearly defined.

Laws need to be well defined while recognizing the startup, for funding, for ESOP’s, taxation and to exit.

Startup India initiative needs an incremental action plan. States are gearing up with momentum which is a welcome sign. It needs a systematic approach with guided timelines where in norms have to be evolved. It can be said that it is still in infancy stage which needs to grow and develop to achieve the dream of making India ‘Innovation Hub’

Young individuals who have an IDEA, this is a welcome opportunity to surge ahead. There are going to be quite a few hiccups while going through this Plan as it is quite tedious at the moment. Though there are quite a loopholes let’s be optimistic so that the gaps can be bridged and it reaches out to a larger population to make this idea a success.

Read More: starsofstartups.in