Team Polyglots

Manish Pandey, Smriti Priya

Asawari Moon,

Introduction:
Start-up India Action Plan was unveiled by our honorary Prime Minister Narendra
Modi on 16th January 2016 with the motto of flourishing start-up conducive
ecosystem in India by easing up various regulatory, financial and legal hurdles
faced by them. This seems to be a logical move in a country with sluggish economic
recovery, 4.9%1 unemployment rate and 15% 2 (Census-2011) of all Indians with
highest level of education still unemployed. Also we can see that in countries such
as Israel where Government has its contribution in boosting Start-up ecosystem and
Chile & Brazil where start-up initiatives are taken by Government; positive
outcomes can be seen.
Government intends to promote growth and employment by giving shape to
innovative and creative ideas which have potential but couldn't get the resources.
The current system of investments has led to start-ups in India coming up with
business models which were replica of the ones which got successful in foreign
countries like U.S.A.

Analysis of salient features:

Compliance Regime based on Self-certification: This seems to be easing
the regulatory hurdles by allowing start-ups to self -certify on different
environmental and labour laws. But this correction in ease of doing business
is generic in nature and should be made universal to all businesses. Also,
there are chances that labour laws might be misused, as they will not be
inspected for 3 years and the complaint verification process is lengthy.
Further, start-ups should be acquainted beforehand with the different laws to
enable them to self-certify.
Ecosystem support through Start-up India Hub: Some of the established
start-up ecosystems like US or Israel suggest that that it is good to have
integration of start-up community with educational and research institutes.
However, the hub will be consisting of central and state governments along
with other legal, financing and educational bodies. And as per Indian notions,
inclusion of government in the body might delay the knowledge exchange
and access to funding purpose the Start-up India hub is intended for.
Simplifying the start-up process through mobile app and portal: To a
great extent providing different facilities like registering, clearance and
approval through mobile app (which is supposed to release on 1 st April 2016)
will provide ease of functioning to start-up. But the point here is the
underlying laws are going to remain the same and there is no clarity right
now on how these app is going to work. Also, it is not clear what will be the
requirements in the form of documents and other legal procedures in the
online portal.
Providing legal support and fast-tracking patenting process: The
initiative of providing legal support for understanding IPRs and fast-tracking
patents examination seems to be a good approach but the government
1

http://www.tradingeconomics.com/india/unemployment-rate

2 Census 2011

Team Polyglots
Manish Pandey, Smriti Priya

Asawari Moon,

intervention in this through a panel of facilitators might actually delay the

process. Moreover, even if the facilitators proved to be effective and
government bear all its cost, then who will get the patent revenue in case
foreign companies acquire the start-up later?
Relaxed norms of public procurement: If a start-up is already getting
goods and services at competitive prices from other firms which are not PSUs,
this initiative doesnt add much value. And defaults will create further
liabilities for already not so profit making public sector entities. Moreover, the
measure does not state anything about how service capabilities of these
start-ups will be examined in the age of lean manufacturing or JIT.
Faster exit of start-ups: The policy facilitates faster winding-up of start-ups
in as low as 90 days. However, the provision for merger and acquisitions
(M&A) to revive a failing start-up and hence not letting the investments sink,
is not clear.
Tax exemption to start-ups: 3 years is a very small amount of time for a
start-up to break even, let be profitable. Further with high corporate taxes,
ease of investment for growth is on a backburner.
Government involvement through Atal mission, incubators, and
Knowledge parks: GOI should be a facilitator rather than command
ownership in this initiatives because this paves way for fertile grounds for
fangs of bureaucracy to bubble up. To add to this, if GOI is acting as a
facilitator also will it help address the start-ups failures on account of
customers unawareness & less demands, problems in talent acquisition and
difficulties in planning? Also, how government is going to guarantee
sustainability of a start-up in the longer run is dubious.

Challenges in implementation:
Supply and Demand: Before even this initiative kicks off, the biggest
challenge is the lack of supply of talent, skills, mentors and demand of
products. It is imperative the GOI should invest in the whole ecosystem. The
risk averseness of the Indian community in general is a very hampering force
and this needs to be tackled with providing appropriate aspirations,
incentives, failure safeguards and exit options.
Infrastructure gaps: India still lacks basic infrastructure of communication,
business processing etc. for firms to function without any hindrance.
Bureaucracy: The fine print still mentions the need of paperwork which adds
another layer of protocols to adhere to, making it more or less the same,
resonating with our long history of good ideas and bad implementation. For
e.g.: To be eligible for the scheme they have to show that their innovation
"Significantly Improved" the existing one. But unclear definition of significant
can be misused and can lead to corruption & deliberate delays. Further, years
of drudgery faced by businessmen in the country will take time to be shaken
off from the vivid memories.
Restoring good faith in governments intervention: Since there are
already a number of intervening bodies say investors, incubators and
institutes in the start-up ecosystem; it remains a challenge for the
government to restore faith in start-ups how its intervention is going to lessen

Team Polyglots
Manish Pandey, Smriti Priya

Asawari Moon,

start-up failures and at the same time make more of them profitable and
viable.

Recommendations:
Less intervention, more facilitation: The Government of India should not
act as a controller or regulator, and shall partner with VCs and incubators in
providing right platforms to the aspiring minds of the nations. There are many
problems faced by the start-ups in India today which need structural reforms
which GOI should try to introduce.
Development of the ecosystem: As mentioned, investment in education,
training, mentors and faculty is a must in order to supply the talent and skills
start-ups require to grow and succeed. Government can introduce
competitions and start scholarships in schools and colleges to foster
innovation skills at an early stage. Even partnering with current pioneers such
as Israel will be a good option given the two nations can share technology
and resources. Providing some good exit-options to talents willing to work in
start-ups can reduce their resistance to begin with.
Reduction in formality: To improve the ease of registering and running startups, the GOI should make more efforts in reducing the paperwork involved.
Just introducing a mobile app without improving upon the underlying
difficulties is not going to help much. For e.g., definition of Start-up is too
complex to be start-up friendly. In view of the watertight criteria for business
identification, start-ups might find it very inconvenient to get validations from
Inter-Ministerial Board.
Taxation: Its an open secret that hardly any start-up earns profits in the
initial years. Though the move to exempt start-ups from income tax is novel,
start-ups might find the number of years to be too less. Further, reduction in
Corporate Tax is the need of the hour so that seasoned firms invest into these
budding firms and Indian funds dont get transferred to foreign accounts just
to skip taxation.
Staying lean: Lean is the mantra for new age start-ups. Lean management
helps them reduce the clutter of rigidities around protocols and get the things
done faster. It would be interesting to see if Government also is able to catch
up with start-ups and stays lean to update mind-sets of those involved in the
implementation and avoid bureaucracy.

Conclusion:
The start-up India initiative is a commendable effort by the Government of India to
fuel to start up industry in India and promote innovation and job creation. It is an
old story where heavy formalization and paperwork has killed lots of new ideas. It
was a high time that India started nurturing aspiration of young minds and strive
towards growth. However, the initiatives still suffer from usual fine prints with
opportunities still plagued with bureaucracy, red tapeism and risk averseness. Step
by step the GOI needs to back this mission with structural improvements, both on
supply and demand side. Further, the implementation is the key and the
Government should iron out the current fallacies in the offerings of these initiatives.

Team Polyglots
Manish Pandey, Smriti Priya

Asawari Moon,

Government should also promote social entrepreneurship which helps create social
infrastructure even though they arent very attractive to venture capitalists.
Fostering inclusive growth through these initiatives can be made possible if the new
age entrepreneurs have GOIs backing as a facilitator. All three, Start up India,
Digital India and Make in India shall support each other and work towards the
growth and prosperity of the Nation.