Startup India is making slow progress – but progress none the less. A report released last week by the government listed a number of achievements since the initiative was launched by Prime Minister Narendra Modi (pictured above) in January.
The initiative includes various measures contained in an action plan to reduce red tape for start-ups, increase funding and business support and offer tax breaks (see this earlier post).
In the report released last Thursday the government noted among other things, that it had set up the Startup India Hub, to resolve queries from start-ups. The hub was able to resolve over 12,000 queries by telephone, email and Twitter, since its launch on April 1.
Proposals have been received to set up seven new science parks, 16 business incubators and 13 start-up centres. In addition the promised $1.5 billion government venture fund-of-funds has been set up and will be managed by the government's Sidbi.
In May 2016 the government amended the country’s Finance Bill to provide for an exemption from capital gains tax from the sale of capital assets for start-ups if shares of an unlisted company were held for more than two years.
Last month in response to the low number of successful applications for incentives available under the programme (just seven start-ups had qualified for incentives from 571 applications between April and June 2016) the government said it would add things like workshops, drop some requirements and speed up the processing of applications.
In addition, a pledge by Modi in the Startup India Action Plan to include start-ups in the 20% procurement set-aside from small businesses, which came became mandatory from April last year, has yet to be realised.
While the Ministry of Micro, Small & Medium Enterprises (MSME) notified central departments and public agencies on March 10 of the new provision, Manoj Joshi, joint secretary for SMEs in the ministry, told Economic Times last month that it was up to central government agencies to decide on which enterprise to procure from.
Micro firms support
The Indian government has also launched two other schemes to boost funding to micro entrepreneurs as well as to businesses run by lower castes and women.
Stand Up India (launched in January 2016) mandates bank branches to fund at least one woman and one person described as a scheduled caste member. The Mudra scheme, launched in April 2015, provides small loans via banks. In the 2015/16 financial year banks disbursed over 34.8 million loans worth $19.7 billion.
Growth boom over?
India’s start-ups are growing thanks to a booming domestic market hungry for new services. A 2015 report by India’s IT association Nasscom ranked the country’s number of start-ups behind only the US, the UK and Israel (see this earlier post).
A subsequent Nasscom report from the same year reported a 100% growth in the number of private equity, venture capitalists, angel investors and a 125% growth in funding last year over 2014.
However India's entrepreneurs are still constrained by a shortage of skilled workers, poor infrastructure, red tape and low internet adoption (see this post). Many start-ups are forced to register abroad to avoid complex regulations in the country.
Investment in start-ups may also have already overheated. The Wall Street Journal reported earlier this week that private-equity and venture-capital funds raised by IT firms in India fell 56% to $528 million in the three months ended June 30.
The hot money might cool, but for Startup India to succeed Modi's government must double its efforts to cut the tedious red tape that bog down Indian business and let entrepreneurs get on with what they do best.
Timm is a South African who writes on small business. He visited India before the start-up boom, in 2010. Follow Small Business Insight on Twitter at @Smallbinsight.