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One Year of Start-Up India - What have we achieved?

 17th Jan 2017    23:22    Ayush 



‘Start-up India’ has completed its first anniversary. How did it affect the startup ecosystem? How did it meet the expectations of the entrepreneurial world? What else is to be expected from the scheme in the coming year? Come, let's peek into the life of Start-up India, the flagship initiative of the Indian government, intended to create a tenable ecosystem for nurturing the spirit of innovation in the form of startups in the nation.

On 16 January 2016, the ambitious scheme took its first step from the discussions on paper to one of the most rapidly executed schemes. Ringing in the tunes with ‘Start-up America’, launched on 31 January 2011, this plan also sought to galvanize the environment surrounding startups with a Rs 10,000 crore ‘Fund of Funds’ and an ‘Ecosystem without the bounds of a system’. The Action Plan included simplification and hand-holding by supportive funding and incentives, through due partnerships and incubation. The benefits would include compliance regime based on self-certification, Startup India hubs, roll-out of mobile apps and portals, fast-tracking patent examinations and tax exemption on capital gains.

So, how well did it fare? How about letting the data speak?

The official report quotes, “the Startup India Hub has been able to handle about 25000 queries received from Startups through telephone, Emails and Twitter. 1,368 applications have been received for out of which 502 had the required documents and have been recognized as Startups by DIPP. Out of the total applications received for tax, 111 applications can be considered for tax benefits as only these Startups have been incorporated after April 1, 2016. Out of these 111 applications, all have been considered by the IMB and 8 Startups.” Compared with 2015, which saw 87% rise in the startups, in 2016, ironically, the number fell by 67%. The situation looks even more grim if we note that about 800 startups founded after 2011 have somehow or other gone out of business in the past year.

Did the scheme really fail in its first year?

If we are to quote NS Viswanathan, Vice President (Industry Initiatives), Nasscom, “It took slightly longer time (for startups) because there are multiple designated units who can certify that these startups are eligible for tax benefits. Everybody is new to the scene and due diligence takes time. The process has got streamlined, now scaling up is required, which possibly should happen soon. In the governmental system, 12 months is a luxury, but this time they have acted very fast… The Startup India programme is a good beginning. The intentions were made clear. With many states coming up with their own startup policies and the countrywide momentum created, the signs are welcoming. Of course, there’s always scope for improvement. Even today, not many issues have been resolved such as ESOPs, taxation etc. I believe many of these changes will get reflected during the Union Budget. Yes, 12 months have gone by, but we will see a lot of momentum by this month end.”

In retrospect, during 2015, investors put most of their funds in e-commerce, fintech and foodtech startups. However, these were the sectors most affected by the slowdown in venture funding. Experts opine, only when investors exit with handsome returns will they invest more into newer startups, it is hypothesized to be the primary reason for the drop in investments in startups. 

Now, with demonetization setting the ground fertile for a cashless economy, startups involved in mobile payments ecosystem and cashless transactions might be at an advantage. Also, ventures into exploiting the market status with alternate currencies like cryptocurrencies may be an attraction to the investors. One thing we can surely expect that, this year would see a more originality oriented investment trend with investments in startups that intend to add value in the long run. This shall fill this year with hues of impalpable ideas and a market to explore.