Startups & Make in India Obstacles and Achievements

Posted in Entrepreneurship & Startups Articles, Total Reads: 408
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India, the land of entrepreneurs stands third in global startup ecosystem (Nasscom report, 2015). There are many unique characteristics of India which makes it a prominent start-up nation. Startups are becoming one of the pillars of economy existing in various areas from IT, e-commerce to robotics. Looking at the blessed but challenging demographic of India, providing goods, services, security and employment to growing young population is imminent task for Government of India (GOI). ‘Make in India’ campaign was born from seriousness of this task in Sept, 2015. It consists of many initiatives designed to push firms, local and global, to invest in India and make India a manufacturing hub.

Here startups comes into picture which can make a real positive difference in making ‘Make in India’ campaign a success and reality. With availability of global funds, availability and inclination of best skilled people, transitioning tendencies of self-employment and most important – with world’s one of the largest consumer base, startups can reach for all the stars. Indian startups have capacity to push ‘Make in India’ campaign truly.


Startup India:

Generally speaking startups are new ventures, a form of organization which are designed for scalable business. In the process of development of new processes or products, startups are created. Base of such organization revolves around revolutionary innovative idea which can be converted into business case and make our society better. In last 3-4 years prominently there has been increase in startups in versatile areas like retail, food delivery, consulting, e-commerce, medical services, delivery services, fitness etc. On an average 800 startups are born every year. Startups are evolving in terms of product capabilities, networking, taking calculated risks venturing into new spaces.


Image: pixabay


Both technology based and non- technology based startups are important from ‘Make in India’ initiative. Technology startups like e-commerce contributes through providing platform for thousands of local sellers whereas construction startups like ‘m-supply’ collaborates house owners and raw material suppliers directly. Economic benefits for stakeholders involved in transaction are increased as middle man/unnecessary middle steps are eliminated, which ultimately adds to overall economic output.


‘Make in India’ Campaign:

This initiative of GOI, launched by Prime minister of India in Sept, 2014 has caught attention of different fragments of businesses and society. It recognizes different 25 sectors and aims to enhance productivity and job creations in these sectors. It comprises of many initiatives which will support increase in productivity for small businesses.

Currently biggest challenge before success of campaign is parameters of ‘Ease of doing business report, corruption, availability of skilled labor etc. Further part of the paper will be discussing how startups and ‘Make in India’ initiatives can be of integral part of each other.

 

PESTLE analysis of Indian Startups:

PESTLE is acronym for Political, Economic, Social, Technological, Legal and Environmental. It is a part of the external analysis when conducting a strategic analysis and gives an overview of the different macro-environmental factors that the company has to take into consideration. Using the PESTLE analysis, let’s see how of startups India can make a dent in ‘Make in India’ campaign:

1. Political Factors:

Prime minster of India plans to improve India’s rank of ease of doing business to 50 from current 142. India is ranked 155th in terms of starting a business. Many government policies are coming into light to improve this condition. Standup India initiative aims to build positive ecosystem for upcoming ventures. Standup India will help startups with bank funding and encourage entrepreneurship spirit.

One of the other major initiative which will help startups is single online clearance system. This new online clearance system for new entrepreneurs will allow them to apply and track application status at one location. Through this system 133 different clearances those are given by different government bodies will come under a single window.

Overall regulations are changing to support startup ecosystem and ‘Make in India’ campaign. With effective implementation of these policies new firms can achieve new strides. Corruption is biggest impediment which prevents achieving desired policy goals. Together, government bodies and entrepreneur society can come together to tackle corruption related issues.


2. Economic Factors:

Many different factors comes under economic factors like access to credit, inflation rates, global economic environment, access to resources, availability of skilled workforce etc.

Here biggest problem for startups have been access to credit. Attracting investors to fund ventures or getting loans from banks are perennial problems for startups. Below fig shows changing trends over last quarter of 2015 over increasing uncertainties in global economic environment. Banks should give loans to startups without prior credit history. Many times despite raising sufficient initial capital, startups find it difficult to survive as they can’t match revenue and burn rate mostly because of changed economic factors.

On the other hand many corporates are investing into new ventures, setting up incubators to support them. Also there is new, emerging concept of funding called “Crowdsourcing” where capital is raised from numerous investors through many channels like internet, events, mail-order etc. Many startups like Wishberry, Kitto have raised money through crowdsourcing. But this option is not that popular in India yet.

Finding right skilled human power is another biggest challenge before startups. India’s need of skilled labour is so huge that National Skill Development Corporation (NSDC) has been mandated to skill 150 million Indians by 2022. For a startup, it is particularly difficult to attract and hire talent and skilled workers. As they cannot match salary level given by large, established companies and also cannot offer job security on long term basis.

Economic Contributions of Startups:

Innovations are driving force behind economic developments and most innovative and radical ideas are generated from new ventures. With Flipkart’s birth e-commerce was born in India and in just few years they have covered 95% of coverage (Amazon). Startups like TruckSuvidha are providing marketplace for truckers to ensure that their backhauls are loaded. This way it is improving logistics performance of India.

Another important contribution is of job creation. Startups provide range of employment opportunities even for freshers. India needs job creation at alarming pace. As per Nasscom, 80,000 jobs were created by startups in 2015. This contribution is quite remarkable. Many startups provide flexible hours/part time working options which works as an anchor for many students.

Startup firms are the most versatile economic organizations in the market, since they provide additional dynamics and competitiveness to the economic system. This means that the economy stays healthy, vital and diligent, while individual companies find it harder to fall asleep on their laurels.

 

3. Social Factors:

Indian culture is biggest hurdle as we are taught to look down on failures. Failures are not met with encouraging advices in most of the cases. People are sensitive towards risks and rewards. And Indian economy which is highly price sensitive, worsens the situation. Right kind of mentorship is not available. Available mentorship and skill enhancement may not be accessible in all the cases. So though someone has potential to start something and may be that idea is really revolutionary but if that doesn’t meet right guidance to turn it into a successful business then that idea remain irrelevant.

Second factor among all social factor is nature of Indian markets. Huge, diverse demographics makes it really hard to capture consumer’s mindset. Literally after every 30-40 km region, one can find change in taste, traditions and habits. Standard of living varies across every single region. Even if a firm is able to capture consumer mindset, it cannot cater to all of their needs. At this point most startups gets stagnant in figuring out strategies and they eventually shuts down.

Next factor is location. Depending on the local social environment, startups establish themselves into a particular region/city. Not every product is welcomed by all regions as mentioned earlier taste and culture varies across. Location depends on investment activities also. In the below fig. city wise breakup of startups is shown. NCR and Bangalore has highest number of startups predominantly because of economic activities of population of both cities. Cities like Jaipur, Chandigarh, Chennai, and Jodhpur are witnessing increasing startup activities. Successful startup like Zo rooms was conceived in small city like Jodhpur.

Further relevant point is India’s demographic dividend. India as the youngest nation in the world and huge overall population has one of the largest consumer base in the world. For every unique need of every segment of population there is opportunity for new venture. Our infrastructure, healthcare, education systems are in dire need of up gradation where startups can make huge difference.

Looking at the increasing use of internet and penetration of smart mobile phones, startups have a very exciting attribute to exploit. High mobile penetration in urban and rural India has reshaped the economy of the country and how goods and services are offered. It has led to greater efficiencies and increased productivity. Now after demonization, financial inclusion has accelerated its pace. This is definitely going to help businesses as transparency in overall system is increased.

Last but most important social factor which needs to be discussed here is the values which startups bring into society. Startup stories becomes inspiration for creativity. Entrepreneurship brings a new mind set and pro-activity into the society. The population is starting to increasingly realize that they have a responsibility for their work and career development.

 

4. Technological Factors:

Infrastructure is key issue which need to be addressed. As mentioned above to cater to increasing internet users we need robust infrastructure. Seamless internet connectivity is still present in very few pockets of the country.

Next issue is cyber security. As more and more people are signing up for various internet platforms for shopping, banking and many services, safeguarding their crucial data information is becoming herculean task for startups. Many startups have B2B as their primary customer base and protecting them from cyber threat becomes important from business point of view.

Contributions of startups in technology:

There are numerous startups which are making advances in automation area. Home automation, warehouse automation, banking services automation are the different areas where many startups are functioning. A startup company named Sharpnodes which works on the ground of Internet of things monitors’ performance of household appliances. Falcon Autotech makes warehouse operations efficient. Healthcare tech products are making life easier for patients as well as for doctors and hospitals. These startups not only provide a product or service but they make related system more efficient saving time, energy and other resources.

High-tech service startups are very closely connected to technical education institutions. An appropriate entrepreneurship ecosystem thus promotes the R&D as well as innovation approach of technical institutions, companies and connecting institutions as well as contributes to the applicative orientation of research work at universities and research institutions.


5. Legal Factors

The Government of India has started to reform the business regulations in order to create the hassle free experience for the emerging businesses to grow and evolve.

In order to make compliance easy and flexible, Startups shall be allowed to self-certify compliance with 9 labor and environment laws. In the case of labor laws, no inspection will be done for 3 years. However Startups would inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

Startups would be falling under the ‘white category’ (as was defined by the Central Pollution Control Board (CPCB)) and could be able to self-certify compliance.

A fast-track system for patent examination at lower costs would be started by the central government. This system will promote awareness and adoption of the Intellectual Property Rights (IPRs) by the start-up foundations.

The scheme for Startup Intellectual Property Protection (SIPP) would facilitate filing of Patents, Trademarks and Designs by innovative Startups. Various measures being taken in this regard include:

• Fast-tracking of Startup patent application

• Panel of facilitators to assist in filing of IP applications.

• The Central Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable.

• Rebate on filing of application. Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies.


6. Environmental Factors:

Startups from sectors like tourism, agriculture, insurance should consider their ecological footprints. While creating business venture, the level of knowledge the business advisers have about environmental issues and existing regulations and their willingness to discuss it with their potential clients is important here. In some cases lack of information can falsify otherwise well-meant business purpose. There are many green startups which exists in India. Along with product development and providing services they focus on educating masses about environmental issues.

For e.g.

Bengaluru-based water data company Nextdrop, for instance, allows valvemen to update residents on water availability.


Conclusion:

There are different sectors where by establishing themselves startups can shape up ‘Make in India’ movement. Some of the key sectors are summarized below.


In the present scenario as per the PESTLE analysis startups are facing many challenges but overall ecosystem is evolving. With increasing government support and proper guiding channels, new ventures can become sustainable in long term. Startups can become face of the ‘Make in India’ campaign. They can help government in resolving crippling infrastructure issues where government efforts falls short given the complexity and scope of these issues. In this VUCA (Volatile, Uncertain, Complex and Ambiguous) world, a true entrepreneurial spirit provides hopes for economic progression.


This article has been authored by Rasika Wanganekar from SIBM Bengaluru


References:

- Keshav Kumar, ‘Indian online startups: Can they stand against the world’, IIJCRMS, Vol III, April 2015

- NASSCOM startup report, 2015

- ‘Startups India- An overview’ report by Grant Thorton, 2015

- Crisil survey on SME’s of India, 2015

- ‘Creating a vibrant entrepreneurial ecosystem in India’ report by planning commission, Jun 2013


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