Government Strategies Powering Entrepreneurial Ventures

Published by MBA Skool Team, Published on April 01, 2017

The contemporary India is being described as ‘start-up’ India, thanks to the spiralling numbers of desi start-ups which have made their mark both at the national and international levels. More than 19,000 start-ups are operating in India as per the Economic survey, 2016 and this data alone testifies to start-up mania which is spreading its wings over the modern India

Why start-ups are galloping at this pace? The reasons are not that hard to figure out. Those venturing into start-ups, per se, are turning plethora of opportunities into realms of responsibilities by virtue of successful and ethical business models and in the meantime they are raking in a hell of a lot of money.

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India needs employment, e-commerce and economic boom to turn the tide on poverty, misery, poor infrastructure, etc. It is crystal clear now that government alone couldn’t deliver on these issues .The advent of start-ups have alleviated some of these issues to a great extent. Start-ups have potential to employ a chunk of Indian graduates, to give a fillip to country’s GDP , to bring innovation, to transmogrify people lives and this fact has recently dawned on the Indian government. Thus, the government has come to the forefront to lift the spirit of entrepreneurship and is striving its best to provide start-ups with the requisite needs on demand. There exists a host of roles which the government play to encourage start-ups in India.

• Formulator of smooth and easy start-up setting procedure – Young entrepreneurs don’t have too much money and time to endure the rigmarole and red tape awaiting them in government cubicles. Gauging this the Indian government eased the norms because of which the entrepreneurs can now bypass the inter-ministerial vetting and can become eligible for start-up benefits by simply getting a certificate from the Department of Industrial policy and promotion (DIPP) .The government is also aiming to bring a bankruptcy bill to ease rules to enable start-ups to flourish and is thus rolling out red carpets for entrepreneurs and snipping red tapes.

• Protector of Intellectual property - The creator must have a monopoly over his creation otherwise competitors could piggyback on unprotected successful entities. To stop the product from being counterfeited, the government draws up and enacts legislations to give incentive to creators for further creation and to tackle new threats to IP. With this idea, the Office of the Comptroller General of Patents, Designs and Trademarks launched a scheme for facilitating Start-ups Intellectual Property Protection(SIPP) on 22nd April,2016.

• Facilitator of fund raising – The maxim ‘ one needs money to make money ‘ is aptly suited to start-ups . The cumbersome regulations make investment and exit a nightmare for angel networks and venture capitalists. The government is working on simplifying those regulations to make changes in the system of commercial borrowings. In the 2016-17 financial years, the government of India will provide seed capital to about 80 new ventures with fund ranging from Rs. 50 lakh to Rs. 1 crore per company.

• Provider of R&D – There exists a feeble linkage between industry, academic institutions and R&D . The government has to pump into R&D and academic institutions to offer latest technologies so these can be tapped at the correct time by start-ups. As a part of PM Modi’s Start up Action Plan , the government will set up 31 centres of innovation to incubate over 1200 new start-ups.

• Partner in risk - Due to unforeseen circumstances, the business can go off course and the owner could plunge into the red . To mitigate the fear of failure, the Science, Technology and Innovation Policy , 2013 emphasized risk sharing by the government and this measure is increasing investment in start-ups which are fuelled by risk capital.

• Supporter of Micro, Small and Medium Enterprises(MSME) start-up – MSMEs have exhibited incremental progress in terms of quality of production ,exports, innovation and import substitution .Entrepreneurial efforts have enabled production of a number of items which were hitherto imported. MSME Market Development Assistance scheme has been announced which offers funding for publicity material . Lean Manufacturing Competitiveness scheme has been enacted to enhance manufacturing competitiveness of MSMEs through the use of various Lean Manufacturing techniques

• Acknowledger of successful start-ups – By giving honour and due recognition to successful start-ups, the government can encourage nascent ones and make them realize that their dreams can also come true, by the same token of entrepreneurship. For instance, ASSOCHAM ,on 17th June, 2016 gave prestigious awards at START UP, STAND UP India Summit and Awards, in different categories like Start-up of the year, Most promising brand ,Young Entrepreneur of the year , etc.

• Framer of start-up friendly tax regime – If the domestic taxation is very convoluted and exorbitantly unreasonable then entrepreneurs prefer to venture into foreign land. To stop the flight of talent , the government of India has done a massive overhaul of taxation system. Under original Indian tax law, if an Indian company receives share subscription which surpasses the fair value of shares, then the excess amount was taxed as income of that Indian company. But the new notification of Central Board of Direct Taxes exempts start-up from this rigorous provision. The government has planned to diminish corporate taxes from 30 to 25 % to boost start-up revenue. In the start-up budget, the government gave 100 % tax exemption for three years on profit.

• Liberalizer of Indian e- commerce - The e- commerce sector is not liberalized enough for unfettered growth and is still over-regulated. A committee has been set up under NITI Aayog CEO Amitabh Kant to consider each and every aspect of e-commerce. The government is mulling to liberalise e-commerce policy and this step ,if adopted, could give an impetus to e-commerce leaders like Snapdeal, Flipkart, Amazon,etc. The Indian e – commerce industry is expected to grow to $60-70 bn by 2019 and there would be 320 mn online shoppers as compared to 50 mn in 2015 .Thus, if e-commerce gets optimal environment then e-commerce alone can act as a catalyst for PM’s Start up India scheme.

• Reformer of digital and rural infrastructure – The rural India with a potental market for start-ups is virtually untapped due to apathy and poor connectivity. Start-ups are not able to penetrate in rural areas, be it because of roads, internet, electricity or telecom penetration. The Digital India campaign , launched on 2nd July,2015 aspires to connect rural areas with the mainstream by ameliorating their digital infrastructure. The recent measures have exhorted the Indian start-ups to take the plunge into rural India and of late, start-ups like In three and iPay have emerged with focus solely on rural markets.

The roles are being diligently played but there should not be hysteria over the performance because the start-up show has not yet ended and more roles are in the offing. I hope that these roles will attain their desired denouement and similar pivotal roles will be played out by the Government of India in the forthcoming start-up ecosystem to beget diverse, skilled, empowered and prosperous domestic entrepreneurs.

This article has been authored by Shamsul Hoda from IIM Kashipur

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