THE STARTUP LANDSCAPE IN INDIA A BRIEF OVERVIEW.
INTRODUCTION:
The Startup India campaign, an
initiative announced by the Prime Minister Narender Modi, on the 15th
of August, 2015, was an action plan that intended to discard restrictive
Government policies to promote industry and internal trade. Any business which
is less than 10 years old, is headquartered in India and has a turnover of less
than Rs 100 Cr is included under this ambitious scheme.
Even though the scheme was inaugurated
by the former Finance Minister Arun Jaitley, on 16th Jan 2016, the
technological landscape of India had started evolving in the 1980’s when IT
based companies started emerging in the country.The Indian Startup ecosystem
provided software services for the domestic market and later on expanded to
exporting these services. Many online consumer Start-Ups like Naukri.com,
Matrimony.com and Book My Show led to the emergence of a boom in the online
consumer start-up market. In 2008, when
the Global Recession hit many businesses, there was a surge of professionals
moving back or investing from the Silicon Valley to Indiaand the second wave of
start-ups were kicked off by TDICI. With the emergence of broadband and SMAC (Social,
Media, Analytics and Cloud), the third phase of Indian Start-Ups paved the way
for making India the capital of the Startup culture of the world.
According to Inc 42, with 65% of its
population under the age of 35 years, India boasts of more than 6000 start-ups,
44% of which are based out of Tier2 and 3 cities. As many professionals look
towards entrepreneurship, some of the best talent in corporates is inspiring
the reverse flow of talent from MNCs to independent ventures. To promote
entrepreneurship for further job creation, the MSME Act of 2006 facilitates the
promotion of micro, small and medium enterprises and to augment this venture,
the government has initiated steps like the Startup India Learning Programme
for patent and trade mark filing, relaxing compliance policies, building infrastructure,
funding, tax support and other regulatory issues. Make in India, Skill India,
Digital India are also complementing schemes for Startup India. A prominent
example of all these schemes moving forward as a whole is the laying of Optical
Fibre Network to take internet connectivity to rural India. With this ambitious
plan being taken forward aggressively by the government as a part of the Digital
India platform, tech Startups aiming to provide quality services for education
and healthcare are banking on government support to rope in global investors
for big money. At the same time, advanced technologies like AI, IoT, ML,
BigData, analytics etc are leading to innovation and sustainability.
Thus ,’ the Demographic Dividend ‘,
which is a term used to refer to the population available for tapping into for
job creation as well as for generating consumers for their product ,is making the market more consumer friendly
by addressing local needs and the Startup
eco system in India is making waves across the world .
FACTORS CONTRIBUTING
TO THE RISE OF STARTUPS IN INDIA
1. Increase in capital flows
The increase in huge capital inflow from
global investors and the extensive focus to provide a conducive business
environment are the key factors leading to an increase in the entrepreneurial
environment of India. Many Chinese based e- commerce companies have been
showing tremendous interest in India however, the FDI curb on Chinese
investments in the midst of COVID-19 is adversely impacting many vulnerable
companies as domestic venture capital investments remain negligible. In the
past five years, Chinese investors have put
about$8 billion into India Startups including Big Basket , Paytm ,
Flipkart but Burgeon Law advises Startups to relook their models based on the
global economic environment .
2.Tech Driven Consumers:
Smartphone penetration has led to a
significant increase in the number of consumers connected to the internet. As
per the Internet and Mobile Association of India (IAMAI), in December 2017 the
number of active internet users in India grew by 11.34 per cent to reach 481
million.The sheer size of these users, along with the increasing need for
consumption makes them an attractive customer base.
3.
Potential business environment:
As Startups become scalable businesses , retaining
talent , unique employee value propositions and a great work culture keep the
venture alive and kicking beyond the initial euphoria , Thus,
institutionalising policies , focussing on learning and development and
defining leadership roles help to overcome the internal challenges to build
sustainable business models .There is a huge supply of a tech talent pool and
this human resource is looking at driving this shift of mindsets where business
can be looked upon as a safe career choice for a non-mercantile community as
well. According to John Chambers, who has two domestic companies in his
portfolio, India is emerging as a Startup hub and is a popular location for US
Startups and he feels that India may rival Silicon Valley in a decade from now.
INDO-CHINA RELATIONS
Over
the years, India and China have witnessed growth in their economic ties,
despite some bilateral and geopolitical differences. Various commonalities such
as a huge domestic market, competitive labour cost, growing economies, etc., is
driving the cooperation amongst both the countries. For China, it is looking at
an opportunity to invest in energy, textiles, auto and finance and mobiles.
With most major Indian Startups under the Chinese umbrella, it is also
imperative for the Indian Government to ensure stringent rules which disallow
Chinese takeovers .A pertinent case to mention is how most luxury brands in
Italy are owned by Chinese companies and while free trade and FDI lead to a
surge in the economy , keeping our military geopolitics in mind ,India should
not allow too much penetration of Chinese firms in the Indian market . For
that, the government needs to develop and implement laws keepingin mind the
demands of Unicorns and other Startups.
GROWTH OF INCUBATORS AND ACCELERATORS:
GOVERNMENT
INITIATIVES FOR STARTUPS:
Since the launchof this scheme in 2016,
more than thirty thousand entities have been recognised by the Department of
Industrial Policy and Promotion (DIPP) at Startups. This classification gives
these businesses access to many facilities and benefits including mentoring,
nurturing and funding.The government has brought in a lot of simplification of
regulations which were like road blocks for the ease of business. Over 32 regulations,
including angel tax have been simplified and 220 Income Tax Exemptions have
been granted. Some of the major ones are as follows:
1. Compliance
regime based on self-certification: The objective of the compliance regime
is based on self-certification to reduce the regulatory burden on Startups.
2. Startup
India hub: A virtual Startup India hub serves as an incubation platform for
Startup ecosystem stakeholders as a single point of contact for networking with
each other and access to resources and templates to assist them to grow. It is
a forum for entrepreneurs to meet other advisers, consultants, guides,
investors, incubators, accelerators and venture capital firms.
3. Simplifying
the Startup process: A Startup registration has been made simple-all that
is required is the filling up of a short form through a mobile app or through
an online portal. Thereis a portal for clearances, approvals, and registrations
4. Patent
protection: The government is also working at improvising on a legal
support system for fast-tracking patent examination at lower costs.
5. Funds of
funds
The government has created
a corpus of Rs 10,000 croreto provide funding support
to Startups. Under the SIDBI (Small Industries Development Bank of India), this
fund will play an important role to accelerate innovation-based business
creation and thereby generate employment in the country. It aims to encourage
greater participation of private capital.
6.
Atal Innovation Mission:
In order to promote
innovation and entrepreneurship in different economic sectors, this flagship
mission of the Indian government aims to create awareness through the
development of new programmes and policies.
Mindlabs in schools, incubation centres, mentoring networks with the
public sectors, corporates and institutions to support the initiatives under
the mission, stimulatingcommunity-based innovation in far flung parts of the
country are a few key areas covered under this umbrella.
7. Setting up Research Parks:
The setting up of research parks to boost innovation
through joint efforts between the academia and industry experts was set up with
an initial investment of about $15.4million for each of the seven parks
initially planned at IITs across various locations. Biotech parks are being
given a special thrust and the government intends to set up 50 incubators, 150
tech transfer offices, and 20 Bio connect offices across research institutes in
India. They are also setting up a BIRAC AcE Fund in partnership with the
National and Global Equity Funds.
SUGGESTIONS TO MITIGATE THE CHALLENGES
OF THE STARTUP ECO SYSTEM
After USA and
China, India is ranked third in the Startup ecosystem. It is pertinent to note
that the key sectors for Startups in India are Ecommerce -popular
examples being Shop Clues, Flipkart etc. Their growth rate at 22% is set to see
a huge rise due COVID 19, where people do not want to go out to shop. With a
Year on Year Growth rate of 28%, popularHealthStartups like Netmeds, Get
Active etc are gearing up to an increasing health awareness in the demographic
dividend population in addition to niche sectors. Fintech business like
PolicyBazaar,BankBazaar,PhonePe etc are expanding their operations pan-India
and EdTech, which has the potential to reach a 142 billion INR is slated
to bring about a paradigm shift in education. Post COVID, this sector has and
will be seeing many players entering the market. Market leaders like Byjus,
Unacademy etc are developing aggressive marketing policies to cope with the competition.Travel
TechStartups like GoIbibo,OYO, Yatra etc and Consumer Services like Swiggy,
Grofers etc have the potential to each INR 1088 Billion.Logisticscompanies
like Delhivery, Blackbuck etc are subsidiary industries which cater to the huge
online consumer base and have the potential to reach INR1595 billion by 2020.
In the initial
stages, most Startups are cash strapped and finding investors is a challenge.
The other challenge is the need for a bridge between customer needs and
information dissemination. The Indian customer is extremely price-sensitive and
due to this, volume driven businesses have a higher chance of survival.The
competitive Indian markets have many large players who are more capable of
dealing withbureaucratic regulations. Government regulations can suddenly
change and there have been many instances of Startups receiving notices, which
in turn leads to frustrations. The government has introduced many policies to
ease the business environment for Startups, however, it is widely perceived as difficult,
inefficient and more theoretical. We are ranked 77th out of 190
countries in terms of the ease of doing business index. Reducing red tapism and
bureaucratic processes is the first step to give confidence to professionals
entering the market.
Legal incorporation and registration are still
lengthy and expensive-a problem area despite the declared intentions of the
government to provide the least amount of hassle .The legal set-up and the
formal registration process to qualify a business for tax exemptions and
benefits need to be lowered for more and more players to take advantage of the
intention behind this initiative.
Tax policies and their enforcements lack clarity.
This may lead to a liquidity crunch if there is a penalty on delays due to late
tax filing. The Angel Tax of 2012 whichaimed to thwart money laundering has
been done away in August 2019 and reforms which are business friendly need to
be introduced on a regular basis. The FDI curb on Chinese investors amid the
COVID pandemic may be wise interms of the long-term interest of the country,
however, new policies and tax exemptions are the need of the hour.
Approaches to prudent investing,
government and CSR programs to assist young founders will inspire more people
to take up challenges and involve active citizenry to develop India. Provision
of better internet connectivity, improved transport networks, uninterrupted
power supply will also benefit Startups and help them to expand their base beyond
the Tier2 and 3 cities.
Channelizing investments
in education and building curricula to standardise the knowledge of running
Startups for building the talent pool
will prepare students for careers as entrepreneurs.
The Fund of Funds
set up by SIDBI have not received traction as the disbursement process and
programmes are not very accessible and transparent. These funds can be
leveraged to play across the strengths of diverse sectors across the country.
Emerging technologies and sectors which need an initial push would require
policy intervention like electric vehicle (EV) or e-commerce policies.
CONCLUSION:
There is a lot of
optimism in the eco-system and while Indian Startups may face hurdles and
obstacles, the efforts of all the stake holders-the founders, government
authorities and the financial aid providers- will promote growth and bolster
the economy.
BIBLIOGRAPHY:
https://assets.kpmg/content/dam/kpmg/in/pdf/2019/01/startup-landscape-ecosystem-growing-mature.pdf
https://inc42.com/buzz/sui-research-parks/
https://www.nameclues.com/blog/pm-modis-startup-india/
https://yourstory.com/2019/07/step-by-step-approach-prioritising-startup-growth-india-emulate
made in india
Comments
Post a Comment