PM Modi’s Startup India Campaign

On India’s 69th Independence Day, Prime Minister Narendra Modi announced a campaign from the ramparts of the Red Fort which he named “Startup India” and on 16 January 2016, exactly after the five months of his announcement, he launched the “Startup India” campaign from the Vigyan Bhavan, New Delhi. The organizer of “Startup India” campaign is Department of Industrial Policy and Promotion (DIPP). Startup India has two other branches – “Standup India” (promoting entrepreneurship among SCs and STs) and “Deen Dayal Upadhyay Swaniyojan Yojana” (rural India’s version of Startup India).

Startup India

What is a Startup?

Startup is an entity, working towards innovation and development driven by technology or intellectual property, with annual turnover not exceeding INR 25 crore in any preceding financial year and incorporated or registered in India not prior to five years.

What is the Objective of Startup India?

The prime aim of the Startup India campaign is to encourage startups with job creation by promoting bank finances, restricting role of States in policy domain, providing hassle-free work environment and to get rid of “License Raj”. The main intention behind this flagship initiative of the Government of India is to create a strong eco-system which will nurture the budding startups to promote innovation that will drive sustainable economic growth and which will further generate large scale employment opportunity.

What was the need for Startup India Initiative?

Indian economy has seen a lot of crests and troughs since the period of Indus Valley Civilization. There are ample evidences to show that during the ancient periods like that of the Indus Valley Period, India’s economy and trade was very prosperous and the reason behind this prosperity was that there were least shackles in the path of economic growth. Economic hurdles became more prominent with the passage of time when different rulers ruled over the Indian sub-continent and it approached at its worst level during the British rule.

When India became a republic after its independence, it adopted a socialist-inspired economic model having elements of capitalism which further suppressed economic growth for several decades. From 1950s to 1980s, the economic growth rate of India stagnated at around 3.5% which was termed as “Hindu rate of growth” by an Indian economist Raj Krishna. After a marathon policy-making process, India devised newer policies in 1990s which was termed as “economic liberalization” and these policies boosted the economic growth to some extent, however, the desired results were still awaited as India was still at the bottom in the list of ease of doing business.

In 2014, after the establishment of NDA Government at the centre, either earlier policies were redrafted or some newer policies were introduced to which “Startup India” is an add-on. According to a report by NASSCOM, India has emerged as the youngest Startup nation in the world with over 72% of founders being less than 35 years old and with over 4200 Startups, India has emerged as world’s third largest base for the Startups and to cash this demographic dividend, the concept of “Startup India” was envisaged by the Government of India.

Action Plan of Startup India

  • Self-Certification: Allowing Startups to focus on their core-business by reducing the regulatory burden and keeping the compliance cost low.
  • Startup India hub: Single window system for Startups to enable knowledge exchange and access to funding.
  • Fast-tracking Patent Examination and Legal Support: Providing access to high-quality Intellectual Property services and resources to startups and rebate in patent application fees.
  • Mobile app and Portal: Providing a single platform for Startups to interact with Government and Regulatory Institutions for all the information and business needs.
  • Public Procurement for Startups: It is mandatory for State Governments and PSUs to procure at-least 20% from the Micro Small and Medium Enterprise (MSME).
  • INR 1000 crore Support Through a Fund of Funds: With an initial corpus of 2500 crore and total corpus of 1000 crore, Government will set up a fund for a period of 4 years. The nature of fund will be of Fund of Funds which means that it will not be routed directly into Startups, but through the capital of SEBI registered Venture Funds.
  • Credit Guarantee Fund: Encouraging banks and other lenders to provide Venture Debt to Startups.
  • Exemption of Tax on Capital Gain: Startups investing their Capital Gains in the Fund of Funds shall be given exemptions on their Capital Gains.
  • Tax Exemption for 3 Years: To provide a competitive platform to Startups, the profits of Startup initiatives are exempted from income-tax for a period of 3 years.
  • Exemption of Tax on Investments Above Fair Market Value: It will encourage seed-capital investment in Startups.
  • Startup Fests: Government is planning to introduce Startup Fests at national and international stages which will provide a platform to Startups to showcase their ideas and work with different audiences and other Startups.
  • Atal Innovation Mission with Self-Employment and Talent Utilization (SETU) Program: Providing a platform to promote innovations and give support and guidance to Startups to become successful entrepreneurs.
  • Harnessing Private Sector Enterprise: Government is planning to set-up incubators across the country in public-private-partnership and harness the expertise of private sector to promote the innovation among the Startups.
  • Innovation Centres and National Institutes: Government has proposed to set-up Innovation Centres and National Institutes across the nation to propel successful innovation through augmentation of incubation and R&D efforts.
  • Easy Exit for Startups: Government has proposed a simple exit policy for Startups if they fail in the process. It will encourage new Startups as they would not fear the lengthy exit process.

The architecture of this Flagship scheme seems quite robust, however, it is in its embryonic stage and hence it requires proper nourishment to develop in a healthy adult and that will only be possible by the effective implementation of the embedded features of this campaign-cum-mission i.e. “Startup India”.

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