In recent years, startups have been receiving an increasing focus on various parts of the world. In India alone, the number of startups has increased tremendously, and it has been gathering support from all the directions. In the current state of economic slowdown, the youth of the country is already unemployed and require jobs to sustain. It is through innovation and scalable technology that the startups can generate an impactful solution, and thus act as vehicles for socio-economic development and transformation.
Narendra Modi’s, who celebrated his 69th birthday yesterday, Startup India movement has already brought a lot of startups to success. With the slowing Indian economy, many industries are in flux or in transition made as they look forward to capitalizing on technology. Modi took over this year’s General elections with a sweeping majority. The second term of the Modi government, branded as Modi 2.0, serves as a defining period for the Indian economy. Will Modi 2.0 be successful with the upcoming Startup India’s iteration or Startup 2.0?
BJP’s majority of the pre-election manifesto was about startups-related promises. Under PM’s reign, India has witnessed the rise of over 40,000 startups who have raised more than $130 billion of value from January 2014 to September 2018. India is being called the third-largest startup ecosystem globally with 31 unicorns, that is, startups with a valuation of $1 billion-plus. Despite our country’s significant progress in the startup sector, it cannot be matched by the revenue when compared to the US and China.
The startup itinerary
The Startup India scheme has played an essential role in drawing out the entrepreneurial spirit of India’s innovators and has swept its way into the Tier 2 and Tier 3 markets as well. Early-stage businesses and startups have been given every encouragement and incentive to grow and innovate by the massive initiatives taken by the central & state governments. Even the angel tax, the bane for Indian early-stage entrepreneurs, has been refined to a large extent, and the government has responded to the allegations of tax terrorism swiftly.
Though these initiative have been centered around reducing the existing compliance burden, accordingly, the next iteration of Startup India requires the introduction of specific policies geared towards making Indian startups competitive globally and improvement in the market condition to boost the adoption of startup services and products which is specifically crucial in the slowing economy where startup products and services need assistance to become sustainable.
Domestic support required
The government needs to support ease of access to capital and credit for small to medium enterprises so that the NBFC liquidity crunch can be overcome. For the time being, access to credit would be crucial due to falling spending of the consumer. Hence, the startups need to gather more capital in their bank to expand their runway. The BJP initiated Seed Startup fund of Rs 20,000 crore should be dedicating at least 25% of its body to credit lines for the Indian startups, especially in the MSME sector.
The state has expanded its e-marketplace to heat the situations in the domestic marketplace and improve on the growth prospects of startups. Despite the effort, the government needs to do much more to incentivize investments in startups so that such actions can be capitalized on by young businesses and reach a more extensive customer base. The fact is that the Indian ecosystem needs more domestic investments and investors to succeed, like China and Silicon Valley. Without sufficient local investments, the startups have to rely on foreign virtual capital funds or FDI, which in turn brings more regulation and enormous pressure to succeed.
Startup India goes International
Indian startups have penetrated the international markets with Oyo gaining ground in China and Southeast Asia, Ola commencing business operations in London and Australia, and with Zomato having expanded to multiple countries like US, Canada, Australia and so on. More needs to be done when it comes to facilitating international expansion of the Indian startups. The central government could preferably follow the lead of the Kerala government’s measures to promote global expansion and incubation of state-based startups.
In terms of pumping global prospects of Indian startups, improvements need to be brought in to areas such as cross-border remittances, joint ventures, foreign vehicle investments, external debt funding with lower interest rates, which could be some necessary growth ingredients. The government of India has proposed to set up the ‘India Startup Fund’ with a framework of Rs 1,000 crore to support the tech startups. The fund aims at setting up 50k fresh startups in the nation by 2024.
Other issues that need to focussed on in terms of bringing startups to prosperity include- Innovation Fund and Zone for each sector and city, creation of Rs 20K crore Seed Fund, quick disbursal of Fund of Funds for Startups, regulations pertaining to cryptocurrency in India, tax reformations, recapitalisation of banks and a pathway for creating 1 lakh digital villages.
Adopting technology through policy
Many of the policy statements outlined by the BJP’s manifestos could be fulfilled by startups such as boosting farm and agriculture income, increasing adoption and penetration of AI and automation in industry, using drones and other new-age IT technology to improve the survey, supply chain, and land-mapping. Additionally, the security tech startups require a boost to tackle the growing cybercrimes and make data more secure.
Pivotal initiatives like India Stack- a powerful combination of Aadhaar KYC, UPI, Digilocker, etc.- have gained excellent grip and various emerging and developing economies have been looking to reiterate the nation’s thriving startup ecosystem, guided by Startup India.