Startup India, Standup India, is one of the famous slogans coined by our prime minister Shri. Narendra Modi. It was announced by our prime minister on August 15, 2015, on Independence day.
It came into force in 2016 and gave support for government projects like Startup India. Policy reforms and collaborations with other countries came into force.
Entrepreneurs from every corner of India are attracted and also gave hope for the improvement of Indian technology. Let us now see what impact has this initiative done in the past five years.
An increase in the number of startups is visible in the past five years. Post the announcement of startup India many states and governments have launched their startup policies.
Startup policies and state-sponsored incubators contribute to the startup ecosystem. The major part of their contribution is in tier 2 and tier 3 cities.
Since 2016 establishment of around 38 state-supported Atal incubation centres took place. Around 38.4k startups are started with the help of the startup India program between 2016-20.
“Before the policy launch, there were hardly three to four companies in Uttarakhand. But since the state government started offering seed capital to startups, startups became a viable opportunity for many innovators in the state,” said Rajat Jain, founder of Sunfox Technologies, which is based in Uttarakhand and was founded in 2016.
Out of 38.4k startups, 8.4k used Intellectual property rights(IPR). Startup India also offered to learn courses related to entrepreneurship.
Around 2.6 lakh people got enrolled in these courses offered by Startup India and upGrad. Startup India conducted innovation challenges and innovation programs, and 5.5k startups received benefits of one million.
The government makes a promise, funds of funds, which means that they will collect funds. These funds are collected from foreign institutes and alternative investment funds(AIF).
The government commits investment of INR 3123 Cr for 47 venture capital firms. Moreover, an investment of INR 3476 Cr for 323 startups through invest India is made.
Startup India also enables knowledge and global market access for Indian startups through bilateral government collaborations with Russia, Portugal, South Korea, Japan, Netherlands, United Kingdom, Sweden, Finland, Israel, and Singapore.
Government collaborations for startups are also called a Startup bridge. The startup bridge helps to build healthy communication between two countries, which helps to provide startups with resources.
The Game Changer Policies For Startup India In 2019
The first change is the definition of startups in the legal and taxation point of view. The difference in definition is made in February 2019 by the Department for Promotion of Industry and Internal Trade (DPIIT).
According to the startups’ earlier definition, an entity is a startup if it satisfies the below conditions.
- Until ten years from the date, the organization is started
- If the turn over of the entity in any of the financial year does not exceed 25 Crore.
But, the new definition states that an entity is a startup if it satisfies the below conditions.
- Until ten years from the date, the organization is started.
- If the turn over of the entity in any of the financial year does not exceed 100 Crore.
According to the new definition, the startups should also have a potential employee growth and work towards innovation, a scalable business model, development, or improvement of products.
Later the new startup conditions also helped get exemptions on investments under section 56(2)(viib) of Income Tax Act, 1961, which is popularly known as angel tax.
The Angel Tax Question
A tax collected on funding received by startups that are not listed by issuing shares at a cost higher than the fair market price is called angel tax.
Startups raise many concerns over the years for classifying funding as investment and income. SPIRIT-registered startups are exempted from angel tax in august 209 by the finance minister.
The non-registered startups are likely to be subjected to angel tax. The World Bank ranked India as 142 among 190 countries on ease of doing business in 2015. But, now, in Feb 2020, India is ranked 93.
The three main reasons behind this change, according to the World Bank, are as follows.
- Reduced cost to start a business.
- The ability to submit documents of import and export by using electronic ways.
- Accessibility to building permits.
States Back The Central Vision:
Startup India, Standup India program is equally supported by the states and are significant partners. The state-level policies implemented helped to support the policies at the central level.
States such as Kerala, Maharastra, and Karnataka have always been in front of Startup policies. Simultaneously, states like Delhi have recently revamped their startup policy to be in the game.
Some situations exist where the startups could not receive funds because there is no synchronization between state and central. In these situations, the startups have started depending upon investment bodies or private incubators or chose to build sustainable bootstrapped businesses.
Startups have played a significant role in attracting investors to India. Although the pandemic has caused major economic losses, the investors are still showing faith in startups.
Even then, the startups that are funded well and unicorns have announced layoffs and furloughs. The upcoming challenge for our Startup India is to provide employment.
Indian government allocated INR 20 Lakh Cr. to fight the economic recession due to COVID-19. Micro Small and Medium Enterprises(MSMEs) gained a significant part of the fund.
The government will allocate around 3.7Lakh Cr to bailout MSMEs. This decision questioned the effectiveness of the amount because this may exclude many startups because of eligibility criteria.
The government has done a lot to bring the Indian Startup position to the stage it is today. But the Covid-19 pandemic is testing the efforts.
Will the startup India program continue to have its significance in India? Or will Make in India become significant because the focus turns to make India a major export hub?