Startup India campaign began on 16th January 2016 in Delhi where PM Narendra Modi acknowledged that Indians have ideas and capability, and to implement their business ideas, Start- Up India campaign was launched. His objective and vision of Start-Up India programme comprised the need to feed the ideas of hard working youth to persuade them from job seekers to job creators. The campaign is presented in the form of an opportunity that assures to entertain any business ideas and in itself is a driving force for the discouraged and broken spirited people. This belief is apparently a motivating factor to dislodge any form of skepticism from the minds of the certain individuals whereas on the contrary the lack of its transparency is arousing insecurities. Narrow definition of a Start Up is an ambiguity to people as it finds successful businesses which are dominating the markets, apt to funding and excludes businesses that are in dire need of funds and are eligible for tax exemption but unfit to the description of the ‘Start-Up’ specified by the government. Unsuccessful businesses might fall prey to red-tapism lurking under the form of inter-ministerial board set-up by the government which apparently would decide the eligibility criteria for tax exemption. As the campaign roars with ‘minimum government maximum governance’ but the situation contradicts the motto of the campaign. Such flaws need the immediate attention for reviewing and revision.
Let us begin with the definition of the Startup which means an entity, incorporated or registered in India not older than five years with annual turnover not exceeding 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence, also an entity shall cease to be a Start-up if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration and Provided further that a Start-up shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.
The definition’s limited information on the start ups incorporated for more than 5 years with the turnover not reaching up to 25 crore are or are not eligible for tax exemption ? There is no foundation for inter – ministerial board to decide the criteria for tax exemption. This can be looked down upon ending into questioning the accountability of the board and and on the other side would wind the board members into unwanted and tedious court cases. There are businesses that are not driven by technology or intellectual property but lacks funding. So, are they entitled to funding or the mere act of selling product or services that lacks the potential for commercialization would be disregarded as a start up and will be deprived of the same labelling them as incapable to start a business venture ? Won’t it be a discouraging factor? 65% of Startups relocate themselves outside from India owing to difficulty in conducting business. These are some of the flaws regarding the definition of the Start-Up.
Provisions of the Startup India holds certain advantages:
- Process of registration of the startup through an online application would be shackle free for the entrepreneur.
- The Union Cabinet has approved the establishment of Funds for Startups(FFS) at Small Industries Development Bank of India(SIDBI) to contribute in various Alternative Investment Funds(AIF), registered at Securities and Exchange Board of India(SEBI) which would further extend funding to the startups. Department of Industrial Policy and Promotion(DIPP) is authorized to monitor. 18 lakh people are expected to get employed with the help of the funds.
- Startups are being offered with funds up to 10,000 crore for 4 years which would be managed by the board comprising of professionals, academicians and successful startups pushing the business venture towards profitable entity.
- There is a provision on self- certification in regard with labor and environmental laws which will increase the trust of the entrepreneur on government’s confidence.
- Exemption from nine labor laws for the period of three years to prevent unnecessary interference and harassment of entrepreneurs.
- New bankruptcy law on free exit of the unsuccessful business ventures within 90 days. This step would prompt the entrepreneurs to act upon the necessary risk they fear from taking.
- Startups are exempted from paying taxes for continuously 3 years assisting them in carrying their burden.
- Filing of patents is guaranteed for free of cost and there is a reduction of 80% in filing for patent fee.
- Startup India Action plan aims to set up 35 new incubators based on the public private partnership (PPP) model which would enhance the economic growth but by some entrepreneurs it is considered to be left with private sector.
Overall the project is a success and has yielded in the participation of women. This year entrepreneurs were sanctioned up to 31 million loans whose total value is 19 million dollars. 77% of the entrepreneurs were women out of which 22% are from Scheduled Caste and Scheduled Tribes. The definition of a startup must be re- defined to widen its scope and include other business ventures that are suffering from lack of funds but are not a startup. Enormous amount of Funds offered and tax exemption are quite friendly regulations encouraging the increase in the participation in the action plan and reduction in cash outflows. Exemption from following nine Labor laws for consecutively three years and self- certification is a considerate step taken by the Ministry of Labor and Employment but it should be under a perimeter and an accountable authority must be set above it to monitor and prevent the violation of labor laws. Subjects like entrepreneurship are advised to form a part of curriculum to guide the students and increase their interest in learning and starting a business. There are no provisions and incentives provided to re-domicile the companies like Flipkart in India which should be a point of consideration. Inter- Ministerial board must be made more transparent and should be accountable to the public at large.
By: Gargi Singh, University of Petroleum and Energy Studies, Dehradun.