India already boasts the third largest number of start-ups world-wide but these businesses are marooned in red tape, an apathetic banking system and a sluggish bureaucracy. The Start-Up India initiative announced by the Honourable Prime Minister to catalyze an entrepreneurial culture in the Start-Up universe created waves across the country. The move is expected to catapult India to the high table of Start Up eco-systems in the world.
Government of India has decided to contribute Rs.2,500 crore annually to a fund for a period of four years, thereby building a corpus ofcrore. The corpus will be deployed to fund startup ventures, albeit indirectly, through venture funds that are registered with the Securities and Exchange Board of India. The fund will be professionally managed by representatives co-opted from industry bodies, successful startups and academia.
24 hour registration
The Union Government will be launching a mobile app and internet site that will make registration of start-ups within a day a reality. The portal will act as a single window contact point for all start-ups looking for clearances, registrations and approvals, and seeking assistance under the Startup India aegis.
Regulatory Self- Certification
Start-ups will be permitted to self-certify compliance with laws relating to labour and environment through the app. These enterprises will also be exempted from labour inspections for three years.
Ease of Patent Registration
For the first year, 80% of the cost of registration of trademarks, patents and designs will be reimbursed by the Government.
To encourage banks and financial institutions to supply debt funds to start- ups, Government proposes to establish a credit guarantee arrangement with annual funding ofcrore for the succeeding four years under the stewardship of a National Credit Guarantee Trust Company (NCGTC) / Small Industries Development Bank of India (SIDBI).
Exemption from payment of income tax for the first three years will help start-ups to retain cash flows which could be ploughed back for research & development, marketing expenses and such largely intangible but essential expenses that are typically excluded from bank financing. In addition, to incentivize venture funds to finance start-ups, the profits earned by them on investments in start-ups will be exempted from capital gains tax.
Public Procurement Norms
The ‘prior experience’ criterion will be excluded by the Union and State Governments and Public Sector Undertakings (PSU) while considering bids of start-ups provided they satisfy the tendering organisations that they possess the core competency to otherwise execute the project successfully.
The Insolvency and Bankruptcy Bill, 2015 has a provision for voluntary closure of operations. Start-ups will be provided with a fast track passage that will enable them to shut shop within 90 days from the date of their application.
Hub for Collaboration
The planned Start-Up India Hub will include all players in the start-up system – governmental, institutional and academic – who will work synergistically to support, guide and mentor start-ups.
The Start-Up India initiative is ambitious and, successfully implemented, could prove to be a game changer in the business world.