The government on Saturday unveiled a raft of measures – ranging from tax waiver for three years, ending inspector raj and a mega fund — to help boost the start-up eco-system.
The 19-point action plan, which was announced by Prime Minister Narendra Modi after a day-long event, came with the promise that the government will only play the role of a facilitator and not burden entrepreneurs with complicated compliance requirements.
“If the government doesn’t do anything, so much will happen. We have done a lot for 70 years. Where have we reached? Please tell us what not to do. If we decide not do anything, they (entrepreneurs) will take us places,” Modi said at a jam-packed Vigyan Bhawan in the Capital.
The prime minister had announced the Start Up India campaign in his Independence Day speech last year to accelerate the pace of creating jobs at a time when employment growth in the government and the brick-and-mortar economy remained slow.
On Saturday, Modi — who shared the dais with prominent names from Indian start-ups as well as global giants such as Uber founder Travis Kalanick and SoftBank chairman and CEO Masayoshi Son — put in place the first building blocks, by defining a start-ups and detailing the action plan to help these businesses grow.
To begin with, any entity which has been around for less than five years and has a turnover of less than 25 crore qualifies to be defined as a start-up, provided it is working towards innovation, development, deployment or commercial of new products, process or services that are driven by technology or intellectual property.
If a company clears the test conducted by a government board, it will be entitled to several benefits including a three-year income tax holiday. In addition, the government announced capital gains tax benefits. Although the plan has been unveiled some of the measures can only be implemented after the budget is cleared by Parliament.
The policy recognises the potential that start-ups can play in the coming years after a recent spurt which saw the number of in the technology space jump over nine times from 501 entities in 2010 to over 4,500 last year. The increase has come with the rise of Flipkart, Snapdeal, Ola Cabs and Paytm, which have become household names and attracted huge investor interest.
Currently, Indian entrepreneurs depend on overseas investors for over 90% of the funding, which has been a major area of concern. The government sought to address this partly through a Rs 10,000 crore fund of funds and a Rs 2,000 crore credit guarantee fund. While the corpus was seen to be small, industrial promotion and policy secretary Amitabh Kant said that the steps announced on Saturday were just the beginning and the government would build upon them in the coming years.
But even before a start-up can claim benefits, the government promised to set up a forum for handholding apart from aiding patent applications.
Some of the measures initiated by the government and some that are in the pipeline are meant to check a flight of companies out of India to avoid high taxes.
The government once again promised easier exit through the new insolvency law. Modi then went on to seek the support of entrepreneurs and suggested that they should mount pressure on the Opposition, which had not yet pledged support to the Bill introduced in Parliament.