January 07, 2019
5 months

What is the issue?

Fund allocations made under the Start-up India initiative show that the ambitious scheme is far from being a success.

What is the Start-Up India plan?

  • The start-up fund of funds was launched some three years ago by the Prime Minister to help early-stage entrepreneurs.
  • The objective was to create a lively ecosystem for entrepreneurs.
  • It aimed at making allocations to start-ups to be routed through venture capital firms.

How has it performed?

  • Despite the gaps, there is a growing number of unicorns (start-ups reaching a valuation of $1 billion or above) in India.
  • Eight of them became unicorns in 2018, which was the highest addition in a single calendar.
  • India is the third-largest start-up destination with an estimated 7,700 tech start-ups.

What does the recent estimate show?

  • The recent estimates on the scheme were given by the Small Industries Development Bank of India (SIDBI).
  • SIDBI manages the fund of funds for the Start-up India.
  • It has so far committed Rs 1,900 crore, which is less than 20% of its Rs 10,000-crore corpus to venture capital firms.
  • This is an indication that the government has fallen short on delivering its promise.

What are the policy shortfalls?

  • Not just Start-up India, other initiatives such as Make in India and Swachh Bharat have not been fully successful despite their potential.
  • While business and politics often go hand in hand, schemes such as Start-up India should have had a clear vision and goal.
  • For Start-up India, the focus should have been on nurturing innovation as well, rather than just on disbursing money.
  • The idea of just a money bag without any attention to innovation is out of sync with entrepreneurship.
  • Besides this, the Central Board of Direct Taxes (CBDT) recently asked start-ups to pay the angel tax based on the valuation of firms.
  • This has adversely hit the mood in the sector, despite assurance of no coercive action till the matter is looked into by an expert committee.
  • Also, the government proposal to stop cashback and deep discount sales by e-commerce firms has added to the overall gloom.
  • As large number of new start-ups could get into the e-commerce space, this decision acts against the spirit of entrepreneurship.

How is it elsewhere?

  • In other leading start-up destinations such as the UK, Israel and the US, institutional backing comes with the right focus on cutting-edge research and innovation.
  • For instance, in the US, the federal government does not usually offer grants for starting or growing a business.
  • It, instead, plays an active role in technology development among other areas.
  • In addition, business grants are available through state or local initiatives.
  • Also, there are competitive awards-based programmes, encouraging small businesses to pursue R&D projects potential of commercialisation.
  • India should now make a revised assessment of the scheme to capitalise on its true potential.


Source: Business Standard

Login or Register to Post Comments
There are no reviews yet. Be the first one to review.
UPSC Admissions 2019