STARTUP INDIA: ACTION PLAN (Brief Description)

Definition of Startup- It means an entity incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in ay preceding financial year, working towards innovation, development, deployment or commercialization for 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.

Provided also that an entity shall cease to be a Startup 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.

Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose.

To reduce the regulatory burden on startup India and the startups can focus on the core business and keep compliance costs low, the government had introduced simple and flexible simplified regulatory regime for the start-ups. The government considering the nuances of the issue has tried to remove the regulatory obstacles for start-ups. 6 labor and 3 environmental laws are covered under this head for easy and convenient approval, the terminology adopted for this is “self-certification”, in which start-ups can give self-compliance through the mobile app which will soon be introduced. Furthermore, in instances of labour laws no inspections will be conducted within a period of three years and for environmental law any inspection will be made only on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one officer senior to the inspector.

The second important step under this is to create a “Startup India Hub” with an objective to create a single point of contact for the entire start-up ecosystem. The government focusing  on the young Indians attempts to create a conducive ecosystem, the rationale behind this movement is that start-ups do not reach their full potential due to limited guidance and access. The government has also realized that the start-up movement in India is at the cusp of the revolution.

Third chapter of the action plan is “Rolling-Out of Mobile App and Portal”. Realising the delays or lack of clarity in regulatory and registration process. The government has enabled start-ups to register easy and timely manner to reduce the registration burden. Also, herein identifying that the start-ups are usually unaware of the exact regulatory requirements which causes more fuss and delay in there establishment. The start-ups ecosystem in India provides a formal platforms for start-ups to connect and collaborate with the ecosystem partners  and the mobile app shall have back end integration with the Ministry of corporate affairs and Registrar of firms for the seamless information exchange and processing of the registration application. the most astonishing addition to this is the supply of digital version of the final registration certificate to be downloaded with the mobile app.

The “Legal Support and Fast- tracking Patent Examination at Lower Costs”  seems to be highly interesting and well fitted point to promote awareness and adoption of the Intellectual Property Rights by start-ups and facilitate them in protecting and commercialising the Intellectual Property Rights. The government has proposed to introduce fast track examination of Patent applications and rebates in the fees. Start-ups with limited resources and manpower can sustain in this highly competitive world only through continuous growth and development oriented innovations; for this it is equally crucial that they protect their Intellectual Property Rights. For effective implementation of this scheme a panel of facilitators shall be empaneled by the Controller General of Patents, Designs and Trademarks. Furthermore, the central government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable. Start-ups shall be provided an 80% rebate in filing of patents with the other companies. The scheme will be launched initially on a pilot basis for one year and Waze and experience gained further steps shall be taken.

The fifth chapter of the action plan is the “Relaxed Norms of Public Procurement for Startups” to provide an equal platform for start-ups with the experienced companies or entrepreneurs in the public procurement. The government central as well as state and Public Sector Undertakings have to mandatory procure at least 20% from the Micro Small and Medium Enterprise. In furtherance the start-ups shall be exempted from any criteria of prior experience or turnover but no compromise will be made on any aspect of quality or technical parameters. The start-ups has to demonstrate requisite quality and capability to execute the project as per the requirements of the project and must have their manufacturing unit in India.

The sixth initiative under start-up India is “The Faster Exit for Startups”.  Government has addressed that start-ups also get shut down very soon. The government has made that it is critical to relocate capital and resources to more productive avenues. In the case the start-ups cease to continue,  a swift and simple process will be followed to wind up the  start-ups operations. For this the government will also table the “Insolvency and Bankruptcy Bill 2015” and it contain clauses that within a period of 90 days from making of an application for winding up on a fast track basis and insolvency professional shall be appointed for the start-up who shall be in charge of the company for liquidating its assets and paying its creditors within six months of such appointment.

Following this, the seventh point is the point of economic and financial consideration that deals with “Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore”. A vision to support for development and growth of innovation driven enterprises. Besides, the high risk nature of start-ups wherein a significant percentage failed to take off, hampers their investment attractive. Initially the government will set up a corpus of Rs.2500 crore for a year which will continue to 4 years amounting to a total corpus of 10,000 crore. The funds will be in the nature of “fund of funds” which means that it will not invest directly into the start-ups but shall participate in the captain of SEBI registered Venture Funds. The funds of funds shall contribute to a maximum of 50% of the stated daughter fund size.

The government has also realised that Indian start-ups have a blot associated with the failure of start-up enterprise in general which apprehends the creditors to invest. Therefore, “Credit Guarantee Fund for Startups” which is aimed for Debt Funding to start-ups and is to be made through Banks and other lenders to provide Venture Debts to start-ups. Credit guarantee mechanism through National credit Guarantee Trust Company (NCGTC) and through Small Investment Development Bank of India (SIDBI) is being envisaged with the budgetary corpus of Rs.500 crore per year for the near next four years.

Ninth is the “Tax Exemption on Capital Gains”. Exemption shall be given to persons who have capital gains during that year, if they have invested capital gains in the Fund of Funds recognised by the government. Investment in computer or computer software shall also be considered as purchase of ‘new assets’ in order to promote technology driven startups.

The next two moves are on the tax exemption. “Tax Exemption to startups for 3 years” it is imperative that the profits of startup initiatives are exempted from income-tax for a period of 3 years.  This fiscal exemption shall facilitate growth of business and meet the working capital requirements during the initial years of operations. Exemptions shall only be available subject to normal distribution of dividends by the startups. “Tax Exemption on Investments above Fair Market Value” is the second tax exemption. In the context of startups, where the idea is at a conceptualisation or development stage, it is often difficult to determine the Fair Market Value of such shares.

The 12^th chapter of the action plan is “Organising Startup Fests for Showcasing Innovation and Providing a Collaboration Platform” aimed for showcasing innovation. Under the Make in India initiative one fest at the national and one at international level will be geld annually, to enable all the stakeholders of the startup ecosystem to come together on one platform. This will also enable the individual to meet the investors showcasing innovations, exhibition and product launches.

The launch of “Atal Innovation Mission with Self-Employment and Talent Utilisation Program”.  To serve as a platform for promotion of world-class Innovation Hubs. Grand Challenges, Startup businesses and other self-employment activities particularly in technology driven areas. The program aims at 2 crore functions that are Entrepreneurship promotion and Innovation Promotion.

The 14 chapter is “Harnessing Private Sector Expertise for Incubator Setup” to ensure operational management of Government sponsored / Funded Incubators. Government will create a policy and framework for setting up of incubators across the country in Public-Private Partnership. 35 new incubators in existing institutions and 35 new private sector incubators. 

The 15^th point in the action plan is “Building Innovation Centre at National Institute”, to propel successful innovation through augmentation of incubation and Research and development efforts. Setting up  of 13 startup  centers,  for encouraging  student driven start-ups from the host Institute and also setting up scaling up 18 technology business incubators at National Institute Technologies, Indian Institute of Technologies and Indian Institute of Management as per funding model with Ministry of human Resource Development and Department of Science and Technology.

The “Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras” is the 16^th point. Investment in the tune of INR 100 crore each for seven new Research Park has been allotted to break down the traditional, artificial barriers of innovation through its connectivity and collaborative interaction. This helps industry to create integrated and applied advancements in knowledge. It leverages best practices from successful research box as those at Stanford, MIT and Cambridge added by the government.

“Promoting Startups in Biotechnology Sector” has not been left out in the agenda of the government. Special emphasis is being given to this sector, Department of Biotechnology endeavors to scale up the number of startups in the sector by nurturing approximately 300 to 500 new startups each year to have around 2,000 start-ups by 2020. 5 new bio-clusters, 50 new Bio-Incubators, 150 Technology transfer offices and 20 Bio-Connect Offices will be set up in research Institute and universities across India.

Next to last the 18^th agenda is “Launching of Innovation Focused Programs for Students” with an objective to foster a culture of innovation in the field of science and technology amongst students. Innovation core program shall be initiated to target school kids with an outreach to 10 lakh innovations from find the five next course. One lakh innovation would be targeted and the top 10,000 would be provided prototyping support. Of these 10,000 innovations, the best hundred would be shortlisted and shall be showcased at the Annual Festival of Innovations in the last Rashtrapati Bhawan. It also aims to set up National Initiative for Developing and Harnessing Innovations (NIDHI) through Innovation and Entrepreneurship Development Center’s IEDCs.

The last initiative in the Action Plan is “Annual Incubator Grand Challenge” to support creation of successful world class incubators in India.