'Govt will not support any individual startups'

'Govt will not support any individual startups'

Many have called the recent launch of Startup India by Prime Minister Narendra Modi as timely because the world economic growth prospects are not encouraging. Timely, also because Indian startup firms have begun moving out of the country in search of greener pastures.

India may be the world’s third largest startup destination after the US and Britain. And, while global startup giants like Facebook, Twitter, Amazon, and WhatsApp may have spread their businesses across the country, their exodus of late has perturbed the government.

Keeping that in mind, the government has tried to do away with some rigid rules, some have been amended and fresh initiatives announced in the Startup India Action Plan. No doubt, the Startup India has generated plenty of excitement among the Indian entrepreneurs. However, some knotty issues need to be simplified.

Department of Industrial Policy and Promotion Secretary Amitabh Kant tries to untie the knots around funding and taxation issues in an interview with Annapurna Singh of Deccan Herald.

How is the response from startups after Prime Minister Narendra Modi’s big bang announcements?
The response is overwhelming especially from young entrepreneurs. There is lot of energy and vibrancy after we have assured them of an eco-system where they can grow their businesses free of any fear.
We have tried to clear their doubts about our policies and their compliance, the tax system and all other benefits right from incubation to their education that they should get in India. And, I can say with confidence that we are getting tremendous response from them.

Some clarification is still awaited on the definition of startups. While the prime minister said that the smallest of businesses which can give jobs to even five people can be called startup, the ‘action plan’ says a startup needs to be validated by a recognised incubator or angel fund or venture capital fund registered by the Sebi.
Let me make it clear that no startup requires any definition. However, the definition in the action plan is only for those startups or those innovations which require government benefit for tax purposes or funds. So, it is only for the purpose of government schemes that we have defined the startup but we have kept the definition very loose.
Does that mean that an individual who starts a business but is not affiliated with
a Sebi-registered fund will not get government finances?
No, the government will not support any individual startups. The Rs 10,000 crore corpus fund announced by the prime
minister will be in the nature of fund of funds, which means that it will not invest directly into startups, but shall participate in the capital of Sebi-registered venture funds.
What if an individual wants to start a business and requires funding support from the government?
Then he or she will have to get registered to an incubator or angel fund or venture capital fund. There are hundreds of venture capital funds. The government wants to give a fillip to venture funds. This is also an attempt towards that.
How about the disbursement of this Rs 10,000 crore? The fund is not new. It was announced in the 2014 Budget but has not been implemented till date.
That is why the prime minister has said that it will be implemented this year. The total corpus of Rs 10,000 crore covers four years of which Rs 2,500 crore will be provided to help startups this year.

The startup India initiative has come at a time when startups are leaving the country.
Should we expect more measures towards ease of doing business for them in coming times?
There are certain policy issues. Going forward we may see some policy tweaking to further help them grow in the Indian startup eco-system. We are now seeing a very enthusiastic response from them and as the prime minister said, the government will always be ready for hand-holding those who dream to make India the country of their innovation.
You are launching a mobile app to register a startup in a day. But laws relating to setting up of a company have not changed yet. Until that is done, how will the mobile app help?
We do not really need to change the company law to get registered a startup through a mobile app. We are changing the entire system of registration of businesses. We are talking to corporate affairs ministry to have a centralised place for registration of a business. And we are sure, the system will be in place before April 1 this year. We are going to start registration through mobile app from April 1 for sure.
For income tax benefits, the inter-ministerial group of DIPP will vet the startups. This is opposite to keeping the government at arm’s length as told by the prime minister.
This move is rather to facilitate the startups so that tax inspectors do not meddle with them. You have to get some clearance from somewhere to be able to get tax benefits. The inter-ministerial group will be there to help and not to hinder.
Another concern is that the startups, typically, do not make profits in the initial four to five years. So, the exemption on income tax/capital gains in the first three years does not help much.
We are in talks with the revenue department (finance ministry) on that issue. We are discussing whether the startups should be given exemption for three years after they start making profit or should they be given five years altogether. These talks are on. We are open to suggestions and feedbacks and based on that we will keep improving things in all areas concerning them.