Govt creates value out of ideas, gives Rs 1k-cr boost to start-ups

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Published: March 1, 2015 12:04:45 AM

To establish techno-financial, incubation programme to encourage young minds; entrepreneurs, however, demand more clarity

The government will establish a self-employment and talent utilisation (SETU) mechanism.The government will establish a self-employment and talent utilisation (SETU) mechanism.

In a fillip to the burgeoning domestic start-up ecosystem, finance minister Arun Jaitley on Saturday said the government will allocate R1,000 crore for encouraging young entrepreneurs in the technology space.

The government will establish a self-employment and talent utilisation (SETU) mechanism, which will be a techno-financial, incubation and facilitation programme to support start-ups and other self-employment activities, especially in the technology-driven areas.

“I am setting aside R1,000 crore initially in NITI Aayog for this purpose,” Jaitley said during his Budget speech. “We are now seeing a growing interest in start-ups. Experimenting in cutting-edge technologies, creating value out of ideas and initiatives and converting them into scalable enterprises and businesses is at the core of our strategy for engaging our youth and for inclusive and sustainable growth of the country.

Concerns such as a more liberal system of raising global capital, incubation facilities in our centres of excellence, funding for seed capital and growth, and ease of doing business need to be addressed to create lakhs of jobs and hundreds of billion dollars in value,” he added.

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The Indian start-up community, however, was not very impressed. Saurabh Srivastava, co-founder of Indian Angel Network, said, “Big miss for start-ups as there is no resolution on Section 56, which taxes start-ups on investments they receive from angels if it is above fair market value.

The R1,000-crore allocation for incubation is good, but a lot will depend on its deployment.”

Ravi Gururaj, chairman, Nasscom Product Council, was another leader in the space who agreed to this line of thought. “We have no information on how the R10,000 crore announced for start-ups in the last Budget was spent in 2014-15. We don’t have any evidence of funds allocated during the last Budget being disbursed or the programmes being implemented,” Gururaj said. “We demanded the government make a smaller fund so that start-ups are able to utilise it fully. The R1,000 crore is an initial allocation and if we need more, the government may disburse more. This is in line with what we discussed with the ministry in the pre-Budget discussions. We are meeting the minister and the secretary on

Sunday and will raise the issue of implementation plan for this year,” he added.

Vijay Shekhar Sharma, chairman and managing director of One97 Communications, which runs the digital payments platform Paytm, said the Budget was more realistic about start-ups and reflected the government’s intention to build a supportive ecosystem for emerging businesses.

“They (the government) possibly don’t want to fund the start-ups directly, but support the start-up ecosystem. The funds can be used to support various incubations and facilities, unlike last time, when they had put out the Budget to directly invest in start-ups,” Sharma said. “The government definitely believes that there is a need for a new technology to be built. Even if the funds are not
fully utilised, there is a clear intention in the Modi government to ensure that new technologies are brought out from this country.”

The country is home to 3,100 start-ups, making it the third-largest base in the world. The number is likely to more than treble to 10,500 by the end of 2020, employing more than 250,000 people.

The start-up community had been advocating establishment of innovation labs, tax rationalisation for software product companies and measures to curb start-up exodus from India. According to Sharad Sharma, co-founder of technology product think tank iSPIRT, the announcement of a R1,000-crore start-up fund and a R150-crore innovation fund reflects that the Centre is thinking in the right direction.

“The government certainly sees a shift in the IT industry in India towards software product start-ups and Arun Jaitley in his speech referred to funding for seed capital and growth, and ease of doing business, which need to be addressed to create lakhs of jobs and hundreds of billion dollars in value,” he added.

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