Small gets a firm start

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Published: March 2, 2015 2:23:46 AM

The $146 billion Indian information technology (IT) industry found the right space of recognition in the Union Budget for 2015-16 with...

The $146 billion Indian information technology (IT) industry found the right space of recognition in the Union Budget for 2015-16 with finance minister Arun Jaitley applauding the role played by over 3,000 start-ups, a segment which is expected to be next flag bearer of growth for
the sector.

The finance minister has rightly recognised the role played by the technology start-ups in job creation and being at the cutting edge of technology announced  a couple of measures which is likely propel these firms into the next orbit of growth. The Budget has allocated R1,000 crore under the Self-employment and talent utilisation (SETU) scheme, which  will provide techno-financial, incubation and facilitation services.

Jaitley during his Budget presentation said, “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.”

India is the fourth largest start-up hub globally after US, UK and Israel. Now, the ambition is to get to the second place considering that are over 800 firms being created every year, according to Nasscom, Indian IT industry’s trade body. The country is currently home to 3,100 start ups and this is likely to triple itself to over 10,000 in another five years time, employing 250,000 people.

Partha Iyengar, country manager (research)—India, Gartner, said, “The nod to the ‘start-up ecosystem’ in the country is a major positive. This is the first time such language has made its way into the budget and a good reflection of the fact that job growth has to be broad based by facilitating the SME segment and even the start-up culture in the country.”

The start-up landscape in India has received over $2.3 billion in funding since 2010 with active presence of seventy plus venture capitalists, private equity funds besides over 550 active angels. These firms are engaged in cutting edge technology areas such as: Internet of Things, Big Data and analytics, augmented reality, cloud computing.

Commending the role played by the finance minister, Microsoft Ventures India managing director Ravi Narayan said, “Like its name, SETU should be bridge for these startups to cross the tumultuous waters where economics are not market driven. We hope SETU becomes an all-inclusive program to not just spark innovation and entrepreneurship, but also see these startups through its complete growth cycle. By doing so, the government would have fostered several of successful entrepreneurs who will then be able to benefit from the available funding models and scale up into large enterprises creating many jobs.”

The biggest boost for the Indian start-ups in the Budget has come from the proposal to reduce the tax on R&D, innovation from 25% to 10%. As Sanchit Vir Gogia, chief analyst and CEO, Greyhound Research, said, “We believe that the finance minister’s proposal to decrease the rate of tax on payments by way of royalty and fees for technical services to non-residents from 25% to 10% is a win-win situation for both MNCs and start-ups in India. This will be a growth driver for start-ups and will help promote entrepreneurship in the country and create more jobs rather than being job seekers.”

However, it has not been just a rosy path showed in the Budget as there are some irritants for the start-up segment. The biggest question mark for the tech community is how will these schemes announced be implemented in reality.

Nasscom, while welcoming the Budget initiatives like SETU and Atal Innovation Mission (AIM) said, “We await the details of the facilitative announcements for start-ups and hope to speedy implementation of the R1,000 crore fund.”

Ravi Gururaj, chairman, Nasscom Product Council, said, “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 last budget funds being disbursed or being distributed or the programmes being implemented.” They plan to raise the issue of implementation plan for this year with the government.

The Union Budget has certainly made the right beginning with an elevated platform for the start-ups and now the time is for execution along with seizing the opportunities.

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