With Govt backing FDI and ease of doing business: Why this is best time for startups in India

Many eyebrows were raised when the recent data declared that the demonetisation has not dented the growth of India as it was contrarily expected by the top economists in the country. But there would hardly be any doubt today that now is the best time to don the hat of an entrepreneur in the country.

We can see startups mushrooming in all corners in the country, coming up with many unique and innovative ideas.

You may ask, why it is the best time? The best time is when you have all the resources in place and they are in sync with your passion to start a business. Do we have all types of resources available in the country?

Today, the answer to that would be, an obvious Yes! It is indeed best time to launch a startup. The reason being, India has all type of resources- manpower and technology. Investors are ready to pour in money for your start-up.

And above all the government is coming up with all kind policies to assist budding entrepreneurs to ensure they have their own start-ups started without many hassles.

On Monday, the Commerce Ministry released consolidated FDI (Foreign Direct Investment) policy which for the first time included start-ups. They will now be allowed to raise up to 100 per cent funding from Foreign Venture Capital Investor (FVCI).

This has come at a time when fund raising and capital invested by VC's are witnessing downfall. According to data from start-up intelligence firm Tracxn, the deal count for the first half of 2017 was down by 27 per cent on a year-on-year (YoY) basis as only 396 tech startups got funded during the period, as compared to 547 in H1 of 2016.

On August 17, Prime Minister Narendra Modi, had met start-ups and called them to play a more active role in governance.

"Our current team in the Central government is keen to learn new things, which is the reason why I am asking you all to join permanently with the government," PM told more than 200 start-up founders in a Niti Aayog programme called 'Champions of Change'. Entrepreneurs and CEOs too had called for greater involvement of private sectors in new policy template.

The Indian government in last three years, has scrapped around 1,200 complex laws and procedures for easy registration of start-ups.

India is, not certainly, where it was a decade ago in terms of awareness when it comes to technology and internet business. The number of Internet users in India is expected to reach 450-465 million by June, up 4-8% from 432 million in December 2016, a report from the Internet and Mobile Association of India and market research firm IMRB International said.

Urban India with an estimated population of 444 million already has 269 million (60%) using the Internet. Rural India, with an estimated population of 906 million as per 2011 census, has only 163 million (17%) Internet users. Thus, there are potential approximately 750 million users still in rural India who are yet to become Internet users; if only they can be reached out properly. This will only go up.

Ease of Doing Business

According to World Bank, it takes 26 days to start a business in India. Out of the 190 countries in the list, India Ranks 130 overall in the World Bank Ease of Doing Business Report and rank.

"States economy performance is directly linked to ease of doing business. Young firms now report far less time in regulations” said Niti Aayog CEO Amitabh Kant while releasing a report titled ‘Ease of Doing Business: An Enterprise Survey of Indian States’ along with commerce minister Nirmala Sitharaman and Minister of Law & Justice and Electronics and IT, Ravi Shankar Prasad.

Sitharaman said that “ease of doing business is a priority for the government” and the report will help in correcting policies. The government is planning to improve ease of doing business and bring it down to 6 days by March next year.

The effort is to ensure registration of all companies, including startups, is done in one day. Once this is achieved, there would hardly be any doubt that India would be up and shoulder above the competitive markets around the world.

At present around the world, New Zealand, is a country with best record where only half a day needed to start a company. In Singapore, it takes about 2.5 days to start a company. In the United States it takes about 5.6 days and in the United Kingdom it takes about 4.5 days. India aims for a leap of 80 spots next year to rank among the world's top 50 countries.

The government’s is also determined to create a domestic source of capital for seed and early-stage companies. This money is being disbursed by the Small Industries Development Bank of India (SIDBI) through the India Aspiration Fund and the Fund-of-Funds for Startups. As part of India’s first startup action plan, the government announced 35 sector-specific incubators to help start-ups.

According to the Secretary of DIPP, "A Fund of Funds which would have a corpus of Rs 10,000 crore, will be covered in two finance commission cycles (for a period of next 10 years). Therefore, every year it comes to Rs 1,100 cr per year. At present, the government is not funding start-ups directly.

Presently, the government is not funding start-ups directly.

According to an Assocham report, India was the world's third biggest tech startup hub as there were close to 19000 tech-enabled startups in 2015-16.

Start-ups Industry Views

A Nasscom report marks that India may have 11,500 startups by 2020, up from almost 4,600 startups today. Startup infrastructure is also growing rapidly, at 40 per cent every year.

"India had seen some high-value funding rounds happening since the past two years. Also, some of these were first-time investors for India. It shows a level of confidence in India's start-up ecosystem. What is most encouraging is more than 60% founders of start-ups are below 35 years old. While being dominated by ITES, Software and localised online retail, there is still a huge scope for products businesses.

Fortunately, Govt of India has now started taking tangible steps to enable start-ups. In times to come, this could become a major enabler for some promising start-ups and early stage businesses," said Harshad Bastikar of Jaldhara Technologies.