Chasing unicorns

The Centre’s action plan to kick-start the startup revolution in India differs in one important aspect from similar initiatives aimed at giving an impetus to one or the other part of the economy. Although it contains the usual policy tools governments use in such cases — tax breaks and funding — the more important component by far is the changed mindset in connection with entrepreneurial action. Far from being treated with suspicion, which necessitated the need for a slew of licences, permissions and approvals from the government before enterprises could actually get off the ground, the new startup policy envisages a dramatic slashing of red tape. Startups will now have easy entry — single-day registrations have been promised — as well as speedy exits from business. They will be allowed to self-certify compliance with labour laws and, in some cases, environmental regulations. New enterprises will be exempt from the so-called ‘Inspector Raj’ — cumbersome regulatory inspections — for three years. The Centre has assured a single-point interface for startups with the government for all issues relating to approvals and clearances. Stepping up its role as a business facilitator, the Centre also plans to roll out startup incubators to spur innovation and ease the securing of intellectual property by slashing both the fees and the time needed to register a patent; it has even offered free legal assistance for filing patents.

The measures outlined for startups offer a clear roadmap for easing the doing of any kind of business in India, not just technology or innovation-based ones. If bureaucrats, who are responsible for actual implementation of policy, apply the same to all businesses, India should have no problems in climbing up the ease of doing business rankings. Speaking at the launch function of the startup plan, Prime Minister Modi aptly asked the entrepreneurs gathered there to tell the government not what it could do for them, but rather what it should not do.

But some caveats are in order. In the startup plan, there are several provisions, from deciding which startups qualify for assistance to deciding what exactly is an innovation, that expand the scope for bureaucratic discretion. Further, tax exemptions and incentives for startups not only run counter to the Centre’s stated intention of eliminating exemptions altogether, but also open the door to possible misuse by established businesses, which may sponsor startups as a front to corner benefits. The same applies to the startup quota in government procurement, which is sound in theory but likely to be misused. While the Centre’s plan has all the ingredients for making India a global hub of innovation and enterprise, it requires sharp oversight at the top to ensure that actions match intentions. Otherwise, the plan will join the long list of other such well-intended but poorly executed initiatives.

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