Finance Minister Arun Jaitley’s budget for 2015-16 has allocated Rs 1,000 crore to help information technology startups. I am sceptical about the government as an investor in private companies, particularly in cutting-edge technology.
It is true that social gains come from jobs created and hopefully, patents generated. But the flip side is that high technology investments need not hands-off finance but “value-added” money that comes from the experience, relationships and advice that real venture capitalists bring to the table.
I am not sure if bureaucrats and politicians can bring cutting-edge value to startups. But what they can do, hopefully, is to help create a startup culture in which entrepreneurs do not have to run here and there to get approvals. In another context, Jaitley announced in his budget speech that the government will offer ultra mega power projects (UMPPs) in auctions.
These involve “plug-and-play” projects with required government approvals embedded in the offered schemes.
Ravi Shankar Prasad’s Ministry of Information Technology may think along similar lines, under which a clutch of approvals can be given for startups under a single-point access. In this case, the government may in effect do what incubators do in the Silicon Valley – arrange everything else for the entrepreneurs so that they can focus on what they do best.
A practical solution is for the government to work with private incubators and universities to be a constructive link. There are some precedents for this in countries like Canada that can be suitably adapted for India.
The government works better as a facilitator than as an investor.