Prime Minister Modi announced on Saturday a string of initiatives to support the country’s start-ups, including three years of tax and compliance breaks aimed at cutting onerous government regulations and red tape.
Modi also reiterated plans to set up a Rs 10,000 crore start-up fund, first announced by finance minister Arun Jaitley in the interim budget of 2014-15. He also said start-ups would benefit from cheaper and faster patent applications, a capital gains waiver if the money is reinvested in a similar venture, as well as easier exit for failed projects.
While the announcements will likely help improve the environment for start-ups in India, it wasn’t immediately clear how measures such as three-year tax breaks could help small-bore, innovative ventures that struggle for years to break even.
Modi’s speech was made in the presence of some of the biggest names in Indian and global start-ups who gathered in New Delhi for the launch of one of Modi’s flagship projects – “Start-up India, Stand-up India”.
“People who have achieved success are not just entrepreneurs but also adventurous. Success of entrepreneurs depends on their ability to take risk,” he said.
“That’s how [taxi aggregator] Uber became [god of wealth] Kuber,” Modi said to peals of laughter from the audience.
India is home to the third-largest number of technology start-ups after the United States and Britain, and they attract billions of dollars in funding every year, despite crippling government regulation and red tape – a hurdle Modi referred to in his speech.
“A lot can happen if the government did not meddle. We are here so that you can tell us what we should not do,” he said.
Modi said the government would make it easier for founders to exit their companies, responding to concerns that though it is difficult to start a company in India, it is almost impossible to shut one down. “We understand that to build a large and successful corporation, you cannot escape failure. I want to promote those who have the courage to fail,” he said.
“Those who run from water will never learn to swim. You have to drown once to be able to learn to swim.”
The prime minister also sought to encourage start-ups in government purchases, which now have rigid qualifications based on experience and turnover.
“Turnover will rise if they get an opportunity. Experience has to begin somewhere. We are seriously looking to give relief on those, without compromising on quality. Nobody should be denied an opportunity because he is new,” he said.
“The finance minister will do the rest, but since I have said all this in his presence, things should move,” Modi said, as a Vigyan Bhawan packed with the best known entrepreneurs of the country, and some from overseas, applauded each of his announcements.
Earlier in the day, Jaitley said this year’s budget, due February 29, will unveil taxation policies friendly to entrepreneurs, to help them build businesses for both the local market as well as global.
That, he said, would be the ultimate break from the so-called Licence Raj of shackles on businesses.