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Start now on our start-ups

Southeast Asia is becoming a huge draw for Indian IT firms and that's not good news. Most Indian businessmen have been saying for a while now that they'd rather invest abroad than in India.

india Updated: Apr 06, 2013 01:38 IST
Hindustan Times

It's no longer restricted to talk. Indian companies, especially technology start-ups, are moving base to Singapore and other South East Asian locations. Incentives and opportunities! It boils down to these two issues.

These countries offer easier - and transparent - regulatory frameworks, better access to markets, lower taxes and much better living and working conditions.

Most Indian businessmen have been saying for a while now that they'd rather invest abroad than in India.

But businesses that have already achieved a critical mass aren't easy to shift. But start-ups and small tech set-ups can - and many of them are doing so.

Over the last couple of years, Singapore, Hong Kong, the Philippines, Indonesia and Thailand have all gained at India's expense.

Singapore, for instance, has a marginal corporate tax rate of 17% compared to 35% in India. Then, it pays half the salaries of techies at technology companies for one year subject to a cap of Rs. 1 crore.

One way of looking at it is: let them go; these are only a few small start-ups. They aren't the only fish in the ocean. But that would be the wrong way to react for several reasons.

First, these companies don't operate in a vacuum. They have investors - many of whom are international venture capitalists. They have large MNC customers like Ford, Toyota, Pizza Hut, Samsung, among others.

And it's a good bet that at least some of these start-ups will either become big players in future or be gobbled up by the existing big fish. Any which way, it is India and India's image that will suffer.

In a world where soft power is increasingly becoming a major determinant of perception, it is the opinions of senior and mid-level executives at these financiers and MNCs that will inform global views on India.

If word spreads - and it can spread like wildfire (or, if it goes viral in today's lingo) that even Indians are abandoning India because of unfavourable regulatory and working environments, the road back from the current 5% growth trajectory to 8% and above will be that much more difficult.

Secondly, it is fair to expect at least some of these companies to attain critical mass and go on to become global players.

So who will gain when that happens - India or the SE Asian country these companies are based in? It doesn't take a rocket scientist to figure out the answer. So what can India do to arrest this new age knowledge drain?

The government must immediately draw up a list of incentives to try and hold them back. It must immediately cut the red tape that holds back their growth prospects.

And it must immediately appoint "knowledge envoys" - respected elder statesmen of India's IT sector like Infosys's NR Narayana Murthy, TCS's S Ramadorai, and others like them - to draw up a comprehensive roadmap on what is needed not only to hold back Indian entrepreneurs looking for greener pastures abroad but also to lure and incentivise start-ups in foreign lands to shift base to India.

First Published: Apr 05, 2013 21:32 IST