Government Policies to Help Start-Ups & Entrepreneurs

Janhvi Mehta

It is no secret that start-ups require a supportive eco system to function and grow. Start-ups struggle for a variety of reasons – investment, competition or weak ideation etc. In order to promote participation of entrepreneurs, the government regularly launches various schemes in an attempt to support entrepreneurs and start-ups.

Case in point, approximately 3 decades ago, the government of India came out with a roster of benefits and schemes to increase participation of aspiring entrepreneurs. Some of those included:

Seed money to be given at 1% per annum interest to aspiring entrepreneurs with certain technical qualifications.
Subsidy for generator sets to be given out to use in factories.
In notified backward areas, the government would give out 15 per cent capital subsidies and on top of that, sales tax exemption for 9 years.
Subsidies were to be given out for upgradation of equipment.
Government would provide loans to promising entrepreneurs with a relief on collateral security.
Regular interviews were conducted to allot qualified professionals with plots in industrial estates to promote entrepreneurship.

As a result of that, a hub of entrepreneurs was created.

WHY DO START-UPS NEED GOVERNMENT SUPPORT?

It’s a well-known fact that entrepreneurs are the backbone of the economy and play a major role in creating employment opportunities. Moreover, it’s imperative for start-ups in their early stages to have government support as it gives them a hall pass to gain funding, equipment and helps reduce the regulatory burden. Therefore, the government of India came up with various plans, in an attempt to promote entrepreneurship and start-up culture.

One of those initiatives is Start-up India

START-UP INDIA

Launched in January 2016, Start-up India is aimed at launching entrepreneurs by facilitating a 360-degree approach.
Through this plan, the government of India promotes entrepreneurship by mentoring, nurturing and enabling start-ups throughout their lifespan.
The government has set up research parks, incubators and start-up centers across the country by creating a strong network of academic and industrial bodies.
The aim is to provide an ecosystem for start-ups in order to help them innovate and grow.
Another noteworthy feature of this scheme is that all eligible start-ups with annual turnovers less than Rs. 25 crores will be given an exemption from paying taxes for 3 years.
And more importantly, Start-up India launched a ‘Fund of Funds’ scheme to help start-ups gain access to funding.

FUND OF FUNDS

The government recognises that start-ups face a wide array of risks and challenges and the Fund of Funds aims to address these issues and assists start-ups in their early stages and helps them become fully fledged businesses.
The government encourages participation of private capital and helps leverage mobilisation of larger resources.
With this scheme, the government created a fund of Rs10,000 crore to accelerate growth and innovation in budding start-ups.
This money is disbursed via the Small Industries Development Bank of India (SIDBI).

Over 2 years have passed since these schemes were announced but the Start-up India plan seems to be just that i.e. a Plan.

Initially, these schemes were met with a lot of critical acclaim. The tax exemptions, incubation labs, research parks thrilled both entrepreneurs and investors.

For instance, from the total sum of Rs10,000 crore set aside by Fund of Funds, only 10% of the amount has been released. We are almost half way into the plan’s tenure and as of 18^th December 2017, “Rs605.7 crore has been committed by SIDBI and Rs. 90.62 crore disbursed to 17 Alternative Investment funds (AIFs), who in turn have invested Rs. 337.02 crore in 75 Start-ups”. The government departmental industry policy and promotion recognises over 5350 start-ups. But since the commencement of the programme, only 74 start-ups have been granted the tax exemptions.

Furthermore, a recent poll of over 33,000 start-ups conducted by The Quartz India shows that only a few entrepreneurs have actually benefited from the infamous scheme.

The government support helps restore the start-up ecosystem. One way to do that would be studying individual experiences of start-ups and making legislation based on that. However, it seems that the policymakers are blocking the way instead of paving it.