PM Modi’s ambitious ‘StartUp India’ initiative once again got a question mark when a report by the department-related Parliamentary Standing Committee on Commerce said that the Department of Industrial Policy and Promotion (DIPP) could utilize only Rs 4 lakh (as on December 31, 2017) out of Rs 10 crore that were allocated to it for the promotion of StartUp India scheme in 2017-18. The committee presented its report on March 14.
The Committee expressed concerns about the “huge gap” that exists between the number of startups receiving funding, tax exemptions and the number of such entities that have been recognized. Additionally, the panel observed in its report that, as on February 6, 2018, 6,981 startups have been recognized by the DIPP. Of these startups, only 99 have been funded and 82 have been certified for claiming tax exemptions under the Income Tax Act, 1961.
Asking the DIPP to furnish reasons for the lag in funding recognized startups, the Committee suggested DIPP to “take concerted measures to ensure genuine entrepreneurs are provided all the support to flourish and create jobs.”
The panel report further said that the proposed Rs 2,000 crore Credit Guarantee Fund for startups, announced in January 2016, is still in the formulation stage and there has been no progress made as the fund has been again allocated a token amount (of Rs 1 lakh) in Budget Estimate of 2018-19,”
The report also said the panel fears that the functioning of the Startup India Hub and call centre was hampered due to low utilization of funds.
The above news was first reported in Indian Express.
Notably, this is not the first time when inefficacy of StartUp India scheme has been revealed, where it was again observed that the much hyped initiative is not yielding the desired outcome as promised three years back when it was announced by Prime Minister Narendra Modi in August 2015 to develop an ecosystem to galvanize entrepreneurship across the country, through income tax benefits, easy bank financing and lesser compliance burden.
Last month, a report by Entrepreneurship Development Institute of India (EDII) also revealed that only 5% of the country’s people went on to establish their own business or startups, which is among the lowest rates in the world. Moreover, business discontinuation in India is among the highest in the world at 26.4%, said the EDII report.
Also, an another report revealed that in this year’s Asia’s startup-friendly countries list, India stands at 8th rank behind China and even Malaysia because of the very fact that it is still the poorest country in Asia with GDP per capita of $1,710, in 2017 and a high unemployment rate.
The Start-Up India campaign has recently completed 2 years of its launch on January 16, 2018. According to the latest report, (till 28 February 2018) some 5,350 startups have been recognized in the country with over 40,000 employees working in these startups. Surprisingly, the report said that th worst is that the agency that was designated by the Centre to disburse funds to startups has released only Rs 337 crore out of Rs 600 crore to only 75 start-ups in 2 years.
All this despite of the fact that exactly a year back industry body FICCI, in its report, suggested that startups in India need government support to lesson the number of failures and revealed that startups success rate is not up to the mark in the country. Perhaps, the government didn’t take FICCI seriously.
The market valuation of Indian startups has grown significantly but innovation remains the biggest missing piece of the Indian startup puzzle. Last year, a study — “Entrepreneurial India” — by the IBM Institute for Business Value and Oxford Economics found that 90% of Indian startups fail within the first five years due to lack of innovation.
To recall, in 2016’s G20 digital entrepreneurship survey too India was ranked in bottom 10 in group of 20.
Few days back, industry veteran and former Infosys director TV Mohandas Pai has made a crucial statement concerning Indian startup ecosystem, as he said that 60% of startups in India may fail owing to lack of market and other factors. He, however, also added that all startups have bright future.
Like this content? Sign up for our daily newsletter to get latest updates.