Monday, January 18, 2016

[Editorial # 43] Starting up to stand still?: The Hindu

[Following editorial has been published in The Hindu on 18th January 2016. Read through it and try to answer the questions that follow. Please do not copy and paste answers. The objective of this exercise is to get you in the groove of answer -writing. Try to write in your own words. Don't hesitate to write in a bulleted-format, if you are uncomfortable in writing in paragraph form.]

Two lakh passes were sought for the Start Up India workshop at New Delhi’s Vigyan Bhawan with a seating capacity of 1,350, a good indicator of the interest in the action plan for start-ups unveiled by Prime Minister Narendra Modi after a nine-hour talkathon between Silicon Valley honchos, financiers, Indian unicorns and top government officials. Amidst the euphoria, at least one Silicon Valley CEO, B.J. Arun of July Systems, warned that India was witnessing a bubble similar to the heady dot-com rush of 1999-2000 in Silicon Valley with too much money chasing too few ideas. The high demand for passes to the event is probably a sign of that growing bubble. India, Mr. Arun warned, won’t recover as easily as the U.S. did after the bubble bursts, only to be told by his Indian counterparts that there is no bubble and even if there is, the fittest would survive. That confidence is refreshing, coming from under-40 first generation entrepreneurs. The government’s action points seem laudable for starters, if not deep enough. They include Rs. 10,000 crore of funding for the next four years, tax-free and labour-inspection-free existence for start-ups for the first three years, speedier patent clearances with the exchequer footing most of the bill, and promises to fix taxation hurdles that deter domestic and global financiers from bankrolling new ventures in the coming Budget. That the government must intervene less for start-ups to succeed — Mr. Modi’s core message — drew the loudest cheers, followed by the tax breaks on start-up profits. The tax breaks fly in the face of the corporate tax reform being pursued to lower rates and phase out exemptions; but it is a headline-grabbing measure that won’t hit revenues as few start-ups would make profits in the first three years.


A bigger issue is the attempt to define the start-ups eligible for the sops, support and funding announced by the Prime Minister: firms set up in the past five years with an annual turnover below Rs. 25 crore, working ‘towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property’. The mere act of developing products or services that do not have potential for commercialisation or have no or limited incremental value for customers would not be a start-up. Moreover, a start-up shall be eligible for tax benefits only after it is certified by an inter-ministerial board. Slotting something like innovation into a template may not click and until more details emerge, it just sounds like more red tape to clear to avoid some red tape. Smarter ventures would seek funding on their own and work without official sops, but the government must not lose sight of the need to fix India’s overall business climate. Failing that, even with tax sops, start-ups will continue to quit India and list or register elsewhere. Bubble or not, that’s one issue Indian unicorns are unanimous about.

Questions:

1. What is a Start-Up? What are the criteria for a company to be recognised as a Start-Up?

2. Why is India seeing such a rapid increase in number of Start-Ups?

3. What makes the government to come up with an action plan for Start Ups in India?

4. What are the features of the Start-Up India Action Plan released by the Government?

5. What is understood by "dot-com rush of 1999-2000"? 

6. What is meant by red-tape? How does it impact the common man?

7. Given the jobless growth being witnessed in India, Start-Ups can be an effective tool to generate employment in India. Discuss (200 words)

7 comments:

  1. 1. What is a Start-Up? What are the criteria for a company to be recognised as a Start-Up?
    A .startup is a temporary organization designed to search for a repeatable and scalable business model." The criteria to be a startup in india is that it shouldnot have the turnover of 25 crores in past 5 years. Its establishment shouldnot be beyond 5 years but working towards development, deployment and innovation of new products,processes and services.

    ReplyDelete
  2. 2. Why is India seeing such a rapid increase in number of Start-Ups?
    A. India's demography turns into demographic boom with average median age of india is 28 which shows more number of labour force. Moreover, as the country is on the trajectory of growth it attracts larger investments in the sectors like manufacturing , food processing ,services etc. In addition to that the GOI is not leaving any stone unturned by turning steering the economy through schemes like MAKE IN INDIA to promote capital investment. To suit the needed employment demands , SKILL INDIA etc are being implemented to make the individuals beefed up with the knowledge and to tackle technology enabled services.
    Moreover recent reports says that smartphone users will be 40 cr in 2018. Another report on internet penetration says that the internet penetration on mobiles is approximately 50%. Hence there is a much scope for the .com services to become the potential sectors of growth and engine to the economy.

    ReplyDelete
  3. 3. What makes the government to come up with an action plan for Start Ups in India?
    A. The following are the reasons for the introduction of start up india .
    ECONOMIC REASONS:
    1. india is a developing country with growth rate of around 7%. this shows a large investment through FDI in india will be fallout.
    2.India is a hub for service sector will a number of skilled manpower and labour force.Hence cheap availability of labour futher attracts the investors.
    3.India is in demographic boom with the median age of 28 years. Hence energitic and dynamic young population.
    ADMINISTRATIVE REASONS:-
    Suceess of skill india programme, digital india, etc which gulf the gap of academia-industria disconnect. Hence it is high time to make the skilled youth to encourage to takeup enterpreneurship through self-styled business model

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  4. 4. What are the features of the Start-Up India Action Plan released by the Government?
    A. Start Up india action plan was launched to promote innovation, promote employment by making indians enterpreneurs rather than depending on foreign countries for investment for business models.
    tax exemption for 3 years for startups
    tax exemption for those who invest in the startups
    80% investment will be funded back for successful startups.
    mobile app and portal for clearances, approvals and registration
    self-certify compliance on nine labour and environment laws through the startup mobile app.no labour laws will be inspected for 3 years
    govt to bear the cost of patents, trademarks and designs for a startup, with an 80% rebate to encourage the creation and protection of its intellectual property.
    debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI, which has an annual corpus of Rs. 500 crore for the next four years.
    Startup India Hub on the lines of spike and hub model to support startups
    Startups may be wound up within a period of 90 days from making of an application for winding up on a fast track basis.
    Atal Innovation Mission to encourage entrepreneurship and innovation
    Innovation and Entrepreneurship Development Centres (IEDCs) to support and award INR 10 lakhs to 20 student innovations.
    govt will identify and select ten incubators,with a world class model and award 10 crore each

    ReplyDelete
  5. 5. What is understood by "dot-com rush of 1999-2000"?
    A .com is a company that does most of its business on the Internet, usually through a website that uses the popular top-level domain ".com" (in turn derived from the word "commercial").

    in US it was high time for startups in1997. As internet penetration was high So all the internet companies expected to receive huge investments. Everyone who started startups used the .com domain to attract the visitors to their webpages. Assuming more visitors will generate more revenue .com was used widely across the US creating a bubble. All the startups underwent huge losses as the investments has not yieleded the desired results.

    ReplyDelete
  6. 6. What is meant by red-tape? How does it impact the common man?
    A. it refers to excessive regulations or rigid conformity to formal rules that is considered redundant or bureaucratic and hinders or prevents action or decision-making.
    impacts:-
    red tapism reduces transparency, delayed procedures, generally discourages NRI's to invest in indian companies . hence reduction in employment activities, reduction in demand of goods and services. Hence slow down in economy may occur.

    ReplyDelete
  7. 7. Given the jobless growth being witnessed in India, Start-Ups can be an effective tool to generate employment in India. Discuss.
    A.With india witnessing high rates of jobless growth, it is right move at right time to announce startup India which can be the engines of growth.
    With earlier schemes like DI, Skill india mission ground work has done to make work force
    more compatible with the needed industrial requirements.
    PwC in its 'World in 2050' report said that India, along with China, will be the world's leading economy by 2050. Hence this shows that the potential tbat india has which has to be tapped.

    ReplyDelete