Impact of Start-Up on India’s Economy: Issues/recommendations
Is Company A Startup in India?
Company Age
Period of existence and operations should not be exceeding 10 years from the Date of Incorporation
Company Type
Incorporated as a Private Limited Company, a Registered Partnership Firm or a Limited Liability Partnership
Annual Turnover
Should have an annual turnover not exceeding Rs. 100 crore for any of the financial years since its Incorporation
Original Entity
Entity should not have been formed by splitting up or reconstructing an already existing business
Innovative & Scalable
Should work towards development or improvement of a product, process or service and/or have scalable business model with high potential for creation of wealth & employment
Impact of Startups
- Promoted employment opportunities: Approximately 47% of the recognised startups are from Tier 2 and 3 cities, which provides employment opportunities to the youth.
- Women Empowerment: Approximately 47% of recognized startups in the country have at least one-woman director.
- Rise in Research and Development: They promote new ideas and innovations. For instance, Deep Tech Startups.
- Promoted democratisation of technology and Inclusivity: Fintech startups are now reaching out to remote areas, for instance, Paytm, etc.
- Attracted new investments: Startups have attracted multinational corporations to bring in foreign investments.
Issues/Challenges in the Startup Ecosystem of India
- Less focus on Agriculture: Out of the total recognised startups, only 5.18% are in agriculture sector.
- Low Intellectual Property Rights (IPR): Only 11% of the patent applications filed by startups have been granted patents.
- Flipping (Registering in a foreign country): The Economic Survey 2022-23 highlighted the flipping trend due to more access to overseas debt, eliminating the risk of angel tax, better IP protection, etc.
- Low utilisation of Income Tax Exemptions: Under Section 80-IAC of the Income Tax Act, 1961, only 1% of recognized startups have received the Certificate of Eligibility.
o This Section allows recognised startups a 100% tax exemption for three consecutive profit-making years.
- Lack of Infrastructure Support: Absence of adequate and specific testing standards, particularly for startups dealing with hardware products.
- Uncertainty with Funding: Funding from angel investors and venture capital firms becomes available to startups only after the proof of concept has been provided.
Recommendations of the Committee
- Encourage the adoption of advanced technologies: Such as the Internet of Things (IoT), data analytics, etc., to improve productivity, optimise resource utilisation, and enhance decision-making in agriculture.
- Establishing women entrepreneurs-focused funds: To ensure uninterrupted access to capital.
- Relaxation in regulatory/legal framework: To enable direct overseas listing of unlisted Indian startups and steps to facilitate reverse flipping.
- Amendments to the Income Tax Act, 1961: So that Employee Stock Option Plans (ESOPs) are taxed only at the time of sale of shares and not on notional gains.
- Dynamic testing and certification standards: Shall be established as per international best practices.
- Filling up the talent gap: Encouraging industries to collaborate with educational institutions to create customized courses.
- Encourage partnerships: Between startups and research institutes for collaborative innovation and R&D partnerships.
https://todaynewslife.com/space-start-ups-in-india/