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India has a vibrant entrepreneurial landscape

Rana Kapoor sees flow of futuristic ideas

Rana Kapoor

Rana Kapoor.

India has developed a vibrant entrepreneurial landscape and while start-ups will develop scalable futur-ready solutions, says India’s leading banker.

“India has developed a vibrant entrepreneurial landscape and steadfastly strengthened its position as the third largest start-up ecosystem globally,” said Rana Kapoor, MD & CEO, YES BANK and Chairman, YES Global Institute,

“This is visible in our Food Processing sector and associated ecosystem, which has witnessed a wave of entrepreneurship with disruptive and futuristic ideas, especially in the last five years. Collaborations, linkages and partnerships among key stakeholders including start-ups, will help develop scalable future-ready solutions supported by conducive Government policies.

“Progressive Government initiatives such as Startup India, Atal Innovation Mission, a dedicated Women Entrepreneurship Cell in NITI Aayog and numerous startup-dedicated investment funds, are playing a key role in fostering the culture of innovation and entrepreneurship in India,” Kapoor elaborated.

Kapoor was speaking at the launch of FICCI-YES BANK report states that a robust regulatory environment can enable a favorable macro-economic environment to nurture the growth and development of technology-based startups.

The government has also taken note of this trend and it is expected that ‘Startup India’ will facilitate this growth and development by putting in place the right steps towards creating a nurturing ecosystem for startups, it said.

Late stage startups – by virtue of their maturity and relatively proven business models have much easier access to funds, it added.

However, the current uncertainty in the Indian market means that early stage startups are finding it difficult to raise funds at a stage where they need the maximum financial support, noted the report.

In this scenario, a government backed fund such as SETU (Self Employment and Talent Utilization) Fund can prove to be a reliable resource, desperately needed for these startups to get started, the report said.

“Such a fund can make a real difference to the ecosystem and provide momentum to the wave of innovation that has begun in India,” it added.

A streamlined tax regime can remove hurdles which impact startups and small businesses in India, including venture investment, technology, and mergers and acquisitions.

The government can reclassify what constitutes ‘services’ for tax purposes, to help clarify the application of the term to software product businesses, including startups.

Startups will also benefit from an exemption of income and sales tax, to facilitate their growth and development by making operations more viable.

There should be tax breaks/depreciation for startups procuring items essential for businesses like hardware, software and communication equipment among others, according to the report.

The report states that taxation on investments that are made in startup enterprises must adequately reflect associated risks of such enterprises, especially as gains made out of successful exits are redeployed for investment.

This principle is currently reflected in the pass-through status accorded to venture capitalist funds.

Incubators should be encouraged to avail of the benefits extended from time to time, and for them to be considered SEBI-approved investors.

To encourage the sector’s long-term growth, the government can look at an enhanced taxation regime for incubators, including rendering them exemption from taxes as well as the customs duty which is levied on the purchase and import of goods needed for the incubators, it pointed out.

Given their role in mentoring and connecting innovators to business growth opportunities, funds contributed to incubators should be treated at par with investments in research and development (R&D) activities for businesses, and proportionally the entities that contribute funds to incubators should also be eligible for the 200% tax benefit that is currently applicable to R&D investments.

The role of industry is very critical is boosting the StartUp ecosystem, stressed the report.

An institutionalized collaborative mechanism between the industry and the StartUps is of utmost importance.

Such platforms provide an opportunity to discuss on ground challenges and share experiences with each other for mutual benefits.

“Regular interactions with the industry helps the startups get guidance and assistance from industry veterans,” it said.

The report, ‘Start-Ups: Transforming India’s Food Processing Economy’, was launched on 9 Feb 2018 in New Delhi by the Federation of Indian Chambers of Commerce and Industry (FICCI) and YES Bank.

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