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Challenges for start-ups in India and how Budget could ease them

Sudhir Singh, Partner, PwC India     February 26, 2016

Sudhir Singh, Partner, PwC India


Weak ecosystem: India lags far behind several nations in terms of ecosystem and culture that nurtures startups. Indian laws and policies are not suited to meet  development needs of start-ups, which vary greatly from that of traditional businesses. Also, government, regulatory and compliance authorities have limited understanding of newer business models, resulting in redundant compliance requirements, delays in clearances, etc.

Limited influence: Start-ups are often less influential in representing their interests before relevant authorities, primarily as those are small companies with limited approach in the government and no political connections, linkages or lineages.

High failure: Start-ups have a very high failure rate. Many such companies come up with new business models that have no proven track record.

Current status

Start-up India: The government recently launched a 'Start-up India' programme giving incentives and relaxing compliance requirements for startup companies. This has demonstrated that the government is realising the need for supporting start-ups and is giving them time and attention.

Start-up fund: As part of the 'Start-up India' programme, the government has also announced a Rs10000-crore fund for innovation-driven enterprises.

Private investment:
Start-ups with viable business ideas are doing well with the help of private funding and their leaders' entrepreneurial spirit, and not with huge incentives from the government.

Ease of business:
The government's recent efforts to increase the ease of doing business have helped start-ups as well as other companies.

Need to do

  • Easy entry:Government must make efforts towards creating a single window for all taxes, compliances and registrations, so that the startup companies can put more time and effort in attending to business concerns rather than on administrative matters.
  • Easy exit:Government must create policies that help winding down companies in organised manner with safe exit to the promoters, so that people are not discouraged from taking up entrepreneurial ventures.
  • Fund of Funds: The details of the recently-announced Rs-10000-crore fund are keenly awaited. The detailed policy must ensure seamless implementation of this funding process.
  • Tax sops to supporting ecosystem: Since the startups do not benefit from the initial tax sops due to losses in their early years, the government must help by providing tax breaks to the supporting ecosystem, such as Incubators and Accelerators, Angel Investors, and organisations providing skilled manpower.
  • Smart infrastructure: Good infrastructure is as important for the startups as for other organisations or people. The government must focus on developing smart cities, providing internet, data connectivity, and enabling incubator facilities, apart from the traditional facilities such as logistics, roads and ports connectivity, etc.


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