Prime Minister Narendra Modi unveiled the action plan for the Startup India, Stand up India initiative on Saturday
All eyes are on India to shine as the biggest hub for startups and the Indian government has announced a slew of measures to make sure that happens.
In August, Indian Prime Minister Narendra Modi announced the “Startup India, Stand up India” plan to encourage startup culture in the country. He unveiled the key points of the plan on Saturday, in the presence of over 40 prominent CEOs and heads of companies.
Here are 10 key points of the Indian government’s Startup India action plan:
1. A US$1.5 billion fund for startups
The government will set up an INR 10,000 crore (US$1.5 billion) fund to be invested over four years, with an initial corpus of INR 2,500 crore (US$370 million). The fund, which will be managed by a board with professionals from industry bodies, heads of successful startups and academia, will participate in the capital of SEBI-registered venture funds.
The fund would be used for investment in sectors like manufacturing, agriculture, health and education.
2. Tax exemption for three years, and capital gains
Probably the most popular provision of the plan is a three-year exemption on income tax for startups. The exemption will be available subject to non-distribution of dividend by the startup.
To help boost the funds available to various VC and alternative investment funds, capital gains invested in venture funds registered with the stock markets regulator SEBI, will also be exempt from tax.
3. Credit guarantee fund for startups
To help startups raise debt funding through the formal banking system, the government announced a credit guarantee mechanism through the National Credit Guarantee Trust Company, which will have an annual corpus of INR500 crore (US$75,000) for the next four years.
4. Faster registration and exits for startups
The government will enable startups to set up their company in a day through its a mobile app and a portal, which are scheduled to be launched on April 1. The portal will also be a single point of contact for clearances, approvals and registrations, and for companies to apply for schemes under the Startup India action plan.
The exit route for startups has also been made simpler. Under the Insolvency and Bankruptcy Bill 2015, which was recently tabled in Parliament, provisions have been made the for voluntary closure of businesses. Startups may be wound up within a period of 90 days from applying for winding up on a fast track basis.
5. A self-certification regulatory regime
Regulatory hurdles have often scared potential startups, so to reduce this burden, the government will allow startups to self-certify compliance on nine labour and environment laws through the startup mobile app.
It also provided that no inspections would be conducted in to check implementation of labour laws for three years.
6. A fast-track mechanism filing patent applications
To simplify and fast track the process of filing a patent, the government has launched an intiative under which the Central Government will bear the cost of patents, trademarks and designs for a startup.
It will also provide an 80 per cent rebate to encourage the creation and protection of intellectual property. The programme is launched on a pilot basis for a year
7. Relaxed norms of public procurement
The government and its public sector companies will exempt startups in the manufacturing sector from the criteria of “prior experience/ turnover” on the condition that they have their own manufacturing facility in India. They are also required to have the requisite capabilities to fulfill the project requirements.
8. Startup India Hub for collaboration
The planned Startup India Hub is designed to be a single point of contact for startup ecosystem players.
It will function in a hub and spoke model with central and state governments, VCs both Indian and foreign, angel networks, banks, incubators, legal partners among others. The hub will assist startups in obtaining financing and will organise mentorship programs to encourage knowledge exchange.
9. Atal Innovation Mission to encourage entrepreneurship and innovation
Named after former Indian Prime Minister Atal Bihari Vajpayee, the Atal Innovation Mission will establish sector-specific incubators.
It will also have 500 ‘Tinkering Labs’ to provide pre-incubation training and a seed fund for high-growth startups. The plan also includes innovation awards including a Grand Innovation Challenge Award for finding ultra-low cost solutions for India.
10. An annual incubator grand challenge
The government will hold an annual challenge under which it will identify and select 10 incubators, based on pre-defined Key Performance Indicators as having the the potential to become world class, and give them INR10 crore (US$1.5 million) each as financial assistance to ramp up their infrastructure.
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