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Start-ups need enabling environment

By GovernanceToday
In Editorial
September 10, 2016
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India is a young country and it will remain one for a long time to come; for the most part when rest of the world would start getting old, Indian population will still remain in working age. This demographic dividend is also manifested  in the entrepreneurial energy that the young generation possesses. As economy gets diversified and information age matures with proliferation of mobile phones and internet, it is natural that more ideas would emerge and aim for commercial success. This trend is getting more visible in India now with greater number of start-ups emerging out of all corners of the country.

Last year, India became the third largest start-up country which is no mean achievement. Incidentally, it beat both China and Israel which have been considered more mature ecosystems for start-ups. Also, the funding for start-ups has tremendously grown in last few years. These are all good news.

The government is also leaving no efforts spared when it comes to supporting the start-up culture the country. Earlier this year, it initiated the Startup India initiative which is a great move considering it provides immense support for new  entrepreneurs to set up their businesses and offers benefits like easier tax regime and lesser bureaucracy in terms of registration and reporting etc. It is heartening to see that the government is realizing the problems that these entities are facing and is working on creating ways in which the new ideas manage to find a way around the system.

However, the problem at a broader level still remains which is stifling the entrepreneurial spirit in a more diffused way. Financing is perhaps the most visible and troublesome aspect of the environment in which most entrepreneurs work. Beyond the hallowed IT start-ups, there is still darkness for traditional start-ups who face an uphill task in securing even the working capital; banks, which are still working on their old format of documentation, insist on three years financial, and there are virtually no sources of funding for non IT start-ups in venture capital world. According to the CEO of a start-up, if he had three years’ financial, he would not be seeking small working capital funding from banks in the first place.

But still, a new beginning has been made which needs to be nurtured and supported so that more and more start-ups succeed and become large companies which could provide employment in turn and contribute to the national economy.

An area which is still not addressed enough is the improvement of the quality of education which would churn out more ideas in academic institutions that students would later work on to create start-ups. A significant fraction of ideas and start-ups in the developed world germinates in colleges and institutions of higher learning where there is an environment to challenge the traditional thoughts and where new ideas are encouraged. However, that is not the case in India and as such, even the incubators at premier engineering and tech institutions are not working at their best. This is something that the government needs to work on.

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