Startup India Action Plan: 20 Key Highlights

On 16th January, one of it’s kind (probably in the world) Startup event was conducted by Government of India. Prime Minister himself graced the occasion and unveiled the Startup Action Plan 2016. The action plan contains several positive initiatives for Indian startups that look at easing up various regulatory, legal, financial and other challenges faced by them.

We bring you 2o Key Highlights of the Startup India Action Plan

1.) Defining the phrase ‘Startup’

While it is not exactly part of action plan, this probably is the biggest positive change that has been bought by the Government – Defining the phrase ‘Startup’. Now, Startups will be ‘Startups’ and not a ‘Business’. Till date a Startup was not separated in various policies of the Government. All were businesses. Now, we have definition for a startup and a clear direction for them from Government.

The most encouraging aspect is that Government is now looking at startups as a serious growth engine for India and want to help them achieve success.

2.) Compliance Regime based on Self-certification

Government wants to reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low. Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below). In case of the labour laws, no inspections will be conducted for a period of 3 years.

3.) Startup India Hub

With Startup India Hub, Govt wants to create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding. They will work in a hub and spoke model and collaborate with Central & State governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions.

Govt will also help startups through their lifecycle with specific focus on important aspects like obtaining financing, feasibility testing, business structuring advisory, enhancement of marketing skills, technology commercialization and management evaluation.

4.) Rolling-out of Mobile App and Portal

Govt plans to roll out a Mobile app that will help startups quickly get off the ground. The app features will include registering Startups with relevant agencies of the Government though a single form. The app will also have features like tracking the status of Registration, downloading registration certificate, filing compliances, obtaining clearances and approvals among other things.

5.) Legal Support and Fast-tracking Patent Examination

To promote awareness and adoption of IPRs by Startups , Government is taking various steps that includes fast-track examination of patent applications and rebate in fees. They will also help startups by providing panel of facilitators to assist in filing of IP applications and the cost will be borne by the Government.

6.) Relaxed Norms of Public Procurement for Startups

Going forward, norms for Startups will be relaxed when they are applying for Tenders floated by PSU. Earlier, this was not possible as all tenders require either “prior experience” or “prior turnover”. Now, this will not be roadblock anymore.

7.) Faster Exit for Startups

Government plans to make it easier for startups to close and exit their businesses incase they are winding up operations.

8.) Providing Funding Support through a Fund of Funds

While Government will not directly invest or fund startups, they will be doing it through Fund of Funds with a corpus of Rs. 10,000 Crore. The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups.

9.) Credit Guarantee Fund for Startups

In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs, Government plans to provide credit guarantee comfort with flow of Venture Debt from the formal Banking System.

10.) Tax Exemption on Capital Gains

Government plans to provide Tax exemptions to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government.

11.) Tax Exemption to Startups for 3 years

In what could be termed as one of the most positive moves, exemption for Income tax shall be given on profits generated by startups for a period of first 3 years.

12.) Tax Exemption on Investments above Fair Market Value

Currently, only the investments by venture capital funds in Startups are exempted from operations of provision under section 56(2). Now, the same shall be extended to investment made by incubators and angel investors in the Startups.

13.) Organizing Startup Festivals

Govt plans to organize one national and one international startup festival annually for Showcasing Innovation and Providing a Collaboration Platform

14.) Launch of Atal Innovation Mission

Govt will provide a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas. This will be done through Atal Innovation Mission (AIM)

15.) Harnessing Private Sector Expertise for Incubator Setup

Government intends to create a policy and framework for setting-up of incubators across the country in public private partnership. 35 new incubators in existing institutions will be setup along with funding support of 40% shall be provided by Central Government.

Government will also provide grant of 50 percent for 35  new incubators established by private sector.

16.) Building Innovation Centres at National Institutes

17.) Setting up Research Parks

The Government shall set up 7 new Research Parks at IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT Kharagpur, IISc Bangalore, IIT Gandhinagar, and IIT Delhi with an initial investment of INR 100 crore each. The research Parks shall be modeled based on the Research Park setup at IIT Madras

18.) Promoting Startups in the Biotechnology Sector

To foster and facilitate bio-entrepreneurship, 5 new Bio-clusters, 50 new Bio-Incubators, 150 technology transfer offices and 20 Bio-Connect offices will be set up in research institutes and universities across India.

19.) Innovation Focused Programs for Students

In order to promote research and innovation among young students, the Government shall implement various innovation programs including Innovation Core, NIDHI and Uchhattar Avishkar Yojana

20.) Annual Incubator Grand Challenge

To build World Class incubators in India, Govt plans to launch an annual Incubator Grand Challenge to identify leading Incubators in India.

Kudos to the Government for coming up with a Startup action plan that really touches on every facet of India’s Startup Ecosystem. With such big help from the Government, there is no doubt, our Startup ecosystem has the potential to be the best in the world!

You can check out the detailed Startup Action Plan here.