Home >Opinion >Online-views >R. Chandrashekhar | Fostering multiple Silicon Valleys

With India on its way to becoming the world’s second largest base for Internet users in 2014, there is a huge potential for the country to exploit this opportunity and catalyse growth of innovative technology start-ups that not only serve global markets, but build unique solutions for India.

A recent Nasscom-InnoTrek start-up delegation to the Silicon Valley articulated that with the right policies and thrust, India can herald a golden phase for entrepreneurship.

Technology start-ups and small and medium enterprises (SMEs) could account for more than one-third of the jobs that can be created by the information technology (IT) sector by 2020—3 million direct and 10 million indirect jobs. However, with the World Bank ranking India 132 out of 200 countries in terms of ease of doing business, the challenges of setting up and running start-ups are evident.

The key reasons start-ups are not able to sustain themselves are difficulties faced in compliances/high taxation, nascent domestic market and the lack of seed capital. If India has to establish itself as the entrepreneurial destination and innovation hub, the government and industry have to jointly foster an ecosystem that nurtures start-ups.

This trend can only be reversed through a facilitative regulatory regime. With the new government taking office, Indian entrepreneurs are hoping that as stated in the Bharatiya Janata Dal manifesto, driving entrepreneurship would be a priority.

One of Nasscom’s recommendations to the new leadership would be to build an all-encompassing India technology entrepreneurship mission. Countries such as Israel and Singapore support an early stage seed ecosystem. The venture capital and angel ecosystem has improved in India, but is still able to meet only a fraction of the requirement and lacks in supporting early stage seed funding.

Under the mission, it would be important to establish a fund with participation from private sector and state governments for investment in early stage start-ups not yet ready for private venture capital investment. This along with a dedicated SME bank would offer flexibility to evolve risk mitigation models that acknowledge technology and intangibles as assets while deploying funds.

The government, on its part, should reinvigorate incubator networks to ensure they are deemed attractive to technology start-ups. It should also support software product incubators at all Indian Institutes of Technology and regional engineering colleges in partnership with private organizations.

Despite having no dearth of talent in India, the number of innovations, not only in IT but across verticals, are very few. To encourage entrepreneurs to be innovative, nation-wide technological ideas competitions can be started by the government in partnership with Nasscom to recognize, support and fund really noteworthy ideas. The 10 best ideas can be provided mentorship and support from incubator accelerator networks, besides government grants. This would also generate a whole index of ideas in the country, giving an indication of the level of innovation happening in India.

Companies should also be allowed to support innovation grants to start-ups in cash and kind from their annual corporate social responsibility budgets. Special schemes should be launched to support research, product development in academic, government and private incubators for IT products, and promote industry-academia partnership in innovation, including incentivizing students to undertake project work, launch start-ups, etc., by introducing academic credits for such work under the guidance of faculty/industry.

We also need to review and revamp regulations and policy for technology start-ups and SMEs. This would include simplifying incorporating a company in India, compliance and liquidation, re-engineer processes to remove redundancies in approvals and ensure trackable processes. The objective should be to start operating a company in India in three days.

Tax structures also need a relook—both for investors and the start-ups. It is important to harmonize the tax regime with international regulations for angel funding—fair taxation and exit conditions—to enable domestic venture fund investment in technology start-ups.

These steps would help make India an innovation hub and build multiple Silicon Valleys in India.

The author is president of software lobby body, Nasscom

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