Go Back to Blog

Startup Manifesto

That start-ups can create direct employment in the economy and wealth for investors is a moot question, especially after the Planning Commission findings (click here for planning commission report). To encourage this new and fragile ecosystem to thrive, the government must provide impetus for its growth and ease the processes and regulations.

We have identified six things which the government can do to promote start-ups:

  1. India ranks 173rd globally, on the index measuring ease of starting a business despite being e-governance friendly. It can inch up the index by making company formation a single application process–for Name Search, DIN, Digital Signatures, Incorporation and PAN. When the place of operation is decided, allocate TAN, register it under Shop & Establishment Act and the MSME Act, again in a single application. When the minimum number of employees is reached, a common application should be made for Professional Tax, EPFO, ESI and Gratuity.

  2. Given the high risk of failure for start-ups, the procedures for winding-up an SMC (Small & Medium Business defined in Dec'06 by Ministry of Corporate Affairs) must be simplified with stringent timelines as it will encourage setting-up a company the moment an idea germinates. Moreover, start-ups must be encouraged to adopt a formal corporate entity rather than the current way of sole proprietorship or partnership firm as the former is more transparent and accountable.

  3. SMCs require breathing time and concessions so that they can standup and start walking. We need to permit self-regulation and self-compliance for SMCs with stringent penalties for prevention of potential misuse. Steps in these directions can save valuable time and become competitive globally.

  4. Channelize the savings of HNIs for creation of productive jobs for millions of poor. Currently, all savings go into government securities, gold, fixed income securities and real estate instead of risk capital. HNIs should be allowed to re-invest their capital gains in DVCFs in addition to RBI Bonds. Currently, the capital gains from one residential property can be re-invested in another and tax can be saved under Section 54 of the Income Tax Act. Start-ups require a similar provision.

  5. Indian VCs attract global pension funds, provident funds, insurance companies, endowment funds, charitable and religious institutions, foundations, and the developmental institutions. Strangely, our own Indian Institutions are not allowed to invest even a small portion of their corpus in creation of jobs through entrepreneurial start-ups.

  6. It takes months to convince a NRI/PIO to invest in DVCFs who invest in our start-ups. The FDI policy, as per clause 3.2.3, requires DIPP & FIPB approvals for the NRI to invest via their NRO bank accounts. It will supplement the Mauritius route whereby local managers help the Government to earn a genuine 10% capital gains tax if a NRI reaps capital gains from an Indian start-ups. Setting up base in India is more efficient and viable for DVCFs focused on early-stage start-ups.

This entry was posted in Blog. Bookmark the permalink.

2 Responses to Startup Manifesto

  1. Hi, Iam with honor to contact to your website , iave question , if we are sudanese company would you offer start up fund to foolow our business
    we appreciated your kindly reply

Leave a Reply

Your email address will not be published. Required fields are marked *


− 2 = seven

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>