Startups: Gateway to Make in India

Changes are perceptible. Policy paralysis is being replaced by proactive policy prescriptions and there is every reason to acknowledge the assertion that startups are the gateway to Make in India

A strong and vibrant manufacturing sector buttressed in good measure by a startup revolution is being seen as a game-changer in India. With its buoyant consumption patterns, India provides a very large domestic market for value-added manufactured goods. The ‘Make in India’ initiative holds the key to spurring investments and capital formation, infrastructure development and employment generation. Further, the announcement of a ‘startup policy’ truly makes the twin initiatives, namely, Make in India and startup promotion, make for India being on the threshold of cataclysmic changes.

Startups, if untended, are likely to burn cash and burn out. The need for startups to be provided considerable handholding in the early stages is something that should not be ignored. In the absence of an appropriate ecosystem, chances of reaping a bonanza are slim. Glimpses of the reality on the ground and a roadmap to make for the fruition of the ‘Make in India’ dream through operationalision and speedy growth of startups make up much what follows.

Most of the startups are engaged in fixing broken markets. While this is commendable in itself, India also needs startups throwing up globally path-breaking products. The startup wave in India has gained roots and is spreading across the country with young individuals with a deep seated passion to build or provide something new, with technology being the key enabler. The funding into the startup space has grown significantly according to a report released by Nasscom. Startups are provided the attention they are getting as they are capable of providing innovative solutions for health, infrastructure and energy amongst others. They also have the capacity to deliver various government programmes through the building of apps. Many see startups as the next big employment generator in the country.

A slew of policy decisions announced recently has rendered the startup environment hospitable. Amongst them are faster and easier registration of companies, self certification for many laws, no inspection for three years, funding for patents, etc. The new Bankruptcy Bill to ensure closure of companies within ninety days is a huge bonus. Public procurement norms, too, have been changed, removing turnover and track record conditions. Further funding of 500 incubators across universities, innovation movements, research parks and industry parks have been mooted. Accelerators and incubators are important to get a headstart, when one is starting afresh. The handholding process includes helping in hiring and in some cases even finding a cofounder.

The exhortation of Prime Minister Narendra Modi during his Independence Speech in 2014 to entrepreneurs to make in India was verily a watershed moment for the manufacturing sector. The manufacturing sector’s contribution to the gross domestic product in 2013-14 was 17.3%. The corresponding number for China according to the World Bank was 36%. The Make in India campaign is primarily directed at turbocharging a generation of small, medium and large enterprises in India. However technology startups, too, have been warming up to the clarion call of the Prime Minister. Earlier, entrepreneurs did the prototyping in India and set off for China or Taiwan for manufacture. That trend is slowly but surely changing. Further, foreign entrepreneurs too are setting up base in India.

Make in India has a host of initiatives such as allowing full or partial foreign direct investment in 25 sectors including automobiles, aviation, biotechnology, defence manufacturing and electronic systems. Important announcements relevant to startups were manufacturing incentives, focus on skilling labour and a simplified intellectual property regime. The fruits, true, would take time to bear, but the governments’ efforts to tend the soil is apparent. Even so, the following examples would serve as evidence of the sprouting of green shoots.

In August 2015 Foxconn Technology the world’s second largest contract electronics maker, announced its intention to make an investment of five million dollars in order to set up manufacturing units in Maharashtra. The reentry of the Taiwanese company has spurred other electronics makers and we are witnessing a comprehensive electronics supply chain blossoming . Further impetus to the Make in India push has been provided by the Lenovo group of China that has started assembling smartphones in its 40,000 sqft facility in Chennai. Another Chinese company, Meizu Technology, a company in which the Alibaba group has a stake, has also initiated steps to set up plants in India.

The operational plans of Karbonn Mobile and Micromax also bear witness to the Make in India campaign making waves. The Union Budget 2016-17 has served additional stimulus to the startup initiatives. A three-year tax holiday on profits of startups has been announced. An allocation of Rs 500 crore for SC/ST and women entrepreneurs would propel Dalit and women entrepreneurship.

These are early days. Changes are perceptible. Policy paralysis is being replaced by proactive policy prescriptions and there is every reason to acknowledge the assertion that startups are the gateway to make in India. In the light of the anecdotal evidence adduced, it can be seen that startups with the support of a proper ecosystem has the capacity to expedite the realisation of ‘Make in India’ objectives as also have a multiplier effect on India’s growth. (The author is a Senior Faculty Member at the Institute of Public Enterprise, Hyderabad)