19 and 20 JAN 2016

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Start UP India :-

Startup India is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower Startups to grow through innovation and design.

Actions Plan:-

From digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc

From existing tier 1 cities to tier 2 and tier 3 citites including semi-urban and rural areas

Simplification and Handholding

Funding Support and Incentives

Industry-Academia Partnership and Incubation

Compliance Regime based on Self-Certification:-

Objective
To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.

Details:-

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. Startups may be inspected on receipt of credible and verifiable complaint of violation, filed in writing and approved by at least one level senior to the inspecting officer.

Labour Laws:
• The Building and Other Constructions Workers’ (Regulation of Employment & Conditions of
Service) Act, 1996
• The Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
• The Payment of Gratuity Act, 1972
• The Contract Labour (Regulation and Abolition) Act, 1970
• The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
• The Employees’ State Insurance Act, 1948
Environment Laws:
• The Water (Prevention & Control of Pollution) Act, 1974
• The Water (Prevention & Control of Pollution) Cess (Amendment) Act, 2003
• The Air (Prevention & Control of Pollution) Act, 1981

Startup India Hub:-

Objective:-
To create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding

Details :-

The “Startup India Hub” will be a key stakeholder in this vibrant ecosystem and 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
• Assist 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
• Organize mentorship programs in collaboration with government organizations, incubation centers, educational institutions and private organizations who aspire to foster innovation.

Rolling-out of Mobile App and Portal:-

Objective:-
To serve as the single platform for Startups for interacting with Government and Regulatory Institutions for all business needs and information exchange among various stakeholders

Details :-

• Registering Startups with relevant agencies of the Government. A simple form shall be made available for the same. The Mobile App shall have backend integration with Ministry of Corporate Affairs and Registrar of Firms for seamless information exchange and processing of the registration application
• Tracking the status of the registration application and anytime downloading of the registration certificate. A digital version of the final registration certificate shall be made available for downloading through the Mobile App
• Filing for compliances and obtaining information on various clearances/ approvals/ registrations required
• Collaborating with various Startup ecosystem partners. The App shall provide a collaborative platform with a national network of stakeholders (including venture funds, incubators, academia, mentors etc.) of the Startup ecosystem to have discussions towards enhancing and bolstering the ecosystem
• Applying for various schemes being undertaken under the Startup India Action Plan

Legal Support and Fast-tracking Patent Examination at Lower Costs

Objective:-
To promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs by providing access to high quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in fees.

Details :-

• Fast-tracking of Startup patent applications: The valuation of any innovation goes up immensely, once it gets the protective cover of a patent. To this end, the patent application of Startups shall be fast-tracked for examination and disposal, so that they can realize the value of their IPRs at the earliest possible.
• Panel of facilitators to assist in filing of IP applications: For effective implementation of the scheme, a panel of “facilitators” shall be empanelled by the Controller General of Patents, Designs and Trademarks (CGPDTM), who shall also regulate their conduct and functions. Facilitators will be responsible for providing general advisory on different IPRs as also information on protecting and promoting IPRs in other countries. They shall also provide assistance in filing and disposal of the IP applications related to patents, trademarks and designs under relevant Acts, including appearing on behalf of Startups at hearings and contesting opposition, if any, by other parties, till final disposal of the IPR application.
• Government to bear facilitation cost: Under this scheme, the Central Government shall bear the entire fees of the facilitators for any number of patents, trademarks or designs that a Startup may file, and the Startups shall bear the cost of only the statutory fees payable.

• Rebate on filing of application: Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years.

Relaxed Norms of Public Procurement for Startups

Objective:-
To provide an equal platform to Startups (in the manufacturing sector) vis-à-vis the experienced entrepreneurs/ companies in public procurement

Details:-
Typically, whenever a tender is floated by a Government entity or by a PSU, very often the eligibility condition specifies either “prior experience” or “prior turnover”. Such a stipulation prohibits/ impedes Startups from participating in such tenders.

In order to promote Startups, Government shall exempt Startups (in the manufacturing sector) from the criteria of “prior experience/ turnover” without any relaxation in quality standards or technical parameters. The Startups will also have to demonstrate requisite capability to execute the project as per the requirements and should have their own manufacturing facility in India.

Faster Exit for Startups

Objective:-
To make it easier for Startups to wind up operations

Details:-
Given the innovative nature of Startups, a significant percentage fail to succeed. In the event of a business failure, it is critical to reallocate capital and resources to more productive avenues and accordingly a swift and simple process has been proposed for Startups to wind-up operations. This will promote entrepreneurs to experiment with new and innovative ideas, without having the fear of facing a complex and long-drawn exit process where their capital remain interminably stuck.
The Insolvency and Bankruptcy Bill 2015 (“IBB”), tabled in the Lok Sabha in December 2015 has provisions for the fast track and / or voluntary closure of businesses.

In terms of the IBB, Startups with simple debt structures or those meeting such criteria as may be specified may be wound up within a period of 90 days from making of an application for winding up on a fast track basis.This process will respect the concept of limited liability.

Providing Funding Support through a Fund of Funds with a Corpus of INR 10,000 crore

Objective:-
To provide funding support for development and growth of innovation driven enterprises

Details :-

• The Fund of Funds shall be managed by a Board with private professionals drawn from industry bodies, academia, and successful Startups
• Life Insurance Corporation (LIC) shall be a co-investor in the Fund of Funds

• The Fund of Funds shall contribute to a maximum of 50% of the stated daughter fund size. In order to be able to receive the contribution, the daughter fund should have already raised the balance 50% or more of the stated fund size as the case maybe. The Fund of Funds shall have representation on the governance structure/ board of the venture fund based on the contribution
made.
• The Fund shall ensure support to a broad mix of sectors such as manufacturing, agriculture, health, education, etc.

Credit Guarantee Fund for Startups

Objective
To catalyse enterpreneurship by providing credit to innovators accross all sections of society

Details
In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee comfort would help flow of Venture Debt from the formal Banking System.

Debt funding to Startups is also perceived as high risk area and to encourage Banks and other Lenders to provide Venture Debts to Startups, Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC)/ SIDBI is being envisaged with a budgetary Corpus of INR 500 crore per year for the next four years.

Tax Exemption on Capital Gains

Objective
To promote investments into Startups by mobilizing the capital gains arising from sale of capital assets

Details

Due to their high risk nature, Startups are not able to attract investment in their initial stage. It is therefore important that suitable incentives are provided to investors for investing in the Startup ecosystem. With this objective, exemption shall be given 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.

Tax Exemption to Startups for 3 years

Objective
To promote the growth of Startups and address working capital requirements

Details

Innovation is the essence of every Startup. Young minds kindle new ideas every day to think beyond conventional strategies of the existing corporate world. During the initial years, budding entrepreneurs struggle to evaluate the feasibility of their business idea.

Significant capital investment is made in embracing ever-changing technology, fighting rising competition and navigating through the unique challenges arising from their venture. Also, there are
limited alternative sources of finance available to the small and growing entrepreneurs, leading to constrained cash funds.

With a view to stimulate the development of Startups in India and provide them a competitive platform, it is imperative that the profits of Startup initiatives are exempted from income-tax for a period of 3 years.

Tax Exemption on Investments above Fair Market Value

Objective
To encourage seed-capital investment in Startups

Details
Under The Income Tax Act, 1961, where a Startup (company) receives any consideration for issue of shares which exceeds the Fair Market Value (FMV) of such shares, such excess consideration is taxable in the hands of recipient as Income from Other Sources.

Currently, investment by venture capital funds in Startups is exempted from operations of this provision. The same shall be extended to investment made by incubators in the Startups.

Organizing Startup Fests for Showcasing Innovation and Providing a Collaboration Platform

Objective
To galvanize the Startup ecosystem and to provide national and international visibility to the Startup ecosystem in India

Details

• Hold one fest at the national level annually to enable all the stakeholders of Startup ecosystem to come together on one platform.

• Hold one fest at the international level annually in an international city known for its Startup ecosystem.

The fests shall have activities such as sessions to connect with investors, mentors, incubators and Startups, showcasing innovations, exhibitions and product launches, pitches by Startups, mentoring sessions, curated Startup walks, talks by disruptive innovators, competitions such as Hackathon, Makerspace, etc., announcements of rewards and recognitions, panels and conferences with industry leaders, etc

Launch of Atal Innovation Mission (AIM) with Self-Employment and Talent Utilization (SETU) Program

Objective
To serve as a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas

Details
The Atal Innovation Mission (AIM) shall have two core functions:

• Entrepreneurship promotion through Self-Employment and Talent Utilization (SETU), wherein innovators would be supported and mentored to become successful entrepreneurs

• Innovation promotion: to provide a platform where innovative ideas are generated

Entrepreneurship promotion:
• Establishment of sector specific Incubators including in PPP mode • Establishment of 500 Tinkering Labs

• Pre-incubation training to potential entrepreneurs in various technology areas in collaboration with various academic institutions having expertise in the field

• Strengthening of incubation facilities in existing incubators and mentoring of Startups

• Seed funding to potentially successful and high growth Startups

Innovation promotion:

• Institution of Innovation Awards (3 per state/UT) and 3 National level awards

• Providing support to State Innovation Councils for awareness creation and organizing state level workshops/conferences

• Launch of Grand Innovation Challenge Awards for finding ultra-low cost solutions to India’s pressing and intractable problems

Harnessing Private Sector Expertise for Incubator Setup

Objective
To ensure professional management of Government sponsored / funded incubators, Government will create a policy and framework for setting-up of incubators across the country in
public private partnership.

Details

India currently lacks availability of incubation facilities across various parts of the country. Incubation facilities typically include physical infrastructure, provision of mentorship support, access to
networks, access to market, etc. Of all these features, physical infrastructure entails large capital investments which can generally be facilitated by the Government. However, requisite skills for
operating an incubator are pivotal as well, for which expertise of the private sector needs to be leveraged.

Considering this, Government shall encourage setting up of;

• 35 new incubators in existing institutions. Funding support of 40% (subject to a maximum of INR 10 crore) shall be provided by Central Government for establishment of new incubators for which 40% funding by the respective State Government and 20% funding by the private sector has been committed. The incubator shall be managed and operated by the private sector.

• 35 new private sector incubators. A grant of 50% (subject to a maximum of INR 10 crore) shall be provided by Central Government for incubators established by private sector in existing institutions. The incubator shall be managed and operated by the private sector.

The funding for setting up of the incubators shall be provided by NITI Aayog as part of Atal Innovation Mission

Building Innovation Centres at National Institutes

Objective
To propel successful innovation through augmentation of incubation and R&D efforts

Details

In order to augment the incubation and R&D efforts in the country, the Government will set up/ scale up 31 centres (to provide facilities for over 1,200 new Startups) of innovation and entrepreneurship at national institutes.

Setting up of 7 New Research Parks Modeled on the Research Park Setup at IIT Madras

Objective
To propel successful innovation through incubation and joint R&D efforts between academia and

Promoting Startups in the Biotechnology Sector

Objectives
To foster and facilitate bio-entrepreneurship

Details
The Biotechnology sector in India is on a strong, growth trajectory. Department of Biotechnology endeavors to scale up the number of Startups in the sector by nurturing approximately 300-500 new Startups each year to have around 2,000 Startups by 2020.

In order to promote Startups in the sector, The Department of Biotechnology shall be implementing the following measures along with its Public Sector Undertaking Biotechnology Research Assistance Council (BIRAC):

Bio-incubators, Seed Fund and Equity Funding:
• 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.

• Biotech Equity Fund – BIRAC AcE Fund in partnership with National and Global Equity Funds (Bharat Fund, India Aspiration Fund amongst others) will provide financial assistance to young Biotech Startups.

Encouraging and leveraging global partnerships:

• Bengaluru-Boston Biotech Gateway to India has been formed.  Through this initiative, a range of institutes in Boston (Harvard/ MIT) and Bengaluru will be able to connect to
share ideas and mentor the entrepreneurs especially in the areas of Genomics, Computational Biology, Drug Discovery and new vaccines.

• Amplification of Bio-entrepreneurship through BIRAC Regional Entrepreneurship Centres (BREC). The BREC aims to impart bio-entrepreneurs with the necessary knowledge and skills required for converting innovative ideas into successful ventures. Department of Biotechnology shall set up 5 Regional centres or Mini-BIRACs in the next 5 years.

Launching of Innovation Focused Programs for Students

Objective
To foster a culture of innovation in the field of Science and Technology amongst students

Details

Innovation Core. Innovation Core program shall be initiated to target school kids with an outreach to 10 lakh innovations from 5 lakh schools.

NIDHI: A Grand Challenge program (“National Initiative for Developing and Harnessing Innovations) shall be instituted through Innovation and Entrepreneurship Development Centres (IEDCs) to support and award INR 10 lakhs to 20 student innovations from IEDCs.

Uchhattar Avishkar Yojana: A joint MHRD-DST scheme which has earmarked INR 250 crore per annum towards fostering “very high quality” research amongst IIT students

Annual Incubator Grand Challenge

Objective
To support creation of successful world class incubators in India

 

Definition of Startup (only for the purpose of Government schemes) :-

Startup means an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding INR 25 crore in any preceding financial year, working towards innovation, development, deployment or commercialization of new products, processes or services driven by technology or intellectual property.

Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

Provided also that an entity shall cease to be a Startup if its turnover for the previous financial years has exceeded INR 25 crore or it has completed 5 years from the date of incorporation/ registration

Provided further that a Startup shall be eligible for tax benefits only after it has obtained certification from the Inter-Ministerial Board, setup for such purpose

Inter-Ministerial Board

An Inter-Ministerial Board setup by DIPP to validate the innovative nature of the business for granting tax related benefits

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Most Indians are healthier, says govt health survey

• Results from the first phase of the National Family Health Survey (NFHS-4) 2015-16 show that child malnutrition, as well as maternal mortality rates, have declined significantly in the 13 states—including the populous states of Bihar, Madhya Pradesh, West Bengal, Haryana and Tamil Nadu—and two union territories that the first phase covered
• Almost all mothers have received antenatal care for their most recent pregnancies, and an increasing number of women are receiving the recommended four or more visits by the service providers.
• More and more women now give birth in healthcare facilities, and rates have more than doubled in some states in the last decade.
• Poor nutrition is less common than reported in the last round of the National Family Health Survey. Fewer children under five years of age are now found to be stunted, showing intake of improved nutrition.
• While almost all states depict a decline in fertility rates, the survey also shows a decline in use of family planning methods, which is puzzling in itself.(The total fertility rate represents number of children born per woman.)

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Solar Power: truth versus hype

Background :-

Before the Paris climate summit, India had pledged to increase its share of non-fossil fuels to 40% of the total power generation capacity by 2032.

Keeping in mind India’s high import dependence and chronic energy poverty, it is imperative that solar energy should be given impetus.

The tariff for solar power has fallen from Rs.18 per unit a few years ago to an unprecedented level of below Rs.5 per unit—a big step in promoting clean energy. However, one must look critically at the reasons behind the massive cost reduction of solar cells and modules, along with the techno-economic feasibility of India’s solar ambitions.

Details:-

Unfortunately, the reduction in the cost of solar power is not the result of a technological breakthrough in terms of enhanced conversion efficiency, but due to the dumping of cheap imported solar cells and modules by foreign cell manufacturers who enjoy massive state subsidies to practise predatory pricing and, thereby, destroy the domestic solar industry.

High import dependence on solar cells and modules has its own ramifications on India’s energy security. While solar power developers in India are bidding aggressively, they are not leaving enough room for cost escalation.

Further, a massive injection of solar power of the scale envisaged may perturb grid stability. Solar farms, unlike coal and nuclear power plants, cannot deliver the same amount of continuous electricity. To maintain grid frequency, grid operators must be able to predict precisely what the solar energy input at any given hour will be.

But such an exact prediction every time is impossible. A small error in judgment will trigger frequency fluctuations and, thereby, instability in the grid. Moreover, India needs to have massive backup power plants and a delicate balance between base and peak load power plants when power from solar energy would not be available

Massive land requirements to erect solar panels amplify the issues further. A 1 megawatt (MW) solar photovoltaic (PV) power plant should require around 2.5 acres. However, owing to the fact that large ground-mounted solar PV farms require space for other accessories, the total land required for a 1 MW of solar PV power plant would be around 4 acres. So investment in solar power must provide for a mammoth hidden cost.

Even from the environmental standpoint, while solar power plants involve much lower carbon emissions over their lifecycle than coal-based plants, solar power is not entirely clean. Manufacturing a PV solar cell requires huge amount of energy, starting from the mining of quartz sand to coating the cell with ethylene-vinyl acetate—most often derived from the burning of dirty fossil fuels.

While there is no carbon emission associated with the generation of electricity from solar energy, there are emissions associated with various stages of the PV lifecycle, including the extraction of raw materials, production of materials, module manufacture, and system and plant component manufacture.

Germany’s solar experience

Solar power is still the least efficient among Germany’s other renewable energy technologies, but 50% of total green energy subsides go to solar power.To address unaffordable and unreliable solar power, which increases power tariff and government subsidies, Germany renewed its focus on renewable technologies.

German industries have repeatedly expressed concern that the rapid and costly expansion of renewables could undermine the strength of the country’s industrial base, ultimately putting 800,000 jobs at risk.

High usage of solar and other renewable energies is also causing instability to Germany’s electric grid, which prompted industrial consumers to purchase generators and other emergency backup systems to protect equipment from being damaged during disruptions.

Way Forward

India must explore all supply options, which include conventional and renewable energies like solar, wind, small hydro and biomass, to bridge the burgeoning demand-supply gap.

The focus should be on cleaner coal technologies along with nuclear power for India’s base load power generation. Cleaner coal technologies like super and ultra-supercritical combustion as well as coal-to-gas have the capability to minimize the emission of greenhouse gases from thermal plants due to their higher thermal efficiency. Domestic coal should be our major source in order to make energy affordable

It is also important to accelerate India’s three-stage nuclear programmes so that we can utilize our vast thorium reserves to produce electricity at stage three.

However, given the initial difficulties with solar power , it must not discarded or side-lined, the major challenge is the technology and once innovation sets in solar power can substantially contribute to India’s energy mix.What we need is a cautious approach that encompasses – affordable cost, decentralized solar harnessing , grid stability and innovation . It is a good start but has a long way to go in order to challenge the conventional power sources.

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Slowing Dragon and Steady Tiger (China and India – Economic outlook ):-

China’s economy grew at its slowest pace in a quarter of a century last year, raising expectations of a further devaluation of the yuan to boost its exports—a move that may erode India’s export competitiveness and fuel currency-market volatility.

Separately, the International Monetary Fund (IMF) recently  kept its growth forecast for India unchanged at 7.5% in 2016-17 and lowered its global growth projection in an update to the World Economic Outlook (WEO) released in October, maintaining that China remains a source of uncertainty.

China grew 6.9% in 2015 after fourth-quarter expansion slowed to 6.8%, capping a tumultuous year in which the world’s second-largest economy was hit by capital outflows and a summer stocks crash.

For long a driver of global growth, the rapid slowing of the Chinese economy is triggering fears of a fresh global setback.IMF kept China’s growth projection unchanged at 6.3% in 2016, but lowered its global growth forecast to 3.4% from the October projection of 3.6% for the same year.

India is projected to remain the fastest growing major economy for the second year in a row. To be sure, the Chinese economy, at $10.4 trillion, is little over five times the size of the Indian economy, estimated at $1.9 trillion in 2014-15.

India and the rest of emerging Asia are generally projected to continue growing at a robust pace, although with some countries facing strong headwinds from China’s economic rebalancing and global manufacturing weakness,as stated by IMF

Spillovers from China to the rest of the world are quite significant, both through their demands for imports and on the effect on commodity prices. That contributes to the volatility.

India’s exports contracted for the 13th time in a row in December, due to tepid global demand and a volatile global currency market.

IMF warned that downside risks such as a sharper-than-expected slowdown in China’s growth, tighter global financial conditions as the US exits from an easy monetary policy, a sudden rise in global risk aversion and an escalation of current geo-political tensions could derail the slow global economic recovery.

Analysis:- Any desperate attempt by China to devalue Yuan further will hurt Indian exports , however there is stress-relief too , becasue economic infrastructure of China and India are little different – One is a manufacturing hub and one is a service hub, hence devalue will hurt  Indian manufacturing not service ,significantly .As India is not tapped in to China’s global supply chain set up significantly , hence there is a room for breather .But to overcome this , Indian manufacturing has to be competitive enough and should enlarge it’s market beyond the the West- but that is a long term goal which requires restructuring of fundamental of our manufacturing sector.

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Source- GOI website, Thehindu,Livemint,Pib etc