Start, Up plan

Vishal Sharma
Start ups have been given the attention they should have received long time back in India. An economy that wishes to grow on sustained basis can’t have same set of rules of game for both the established enterprises and the start ups. The growth pangs of a start up are entirely different and in this country most vanish without trace before they plod their way to being the established ones.
The start up plan announced recently has for the most part addressed the long standing concerns of the new generation entrepreneurs schooled in the tradition of the silicon valley and nearer home at the Bangaluru’s outlier service sector enterprises. With no policing for the first three years of incorporation and freedom to transact the businesses on self certification basis in respect of a few identified regulatory clearances coupled with the introduction of mobile app to fast track the registration process, the start up plan creates an environment or promises to create an environment in which an enterprise will come up without the registration hassles of the past. This is revolutionary to say the least.
Just juxtapose this with the system of mentoring, plan incubation and fiscal handholding in the shape of tax breaks that the plan envisages and this country now has a start up regime that rivals any such paradigm any where in the world that qualifies as a best practice. Will this plan, in the face of such big bang offerings, throw up the deliverable that India has set out to attain? Well, as some body so famously said, the problem with India has not so much been at the policy level, it is at the implementation level. The solution to most of India’s problems is implementation, implementation and implementation.
The success of this plan, as in the case of most plans, will depend upon how it will play out in the ground zero of fiscal federalism represented by the states. With so much divisiveness in the country presently, it is likely that the states ruled by the opposition may not warm up to the plan as well. This is where it will perhaps receive its first jolt. A country that is looking for a balance industrial growth to further reinforce the macroeconomic fundamentals that have so far weathered the global swirl well can’t have inequitous growth landscape for that will affect the process of equalization of resource allocation aimed at balanced growth of all the states to the detriment of the performing states.
The other problem facing the plan is structural. The way the plan is designed, it is likely to face implementation issues at the level of the states. Start ups need mentoring in the beginning more than the exemption from regulatory clearances. In the states, barring a few, the system of counseling, glamorously called in this plan as mentoring, is amiss due to some reasons not least because of paucity of domain knowledge. J&K is one such state where mentoring services are perhaps the most required. In the central government, there is no shortage of advisory professionals and, thus, it is important that mentoring services (by way of appointment of a mentor specifically for the start ups) are provided by the central government. If anything, the central government should also pick up the tab in this case.
Registration of enterprises in some states including J&K is e- enabled. On line registration of the enterprises loses the significant advantage of speed and transparency if it is burdened with the executive or statutory requirement of voluminous documentation. The MSME’s recent udyog adhar memorandum has supplanted the current two tier system of registration with very little documentation that can perhaps be managed in a day. UAM as it stands to day is going to finish off the industry-department interface at the time of registration almost completely. While this is a step in the right direction, it may hit the roadblock if the checklists framed for manual registration are not immediately aligned to the UAM paradigm.
Although the start up plan would evolve as the time wears on for everything could not have been possibly conceived by its authors at the time of its conception, a distinction between the service and manufacturing enterprises and within the latter between the less polluting and most polluting should have been considered and the regime of self certification extended to the service enterprises and less polluting manufacturing enterprises with the caveat of random surprise inspection. A penal clause for the false certification involving heavy fiscal costs could have also been built in to deter the possible deviants.
The plan sheds no light on whether the existing subsidy regime shall also be applicable to the start ups. Although a fund of Rs 10000 crore over 4 year horizon is proposed to be set up to bankroll the start ups besides extending credit guarantee cover and financing the patent fees, the plan is silent on whether this fiscal bonanza would extend to all the units irrespective of their location. Tax breaks on income and capital gains are welcome, but the conventional wisdom has it that the entrepreneurs are not particularly enamoured of tax breaks and fiscal doles as much as of the ease of starting and quitting the businesses. It appears doubtless that the bait of tax breaks is to liven up the start up ecosystem which for some years has choked both on the obduracy of the system and insensitivity of the rent seeking officials. But the constraints of the political economy and the urgency of rebooting the system through the band-aid measures notwithstanding, the act of throwing good money after bad has never been an enduring solution.
The best bet still remains to make it easy to enter and exit the business. While starting a business has been made easy and will perhaps be made more easy over time, the exit piece of the puzzle still remains to be fixed. The Insolvency and Bankruptcy Bill 2015 which has been tabled in the Lok Sabha in 2015 has provisions for the fast track and voluntary closure of the business. Until its passage, the quick exit from businesses will remain a pipe dream and the reallocation of the assets from the sick units to other productive areas a challenge. With the start up plan we have started on a good note, let’s have a wind up plan soon and allow the businesses to wind up on a good note too.
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