With a few exceptions, every business goes through what’s called the ‘infancy’ stage, a process starting from conceptualization of the business idea to its actual implementation on a very primary pilot scale. During infancy, the business may not have any formal name, brand or a legal constitution. Quite simply, an individual with an idea, or a group of persons with a common idea or concept which can transform into a business come together and begin the activity. Many a time, it is just from home or an informal place, with no formal address of a workplace.

Previously, even though the terms ‘start-up’ and ‘incubation’ were not formally used, they indeed existed in other forms such as support from friends and relatives, and existing family businesses in other areas. It was considered as a common family responsibility to support a family member undertaking a new venture by extending financial assistance to him/her till the new venture became self-sustaining and viable. Families also considered it their conventional responsibility to accommodate incoming members through gainful self-employment, and they fulfilled this by resorting to diversification, and broadening the base of the existing family business. Families supported new businesses not only in the form of finance, but also by sharing manpower, premises and required infrastructure.

However, the trend of nuclear families has caught up. 

Younger generations with technical qualifications and new ideas, innovations and concepts of business models, in the light of technological developments, are increasingly needing a catalytic agency to render the initial support for setting up and starting new ventures. 

An agency established with this intention can create and provide supportive infrastructure in the form of common rental premises, furniture and storage, generators for power back-up, communication facilities etc., thereby reducing the initial capital investment required for setting up and running new businesses.

The latest “Make in India” policy of the Government of India aims to promote indigenous industries deploying local talent in order to boost employment and reduce dependence on foreign countries for critical products and services. “Make in India” has prioritised and officially adopted and promoted the concept of “Startup & Incubation”. Further, the intention behind promoting start-ups and incubation is to encourage development and production of import substitutes and thereby stem the outflow of foreign exchange. It is also worth noting that the government is also encouraging and welcoming the participation of Indian manufacturers in developing and supplying high-tech products to the defence sector.

The general phenomenon observed is that there has been some percentage of mortality in the initial stages of a new venture, either at the concept stage or the take-off stage, on account of various reasons. The concept of “Startup & Incubation” is being vigorously promoted to reduce this ‘infant mortality’ and ensure sustainable success of the new business concept.

New, young technocrats, with new, offbeat, innovative ideas are coming up from all sections of society. They need dire support and backup for implementing their projects on all counts including space, finance, infrastructure etc. The Government has taken initiative in inviting applications from new ventures, identifying viable projects and recognising them formally as start-ups. The formal recognition makes them eligible for financial support and prioritises them in the case of mandatory permissions and registrations at various governmental and semi- governmental agencies.

Both Indian and foreign agencies are coming forward to extend support by way of venture capital which is offered on ‘soft’ terms (low interest rate and long-term repayment schedule) with initial moratorium for principle and interest.  For certain categories of industries, the Reserve Bank of India has initiated the scheme of Automatic Route of Approval (ARA) to encourage the inflow of 100% foreign direct investment.  

Incubation centres are established across the country to accommodate new ventures. First-generation entrepreneurs, or Indian technocrats returning from foreign countries are finding it convenient to start their journey from incubation centres, as they require very low initial investment in infrastructure. The Government has also set up some schemes through the National Small Industries Corporation (NSIC) to enable start-ups meet ISO compliance standards. The National Research Development Corporation (NRDC) also encourages registration of patents to protect IP rights of any entrepreneur who has developed a new product design or technology.  

Initially, Software Technology Parks (STPs) across India took the lead to encourage the IT industry in India, as well as to establish incubation centres and welcome new ventures (who have now grown into large software and IT  companies) throughout the country. These moves were instrumental in making India a leader in information technology. Similar schemes were also launched for electronic hardware technology and biotechnology. Few years ago, Special Economic Zones (SEZs) and Export Processing Zones (EPZs) were also implemented with the aim of welcoming new industrial ventures with the assurance of special tax and procedural benefits.

Under the recent policy decisions announced by Union Finance Minister Nirmala Sitharaman in Sept. 2019, the government has also extended various tax benefits and tax holidays and concessions to new industrial ventures as ‘start-ups’ to further the objective of “Make in India”  as per the vision of Prime Minister Narendra Modi, which is an extension of the Swadeshi Movement initiated by Lokmanya Tilak before Independence.

However, a lot still needs to be done to ensure the prevention of  premature failure of start-ups. Healthy start-ups can be further encouraged by  conducting ‘Entrepreneur Development Programmes’ to attract the young talent from among fresh engineering and management graduates. As a promoter of sound industrial growth, I am confident that India would certainly take full advantage of the concepts of start-ups and incubation.

Ajit Phadke

Ajit Phadke, B.Com.(Hons), M.B.A., LL.B, has been operating as a freelance industrial consultant for 35 years and specialises in 100% EOU / Export / Import, Foreign Exchange Rules and Industrial Regulations.

The views and opinions expressed in the article are those of the authors and do not necessarily reflect the official policy or position of The Tilak Chronicle and TTC Media Pvt Ltd.

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