Monday, June 9, 2014

Nasscom wants government to set up technology entrepreneurship mission

NEW DELH: Aiming to replicate the Silicon Valley story in the country, IT-BPO industry body Nasscom has asked the government to set up a technology entrepreneurship mission in India to handle needs of startups like financing, infrastructure, ease of business, among others.

According to the industry body, which represents the over $118 billion Indian IT-BPO industry, the country has showed promising prospects for developing technologies and solutions and many large multinationals are reporting that 70% of their emerging markets solutions are coming from India.

"Over the last 2-3 years, it (startups scene) has really widened. All the key elements of this ecosystem are there in terms of venture capital, private equity, angel investors, mentors," Nasscom President R Chandrashekhar said in a statement.

Even the presence of large companies, which actually encourage this ecosystem by way of incubators, accelerators and looking at them as possible partners or possible targets of acquisition, are also here, he added.

"Most of the large multinationals are reporting that 70% of their emerging markets solutions are coming from India. So, I think all in all this is gaining huge amount momentum and traction as well as recognition in different parts of the world," Chandrashekhar said.

Stressing on the need of a Technology Entrepreneurship Mission, the former Telecom Secretary said there are several issues that need to be addressed to sustain and enhance the startup eco-system in India. "I think we still need to do many things to build up this ecosystem and actually in a sense, replicate the Silicon Valley story in India and make sure that this ecosystem is actually able to nurture, grow and deliver breakthrough innovative products, services and solutions," he said.

Nasscom has identified 4-5 different areas and is taking these recommendations to the government. Many states have actually funded and partnered with bodies like Nasscom to set up incubation centres and provide infrastructure support, which lowers the cost of entry, he added.

"There is also the need to ease the flow of capital into this ecosystem because the normal banking and financial set up don't work. This industry is not an asset based industry, it is basically based on the value of an idea and on value of technology," Chandrashekhar added. He said these issues are not recognised by the domestic financing system, which is more focused on assets and collaterals.

Another element is to leverage the domestic market to encourage the growth of such firms as a lot of them also look at the domestic market. The innovation and products and services are also based on domestic market needs, he added.
Chandrashekhar further said: "Spreading this ecosystem to different parts of the country is important because there many places which can support this ecosystem, so we need to grow it beyond just Bangalore and Delhi NCR and places like that," he said.

While Nasscom launched the 10,000 startups initiative, the organisation believes that there is potential to do much more, especially when there is a comparison with other much smaller countries like Israel, he added.

Stressing on the ease of doing business, Chandrashekhar said: "How do you ease the regulatory environment? How do you make it easier for a company to start up? Can you make it possible for a company to be set up in a day or even three days? Five or 10 member companies, that is the usual size of a startup, cannot spend all the time in compliance."

Citing an example, he said small companies that have not even started making revenues, face a tax deduction the moment they make a sale.

Even though the firm is making a loss, finding it difficult to get financing, it has to pay taxes and then claim refund which typically takes 18 months and that further aggravates the financial problem, he said.

"You are not providing financing and on top of that you are extracting taxes where there is no profit. These are some areas we felt some changes are required," Chandrashekhar said.

Today, a lot of firms choose to register outside India and consequently the value that is created dose not accrue to the country, Chandrashekhar added.

"Why should that happen? There is no way you can control it because the nature of the product is such that it can go anywhere. So if we have the people and workforce is here, which is doing all of this, then we must go into the question of why this value creation is not happening within the country," he explained.

The industry body also urged the new government make the regulatory environment more predictable, legal provision more transparent and remove ambiguity.

"And therefore, we have suggested as a very key element of our recommendations to the government that India Technology Entrepreneurship Mission should be set up, which will look at each of these areas that what do we need to do in areas like finance, IT, infrastructure, ease of business and then continuously address those issues," Chandrashekhar said.

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