Prime Minister Narendra Modi last week announced much-needed initiatives to promote an entrepreneurial ecosystem in the country, but the government’s definition of a start-up, especially with respect to ‘innovation’, is ambiguous.
The definition While government defines start-ups as “an entity, incorporated or registered in India not prior to five years, with annual turnover not exceeding ₹25 crore in any preceding financial year, working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property”.
“It is a fact that IT start-ups are always in limelight, get the most hype and funding. But, how do you define a start-up? At my company, I teach coding to students. I am creating value. But if I seek the incentives offered, I’d be told that I am not doing anything innovative,” says Ankush Singla, Co-founder of tutoring platform Coding Blocks.
While most start-ups agree that it is a positive step by the government, but which companies can avail themselves of these benefits has to be seen.
An Inter-Ministerial Board will be set up by Department of Industrial Policy and Promotion to validate the ‘innovative nature’ of the business for granting tax related benefits.
“Innovation has to be defined in black and white. The Action Plan doesn’t offer complete clarity in this respect,” Vamsi Krishna, Co-founder and CEO of ed-tech start-up Vedantu. Any company that creates value is a start-up, he added.
Tech is crucial Moreover, new companies without an element of technology may be left out of the government scheme, Singla said, adding that “innovation is not just at the idea level, but is also at the execution level. This needs to be kept in mind while defining a start-up”.
However, companies also believe that technology is a crucial element of a ‘start-up’, without which it is just a traditional business.
“A start-up leverages technology to innovate and do existing things in a new, convenient way. Without this element, it is not a start-up. For example, taxis used to ply, but Ola made it hassle-free,” Aman Gupta, Founder of Foodport, a Gurgaon-based online food delivery platform, says. Gupta, however, agrees that defining ‘innovation’ could become the tricky part and hence may end up at the government’s discretion.
Rahat Kulshreshtha, Founder, Quidich, an aerial technology services start-up, believes that the overall idea of the scheme is to give incentives to people to do problem-solving that the country needs.
“Traditional businesses are not innovative or disruptive so do not need support or funding,” he said.