An Analysis of Indian Startup Ecosystem : 1st July – 9th July, 2017

An Analysis of Indian Startup Ecosystem April - June, 2017

The first week of July has been an exciting week for the startups in India. Ranging from various developments such as Prime Minister Narendra Modi’s visit to Israel, rollout of GST on July 1st, to Amazon’s infusion of Rs 341 crore into Amazon Wholesale India, the week has been an eventful one.

Prime Minister Narendra Modi is the first Prime Minister to visit Israel. He along with Benjamin Netanyahu, the Prime Minister of Israel, has launched a bi-country innovation challenge for startups in India and Israel. The challenge will be called the India-Israel Innovation Bridge. The DIPP (Department of Industrial Policy and Promotion), Ministry of Commerce & Industry, Govt. of India and The Israel Innovation Authority have come together for the challenge. It will be hosted on an online platform – the India-Israel Innovation Bridge. It is seen as the first step to facilitate bilateral collaboration between the startups of India and Israel, corporations, tech hubs, and other key players in both the countries. The initiative is likely to offer comprehensive toolkits and guides to help the startups explore expansion opportunities in each other’s soil. Through this partnership, the startups of both the countries will be working together to develop resolutions to certain critical challenges in digital health, water, and agriculture. The primary purpose of this initiative is to bring together the technological strength of Israel and huge Indian market potential in order to develop technology solutions.

An Analysis of Indian Startup Ecosystem April - June, 2017

GST is likely to play a major role in shaping the startup ecosystem in the coming years. In the companies’. Tax regime in India, startups needed to register their companies for the payment of taxes only if the total turnover was more than 10 lakhs. Nonetheless, post GST this limit is set to rise to 20 lakhs, which will benefit the SMEs and the small startups alike. It used to be very tedious for the small companies to register themselves for the payment of multiple taxes.

But from now on, they will have to register once, and pay a single tax. There were various taxes such as VAT and layered state taxes that these small startups paid. Some companies were bound to setup separate warehouses in different states. These costs will fall resulting into a decrease in the cost of production and logistics. Presently, big companies procure goods on the basis of locality of the companies in order to decrease the overheads. Therefore the SMEs and startups tries and limit their customers within state as they bear the burden of tax on interstate sales. After the GST has been implemented, these taxes have nullified as tax credit are transferred independent of the location of buyer and seller. The concept of tax credit in the GST is likely to encourage the growth of startups significantly. Under GST, startups in the service industry are entitled for a rebate on the total of the VAT paid on the office goods purchases, which was not permitted under the previous tax regime.

India has offered a vast consumer base for various startups, especially e-commerce giants such as Flipkart and Amazon. The enormous potential that the country possess, has been proved yet again by Amazon. Recently, he Seattle headquartered company has pumped in USD 52.7 million (INR 341 crore) into its Amazon Wholesale India unit. It has appointed Shalini Puchalapalli as the new boss of the platform functioned by Amazon Wholesale ­ This development comes a day after the news that the company has infused about USD 260 million in its Seller Services division. The total investment in the India unit by Amazon is about USD 2.1 Billion.

Other developments include the state-of-the-art innovation centers and co-working space for startups that are coming up in Karnataka. The project is partly funded by Members of Parliament Local Area Development Scheme (MPLADS). The Commerce and Industry Minister, Nirmala Sitharaman, has initiated the project, which would provide a complete ecosystem for startups. The system will consist a 100-seater co-working space for entrepreneurs based out of Mangalore, five incubation centers in colleges, two innovation centers, and around twenty to thirty tinkering labs in schools.

In another recent development, the G20 praised India on startup funding, labor reforms, and initiatives being taken in India for promoting ease of doing business. In the Hamburg Action Plan, adopted at the G20 Summit, the group also said that “in the financial sector, India is popularizing a number of derivative instruments in exchanges or electronic trading platforms” in order to improve the resilience of its economy. It also said that India is facilitating ECBs or external commercial borrowings by the startups to promote innovation and encourage ease of doing business. Furthermore, the group commented on the various steps that are being taken by the member countries for encouraging inclusive growth. The Action Plan said that India is introducing labor market reforms in order to offer security to the workers, escalating female participation and promoting ease of doing business in the country.

The Indian startups, along with the government, has been instrumental in exposing themselves in the global market and become relevant in the global competition. Experts say that if these trends continue, India is likely to become the most attractive market in the recent future.