India recognizes the importance of aligning economic and strategic interests in today’s world, and the important role technological capabilities and control of specific technologies play in international relations, writes Saroj Mohanty for South Asia Monitor
By Saroj Mohanty
The Indian government, which has launched the ambitious StartUp India scheme to foster a broader ecosystem of innovation and entrepreneurship in the country, plans to host a summit of start-ups from SAARC countries, possibly later this year. The summit is billed to facilitate an exchange of ideas and tap complementarities among ventures across South Asia. The conversation is expected to catalyse further connectivity and integration in the region.
Technology and innovation have become critical today for a country to spur and sustain growth and maintain its global competitiveness. This is more so for India now when viewed in the context of slowing growth - economic growth has declined for five consecutive quarters from 2015-16 - and rising joblessness.
Prime Minister Narendra Modi stressed as much when he said innovation is no more a choice but an “imperative” to unleash India’s potential for its own development and global standing. His government, as one of his cabinet colleagues put it, believes it doesn’t have a monopoly on ideas and that start-ups can bring in innovations in different sectors thereby raising output and addressing social challenges like unemployment and low reach of healthcare.
In tune with this outlook, it launched the StartUp India programme in January 2016. Since then, it has relaxed regulations, reduced compliance burden and helped in financing, business structuring and marketing, with an overall outlook of promoting a culture of innovation and entrepreneurship. The government has eased patent filing and appointed a panel of 423 facilitators to help start-ups file patents.
The Department of Industrial Policy and Promotion, the nodal agency for implementation of the initiative, unveiled a new foreign direct investment policy on August 28 under which it allowed start-ups to raise foreign money from Venture Capital funds and other investors through instruments like convertible notes. The FDI policy follows the interactions Modi had with 212 start-up founders and young entrepreneurs earlier in the month where he noted the importance of technology and innovation in addressing development challenges.
According to the new rules, foreign residents, except those in Pakistan and Bangladesh, would be permitted to buy convertible notes issued by an Indian start-up for Rs 2.5 million or more in a single tranches. Non-resident Indians can also acquire convertible notes on a non-repatriation basis.
“The breadth of innovation inputs may not be high in India, but the tip of the iceberg is sharp," said a recent survey by Swiss investment firm UBS Research.
Earlier, the government had launched the Atal Innovation Mission to provide a forum to discuss issues and monitor policy progress. The Mission has set up 941 Atal Tinkering Labs at schools across the country and aims to build 2,000 such labs by the year-end, said Amitabh Kant, chief executive of the government think tank Niti Ayog. The Mission has also identified 13 institutions as incubation centres and is considering plans to set up a credit guarantee scheme for start-ups with a corpus contribution of Rs.20 billion to enable startups to raise loans without any collateral for their business purposes. The Securities and Exchange Board of India (SEBI) has also relaxed listing norms for start-ups, making it easier for them to raise capital from the public.
The policy initiatives have begun to show results. Reports indicate that the enthusiasm around the growing innovation culture has led private equity and venture funds to focus on India. Start-up rating platforms like Oddup say investors from the US, Southeast Asia and China are showing keen interest in Indian start-ups/companies, which are not just space global copycat businesses in B2C arena like Flipkart and Ola, but are evolving and have forayed into real innovation-led spaces like enterprise solutions, renewable energy and aviation.
Also, several multinational companies have set up high-end R&D centres in the country on cutting edge technologies - an acknowledgement of the growing innovation capabilities in India. Many of those working in these setups are expected to come out and establish their own ventures to innovate for the country and the world.
India, of late, has also been exchanging ideas with investors in countries like Germany, Israel and Portugal, besides the US, to tap into complementarities in the start-up sector and see what can be replicated in the country and address cross-border markets. The idea behind this programme is to share best practices with innovative Indian startups and help evolve an integrated, dynamic startup eco-system across the country and South Asia.
India recognises the importance of aligning economic and strategic interests in today’s world, and the important role technological capabilities and control of specific technologies play in international relations. They are regarded as essential elements of a country’s hard and soft power. The country has begun to use its capabilities to derive neighbourhood cooperation. The launch of the SAARC satellite that the neighbours now use to meet their domestic needs is a prime example of this. The start-up summit could be seen as another positive example of neighbourhood outreach.
There are a lot of commonalities across countries in South Asia and in the problems they face. These include innovation under capital scarcity, regulatory systems and tax burdens. Also, many of them need idea validation, mentorship and incubation facilities.
Defence Minister Nirmala Sitharaman who, till recently, led the industry ministry and had spoken about the summit, believes the interaction would lead to “mutually beneficial ideas” that could be worked out for the benefit of the entire region. The summit could also lay the ground for a creative commons for future innovative projects of cooperation and collaboration, and partnership.
Others in the government and industry also see a real opportunity for Indian entrepreneurs to provide solutions to the world. Like the low-cost medical diagnostics and vaccines from India that have travelled across the developing world.
(The writer is a veteran journalist and analyst. He can be contacted at email@example.com)