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Startups like India's money but want more government action

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A screen on the Bombay Stock Exchange in Mumbai shows Finance Minister Arun Jaitley presenting the budget on Feb. 28.   © Reuters

NEW DELHI -- Technology startups in India are getting a financial boost from the government, but entrepreneurs say that more could be done to support growth in the industry.

     India announced in February a 10 billion rupee fund ($161.5 million) for technology startups in the first full budget of Prime Minister Narendra Modi's government. The money will go towards helping companies set up businesses in technology.

     Entrepreneurs said while they were pleased with the government initiative, issues of bureaucracy and fundraising also needed addressing.

     In an interview with the Nikkei Asian Review, Amarjeet Singh, co-founder and head of technology at energy analytics firm Zenatix, said: "Some of the things that will make this initiative very useful for the tech startups will be ensuring transparency, making the application process simple and timebound -- anything more than [a] three-month time frame in decision-making will not be in line with the speed at which startups function -- and exploring novel methods of using the money as a combination of debt and equity."

     Another entrepreneur said that the proposal must be pushed through quickly as the industry is fast expanding.

     Jaskirat Singh, founder and chief executive officer of Webrosoft, a smartphone-based tracking system, said: "The intent is good and highly appreciated but we need to move beyond announcements."

     Webrosoft's Singh added that similar proposals to help startups and small and medium-sized enterprises were announced in the past, but not followed through on.

     Some of those concerns were addressed in Finance Minister Arun Jaitley's parliamentary speech on Saturday. Jaitley highlighted the need to look into a more liberal system of raising global capital, funding for seed capital and growth, and incubation facilities.

     He also said that ease of doing business in the country needed to be addressed to create more jobs and generate more income. To meet this objective, the government is investing the 10 billion rupees in a program called self-employment and talent utilization.

     SETU will be a techno-financial, incubation and facilitation program to support all aspects of startup businesses, and other self-employment activities, particularly in the technology industry.

     In addition, Jaitley also proposed to cut income tax on royalty and fees for technical services to 10% from 25%, a move that will help technology firms. 

     Entrepreneurs said that the initiatives are timely, given that India's thriving IT industry -- which employs four million people directly and generates revenues of around $150 billion and exports of over $100 billion -- is still growing.   

     "We are already seeing a conducive angel and venture environment building up in the country on the back of several very successful e-commerce companies," Zenatix's Singh said, referring to firms such as Flipkart and Snapdeal.

     Sanchit Vir Gogia, chief analyst and CEO of IT advisory firm Greyhound Research, called the government's planned tax cut "a win-win situation" for both multi-national companies and startups in India.

     "This will be a growth driver for startups and will help promote entrepreneurship in the country and create more jobs," he said. "From the MNCs' point of view, this will add more opportunities for them to invest in India and create more demand for their services."

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