The government is considering a proposal to include Micro, Small and Medium Enterprises (MSMEs) in its definition of start-ups to help boost the Make in India campaign. Various government departments have held a series of brainstorming sessions to discuss the definition so that the policy can be formalized. A clear definition is imperative for the government to decide which companies can draw the benefits of any scheme for start-ups.

The Department of Industrial Policy and Promotion (DIPP) is spearheading the exercise of formulating the start-up policy, along with ministries such as finance, skill development and MSME among others. The Start-Up India initiative is scheduled to be announced by Prime Minister Narendra Modi in January 2016 and the policy needs to be finalized by then. Progress on the initiative is being monitored directly by the Prime Minister’s Office. India wants to create an ecosystem that encourages entrepreneurship and is collecting suggestions from the start-up community for steps that need to be taken to ensure that the Start-Up India initiative is a success.

Including MSMEs, collectively one of the biggest employers of people in India, is seen as positive for manufacturing and therefore employment generation, key aims of the Make in India programme. Officials are also discussing specific criteria that would make an MSME eligible to be called a start-up. This would determine eligibility for incentives such as fewer compliance conditions, cheaper credit and tax benefits.

“Defining (start-ups) is the most complex issue. It involves technology companies, MSMEs and so many other sectors. We should be able to finalise something soon,” a Senior Government Official said.

To qualify as a start-up, an entity would also have to meet certain financial standards besides having a level of innovation in its product or service. “It is better to have a broader definition of start-ups, so MSMEs and tech-based start-ups can both take advantage. The moment one leaves things for interpretation, corruption will seep in,” said Gaurav Kachru, Founder, 5ideas Start-up Superfuel. Start-ups are expected to create 250,000 jobs in India by 2020, up from 80,000 now, according to a NASSCOM Report. The Start-Up India initiative announced by Modi in his Independence Day speech assumes significance given the thrust by the government toward employment generation.

Source: The Economic Times