Recently, I read an article (the Wire webiste) on Indian government’s new incentives for startups. The article is written by Purushottam Kesar who is an alumnus of NIT Hamirpur, my alma mater. The recent developments in this area in India is very intriguing and also because Purushottam is a senior from my college, I took the time to read it. He sums up the factors behind success of places like Silicon Valley and Eindhoven (Phillips) in fostering the startup culture.
I am very much in favor or startup being supported by the government. But currently, the startups in India are only derivatives of original ideas, as mentioned in the original article. This is evident from the huge number of consumer market-driven startups that have come up recently and are based on the models that have been tried and tested in the US/Europe market.
The government needs to foster an environment where creativity is encouraged, specially at the universities and regional colleges – both technical and social fields. In his inaugural speech PM Narendra Modi mentioned IIT Madras having an incubator for startups, but I feel this is just a one-off place. Other institutes need to be set up, either by the central government or states. This can be based on a concept of ‘Special Startup Zones’ similar to the famous SEZs in India, but only in educational institutions (and without directly disturbing the local socio-economic life). All premier institutes need to be well funded for innovative research to take place. Purushottam Sir mentioned in his article that the cream students leave for USA/Europe in search of higher education and some even get involved in startups there. Maybe the lure of better higher education is a key aspect for this still-ongoing brain drain.
As someone who is currently working for a startup in USA and is witnessing the growth in Indian startup scene from a distance, in my personal view the following steps are very important to give incentive to innovation in a long-term and sustainable way:
1. The state will have to give impetus to higher education and research.
2. The generation of ideas from this process will have to be protected adequately, locally as well as against large corporations.
3. Providing an environment to bring these ideas to the market and scaling them is the last step.
The government, without taking action on the first two steps, has tried to jump on to the third directly. Of course, being a country of ‘jugaad’ people, there will still be some winners who emerge out of this flawed and unsustainable system. But it is highly unlikely that first generation ingenious startups will come out of this model. If we look at the system as a tree, the government needs to water the tree first before pruning the leaves and trying to eat the fruits soon. I talked with a few of my friends and the perception that I got was that the startups in India today is only driven by the market. Some over-valuation is also taking place, which might lead to uncertainties in the next few years.
You can say that the government is trying to manage a publicity event and also increasing entitlements, but at least there is a first step in the general (not absolutely correct) direction. Once the current consumer market frenzy ends then the industrial groups will themselves realize the instability of such a system. But the government will have to be only fair, transparent and a watchdog for that to happen, instead of trying to facilitate one step more than the other, just because it makes market tick in the short term.
I will keep tracking the Startup story in India with enthusiasm. It will be interesting to see in the next few years if and how much the Indian economy is driven by the startup culture and if any new ideas originate from this leading to an international influence.