<article>Come December, India’s start-ups could close 2015 on a cheer, or brace for some unhappiness in the new year.</article>

Come December, India’s start-ups could close 2015 on a cheer, or brace for some unhappiness in the new year.
The central government, according to media reports, is hard at work putting together a policy framework aimed at easing the regulatory environment for start-ups. This follows Prime Minister <a style="color: #000080;" href="http://www.narendramodi.in/" target="_blank">Narendra Modi’s</a> <a style="color: #000080;" href="http://www.startup-india.org/" target="_blank">Start-up India</a>, Stand up India campaign launched in his Independence Day speech in August.
The government’s moves towards concrete action in this direction were first articulated in early October. Amitabh Kant, secretary in the <a style="color: #000080;" href="http://dipp.nic.in/" target="_blank">department of industrial policy and promotion</a>, indicated that policymakers were thinking along the lines of a framework that would enable start-ups to bypass existing, complex procedures for matters such as company registration, labour registration and income tax for a certain number of years or till such companies achieved a predetermined revenue threshold.
Subsequent reports earlier this month suggest the government may reduce the number of regulatory compliances—some 22-odd rules and regulations—down to a two-page policy framework that has informally been dubbed the Start-up Act. Companies that are under five years old are likely to benefit from the Act, more details of which are expected to be disclosed in December.
It’s an enticing idea and certainly makes for great headlines. But well-intentioned as the government’s plans may be, it is debatable whether an all-encompassing central law for start-ups is workable on the ground. Businesses, whether large or small, are also subject to sector-specific and state-level compliances. How a single, central law would enable start-ups to bypass all those local compliances is almost incomprehensible.
Further, it may be argued that start-ups in India have done quite well for themselves without serious government intervention so far. Currently, there are over 4,000 start-ups up and running in the country. Most of them are from high-growth technology sectors such as consumer Internet, mobile and software. More than 2,000 of those have garnered significant funding—an estimated $15 billion over the last 10 years—from foreign and domestic investors despite the odds. A sizable portion of that has come from venture capitalists, who have pumped in money despite their own set of complaints related to government regulation.
The issue for most start-ups is not the existing regulatory framework itself. The problem lies in the complex and annoying red tape involved in navigating that framework. For instance, it takes an average of two or three months to incorporate a company in India. It takes even longer to shut down a company. In Singapore, by comparison, it takes about two days to incorporate a new business venture. The Southeast Asian city-state also offers a more attractive tax regime—the maximum corporate tax rate is 17%.
Start-ups in India would probably be far better served if the existing regulatory framework was simplified, rather than reinvented. The danger of the government’s newfound zeal to ease the regulatory environment for start-ups is over-legislation. Remember, the last time the government took an active interest in start-ups, we ended up with start-ups having to pay income tax on funding raised from angel investors. That unfortunate piece of legislation, introduced nearly three years ago, is yet to be rolled back.
Snigdha Sengupta is the founder of StartupCentral, a digital news and analytics platform focused on venture capital. She also periodically contributes stories on venture capital and private equity to Mint.
Also Read:<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/india-is-working-on-new-policy-to-make-life-easier-for-startups-18150/" target="_blank"> India is working on new policy to make life easier for startups</a>
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/indian-startups-cold-mailing-their-pitch-brother-can-you-spare-a-dime-17715/" target="_blank">Indian startups cold-mailing their pitch: Brother, can you spare a dime?</a>
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<h4>This article was first published on Livemint.com</h4>
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India, according to media reports, is hard at work putting together a policy framework aimed at easing the regulatory environment for startups.

India plans new policy framework to ease regulatory environment for startups. Does it need a Startup Act?

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