PM's Silicon Valley visit: Modi may announce policy fixes aimed to making life easier for startups in India

NEW DELHI: When he is halfway around the world in Silicon Valley this Sunday, Prime Minister Narendra Modi is expected to announce long-awaited policy fixes aimed at making it easier to build, invest in, and shut down startups in India, people aware of the government’s thinking said.

In addition to making life easier for startups, the push to deliver a tangible outcome could also help counter criticism that a government which came to power on the platform of development does not walk the talk. According to an official involved in the planning for the visit, the Prime Minister’s Office has sought a list of issues and possible solutions from some key representatives in the startup sector.

The wish list has about 10 items, and right on top are recommendations to make it easier for investors to back Indian startups by either abolishing capital gains tax on profits from startup investing or keeping the rate low. “The PMO has indicated that the prime minister would announce decisions on a few items while he is here. We don’t know yet what it would be. The push is on capital gains tax,” said the official.

The push to ensure an outcome-oriented visit started just over a week ago after the PMO became aware of widespread disenchantment engendered by a perception that the government has been unable to keep the promises that were made when Finance Minister Arun Jaitley visited Silicon Valley in June.

Venture capital investors based in Silicon Valley, the Mecca of technology innovation, are among the top backers of Indian startups. Since 2013, venture capital funds have invested $6.3 billion (Rs 40,000 crore) in Indian startups, helping establish India as one of the world’s prominent hubs for entrepreneurship. Outside the United Nations headquarters in New York on Thursday, Vikas Swarup, the external affairs ministry spokesman, made clear what was on top of Modi’s mind during his trip. “Startups, innovation and manufacturing are the thrust areas of this visit,” he told reporters.

The policy announcements are likely to be made during the ‘Start-up Konnect’ event cohosted by The Indus Entrepreneurs (TiE) and software industry grouping Nasscom. This session — one of the three major engagements for Modi in Silicon Valley — will be attended by founders of startups such as Snapdeal, Zomato, Paytm and InMobi as well as leading venture capitalists and angel investors of Indian origin based in the Bay area, including Kanwal Rekhi, Raju Reddy and Vinod Khosla. Those lobbying for policy reform argue that in the event of a successful exit from a startup, there is no certainty about how much tax should be paid and how long the assessment will take. The wish list includes a reduction in the compliance burden, elimination of discrimination in public procurement and making share swaps non-taxable.

Another long-standing demand of the industry which remains unfulfilled despite being announced in the Budget is the ease of setting up and shutting down a company.

“We are hoping that there will be some policy announcements; they are just very long overdue,” said Sharad Sharma, cofounder of software products think tank iSPIRT.

Nasscom has also been sending representations to the government to address some of these issues. “We have again suggested that there needs to be a mechanism which makes it easier for companies to set up, operate and shut shop,” said Sangeeta Gupta, senior vicepresident of Nasscom.