Modi Ji has launched the grand vision of "Startup India" to boost the entrepreneurship behaviour in India. However, the program suffers from weak basics and lack of direction from the government.
Firstly, The investors have a pure "baniya" mindset where they wish to see the revenue model on day one before investing. Precisely for this reason, most of the Indian startup are services based model instead of product and innovation oriented models. As someone explained, startups are different from small businesses. Startups are about diving into uncertain where nobody except the passion of the core team would decide the success or failure of the product.
Secondly, People who start the companies suffer from poor work ethics. For instance, It is alleged that food Panda owners tweaked with their revenue model to siphon off a huge sum of money. Similarly, Flipkart is also accused of siphoning off investors money by creating vendors who themselves became customers. This led to setting up of a vicious leaky cycle of money flow where the same person who sold an item to Flipkart for money X bought the item back at a discounted rate.
From the above point emerges the third point. Most of the startup are discount based or subsidy based. They are burning large sum of money on a daily basis thus adding to the fragility of the system. The discount regime is leading to some behavior change but it does not change the mass user behavior. Some of them like Ola and Uber were able to make some inroads but on the whole, startups have not been able to change the user behavior.
Fourthly, the mindset of Indian masses. Most of us are still the first generation learners. The magic spell of societal expectations, collective culture, and settled lifestyle is discouraging people from venturing into unknown territories. People fear becoming bankrupt or being called a failure. In general, I find Indian people lack the quotient of passion, madness, and weird lifestyles.
Fifthly, Government is launching policies but no one knows the procedure to avail the benefits. Therefore, single window clearances are necessary. Moreover, a government has the policy of maximum governance and minimum government. This is somewhat ironic. Why is government cutting back on government vacancies when the surveys show that existing employees are overburdened and a number of institutions which can act as necessary support to "Start Up India" program are missing? For example, the government can hire a great many contracts, target-driven employees who can handhold literate and illiterate people alike in the task of availing the benefits of any government scheme. We need to have dedicated government call center to help people out 24*7 from these difficulties.
Sixth, We are blindly copying the American model of innovation and technology. What India needs is not entirely a labour-displacing technology. Instead, we need technologies which can generate a large number of jobs. We are a labor intensive country. We need to invest in the sectors which can generate a maximum number of jobs.
Adam Smith in his Wealth of Nations advocated for the division of labor, productivity, and a free market. The theory of Comparative Advantage built over this and proposed that developing nations should focus on agricultural production because being agrarian, their primary advantage lies in investing their energies in an agricultural sector. While, Developed nations should focus on white goods, technology, manufacturing secondary sectors. However this theory suffered from the flaw of marginal utility. The consumption elasticity for an agricultural product is limited in comparison to consumption elasticity for manufacturing goods. For example, if a person gets a bonus of 1000 rs. then his additional expenditure in the edible items would be fractional. If he was eating 1 kg sugar previously then now also he will continue eating one kg sugar only. Thus, his expenditure on edible items will see a limited increase. However, his need for TV, fridge or other items will increase proportionately in an unending manner.
The same concept applies to use of western technology-driven job generation in developing economies. Technology develops job. There is no doubt about it. But the net gains are generally negative. If it generates job equivalent of 20 skilled workers then, on the other hand, it automates the quantum of work which was earlier done by 100 people. so the net gain is -80. Therefore, the elasticity of job generation of high-end technology is relatively low. Thus, as an over-populated and unskilled country, we need to ensure that as a short-term measure, we only import those technologies which do not result in heavy job loss. And this is where we are faltering.
Anyway, not deviating much from the topic, seventh flaw is government is not targeting the right sectors for promoting Startup India.
As per planning commission document, a rs. 10 lakh investment in tourism will generate 78 jobs. The same in manufacturing will generate 45 jobs while the corresponding figures are relatively low for other high-end automation sectors. Therefore, we should ensure that any plan of "Start-up India" should emphasize on these labor-intensive sectors. What has been happening till date is quite opposite. We have allowed the heavy textile machinery in yarn and handicrafts. Due to this, our whole handicraft sector has been ruined. Government has launched policy measures to automate handicraft sector but poor policy rules have resulted into usurping of benefit by unscrupulous players.
Most importantly, agricultural start ups are not taking off and most of the start ups are limited to services based model and targeting rich neo middle class and upper class section. For example food tech or taxi aggregators are working on these lines only. Thus, India eagerly waits for some dynamic startups which innovate as per India's geographical and socio-economic configuration. We need to move fast in manufacturing as well.
Government has made some course correction when it made easy financing facilities for small entrepreneur. The myth of grand sized private sector monopolies driven growth is turning myth. This may increase our GDP figures in certain situations but it comes with a cost of creating inequalities in the society, and disempowering the masses at the cost of few.
Let us hope programs like Startup India, Stand Up India, Make in India, and Skilled India will fit well together to provide buyouncy force to our nation otherwise all I see is a abysmal hopeless swamp from where there is no escaping.
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