On Entrepreneurship and the viability of Government intervention

The Indian entrepreneurship is not a recent phenomenon, the business genes go far back into the Harappan age which had both land and sea business dealings. Subsequent millenniums did not dampen the business spirit, although religious texts did account for the segregation of such class. The advent of a mercantile nation like Britain spelled doom for India which had lagged the world by 17th century in terms of research and development, missing the Industrial Revolution completely.

Post Independence India has seen the growth of business, at first tentatively, due to significant licence permit raj but picked up pace post liberalisation in sunrise sectors like Pharma and ITES. The reason for this are both financial and social – financial as in capital availability from private sector and banks within and outside India and Social because of the mindset change from Job seeker to Job creator.

The recent Start-Up India initiative seeks to tap into the bubbling entrepreneurial spirit backed by liberal financial sops and regulatory clearances. The questions then to ponder are – to what limit can Government back the fledgling Start-Up industry, should it do so and how.

There is an argument in certain circles that seeks to keep the Government entirely out of the Start-Up framework, confined to creating a liberal Regulatory regime. But the experience of USA, the world’s cradle of start-ups and the thriving start-up culture of Israel belie this argument. The Googles and Facebooks of this world would have not been there had the DoD not invested millions of research dollars into ARPANET – the precursor to Internet. Similarly, Government routinely picks up the tab, while bankrolling expensive research into cutting edge molecules, promising of which reach the patients via Research Centre- Private Pharma tie-ups. The sops to companies like SpaceX and Tesla are more of the same, Government funding companies that will give returns in next 20-30 years. There is then ample evidence that Government has a big role to play simply because it has deep pockets and large appetite for longer gestation periods than every private firm out there.

The next argument features on the question of whether the Government should intervene for propping up Entrepreneurship. ‘Sound finance is Bad Politics’ and vice versa are time honoured dictums. It is clear that not every sector in Business needs Government intervention and it should be limited to those where the outcome is distinctly linked to Social Goods – like Cheaper medicines, Food Security, Healthcare etc. The ordering of sectors on the Social Benefit scale thus needs to be done to decide the level of intervention. This would also take care of creating any bubbles in the sectors like Technology where often too much money chases too few ideas.

The third question confronting us is that of how. The previous arguments established the need for Government as an Angel Investor for Socially relevant start-ups. The how would then focus on what stages should the Government leave the handholding, what returns should it expect – financially and socially and the broad framework of Regulatory and Financial guidelines to be crafted. The importance of Basic research and development cannot be stressed enough, as most successful start-ups innovate on existing technology rather than invent new ones. This means that Government has to increase the budged for R&D for research institutes and evolve robust PPP models for the same. Secondly, start-ups often need support in registration of patents and creating viable IP. Governmental support via state sponsored IP experts and Lawyers would stand them in good stead. The Financial sops including tax sops should be innovatively designed to foster business while ensuring sound financial practices.

The opportunity for spearheading a start-up revolution is immense and there is huge potential for creating the next Amazon in Assam and Twitter in Telangana. At the same time it has to ensure that the Government Corpus Fund does not degenerate into a vehicle of Crony Capitalism.