Under Pressure, India\'s Entrepreneurs Look for Help From Unusual Corner

By JYOTI PANDE

Despite its bright minds and entrepreneurial spirit, India famously has not  been able to produce global technology start-ups on the scale of a Google, Apple or Facebook, thanks in large part to the country's challenging business environment.

Now Indian entrepreneurs are pushing for an unexpected solution to the problem: government involvement. India's start-up industry, which has historically shunned government oversight, and thrived without it, is now asking the government for support, in the form of a national policy on entrepreneurs.

That was the message this weekend as 1,100 delegates met in Delhi for TiEcon, the annual conference of The Indus Entrepreneurs, or TiE.  The group is a global body of entrepreneurs with a connection to India who foster start-ups. India, many attendees agreed, can make a cynic out of the most idealistic and optimistic â€" two qualities that are intrinsic to entrepreneurs.

For small players, the dizzying journey from idea to I.P.O. - through the byzantine corridors of Indian regulations and mounds of paperwork, combined with a demanding market that expects the highest quality at the lowest price - is enough to drive one back into the bland safety of a salaried job, they said.

The problem has become particularly acute, attendees said, because of the global economic slowdown, as well as a proposal in March from the Finance Ministry to tax “angel investments” made by individuals early in a company's life.

“If the tax goes through in the way it has been announced, it will kill entrepreneurship completely,” said Saurabh Srivastava, chairman of the software company CA  Technologies, co-founder of the Indian Angel Network and chairman emeritus of TiE. “There will be no funding for entrepreneurs in the start-up phase, zero,” he said, and therefore nothing for venture capitalists to fund at a later stage. â €œIt will completely wipe out entrepreneurship,” he predicted.

Each of three TiE conferences I have attended since 2010 has been a vibrating enclave of hope and expectancy, fired by the energy and optimism of hundreds of bright, young entrepreneurs trying to do different things â€" or do things differently. But this year, the usual buzz was missing.

As in past years, the conference featured popular inspirational speakers, like Arunima Sinha, a national soccer and volleyball player who was pushed off a train in 2011 and lost her leg but is planning to climb Mount Everest. Other speakers included Ashok Alexander, a former director of the Gates Foundation's India office who now runs Avahan, the largest H.I.V. prevention program in India, and the husband-and-wife team behind the 17,000 ft Foundation, which aims to drive social change by providing opportunities to remote villages in Ladakh's harsh terrain. Among other things it does, 17,000ft digitally maps schools in rural Ladakh, so resources reach children who study in isolated areas.

Despite all this, as well as notable attendees like the Oscar-winning filmmaker Shekhar Kapur and the British high commissioner, Sir James Bevan, the conference was missing its usual excitement and high-energy buzz, which some attributed to the global slowdown.

India's economic growth slowed to a nine-year low of 5.3 percent in the quarter that ended in June, and India's entrepreneurs have not been spared.   Even successful ones remarked on the challenge.

“India is still an incredibly hard place to do business,” said Pramod Bhasin, vice chairman of Genpact, one of the country's largest business processes outsourcing companies, which employs more than a million people in India. Mr. Bhasin is also chairman of TiEcon's organizing committee.

“Things are much better than they were in the past, but it is still very challenging to do business here,” agreed Deep Kalra, found er and chief executive of MakeMyTrip, an online travel company that was listed on the Nasdaq in 2010.

The industry believes a national entrepreneurship policy could be a cure for its woes. Attendees at TiEcon  said they hoped that the government would take its own report on entrepreneurship, which was completed in June, seriously enough to use it as a basis for a new policy.

The report, “Creating a Vibrant Entrepreneurial Ecosystem in India,” was ordered by India's Planning Commission and written by a 16-member panel, including government officials, entrepreneurs and software industry representatives, that was headed by the former revenue secretary Sunil Mitra.

Among other things, it recommends that the central government set up a National Entrepreneurship Mission as a single entity crossing state lines, whose sole focus would be to establish a vibrant entrepreneurial ecosystem in India by closing gaps in financing, education, regulatory framework and labor laws.

It certainly isn't the only paper to have been written on this subject â€" the Ahmedabad-based Entrepreneurship Development Institute also has a draft National Entrepreneurship Policy paper - but it is by far the most comprehensive, inclusive and well-written. TiEcon delegates said it  could easily be the foundation for a substantial policy on entrepreneurship.

“The best part is that it already has the blessings of the Planning Commission,” said Mr. Kalra. “The only notable exception that's been left out is crowd-funding,” which is bound to be included later, he said.

Among other things, the Planning Commission report believes that start-ups could help meet the country's future employment needs.  “India needs to create 10-15 million jobs per year for the next decade to provide gainful employment to its young population,” it says.  “Accelerating entrepreneurship and business creation is crucial for such large-scale employment ge neration.”

The report also says that entrepreneurship could generate solutions to  social problems, in areas like education, health care, clean energy and waste management.

In a world which growth has become elusive even for Asian “tigers,” entrepreneurship has become a widely touted path to economic salvation.  Countries like Israel, Canada and Singapore are leading the way with specific policies to make financing and incubating start-ups easier, as well as streamlining laws and removing barriers to entry and exit.

In the United States, despite the election-year controversy over what President Barrack Obama may or may not have said about entrepreneurs, there is a strong belief in innovation-led growth. In his first full day in office, President Obama created the position of “Chief Technology Officer” for his administration. He also held a Presidential Summit on Entrepreneurship in 2010.  Participants at TiEcon said the Indian government's entrepreneurship policy needs similar focus and attention.Classes in entrepreneurship and managing independent businesses are offered at high school levels as electives in some Bay Area schools this summer.

Mr. Srivastava of CA Technologies is confident that the government understands what changes are needed, he said,  especially in light of the report delivered to the Planning Commission. “The government will keep this in mind,” he said. “The intention is not to kill the industry.”

Jyoti Pande is an author and columnist who has covered entrepreneurs from India and Silicon Valley, including producing features for All India Radio in New Delhi, and writing columns for Mint and the Business Standard. She is currently working on her first novel “The Memory of Pai.”