It is vital to opine from the outset that starting a business in India can be a great idea because of the emerging markets in most industries. India has been an attractive place for both local and foreign investors. Business start-ups have become fashionable in India as entrepreneurs strive to put their ideas into practice. India has recorded a considerable number of business start-ups. In this regard, India has become the third largest country for business start-ups. The Prime Minister (Modi Narendra) and his government have developed a raft of measures that are aimed at improving the business start-up ecosystem. It is worth noting that the business start-up culture is considered to in the development and evolution stage. Having said this, setting up business in India is affected by several problems. In this corpus, the problems that inherently affect start-ups and their solutions will be discussed.
Problems Faced in Setting up Business in India
First, it suffices to point out that outside capital provides leverage for business start-ups (Gupta 2015). Capital is necessary not only in the initial stages but also in supporting the expansion of the business. Many business start-ups fail because they lack enough capital (Goyal et al., 2014). Several studies have shown that investors are not willing to take the risk in investing in start-up businesses (Cooke, Saini, and Wang, 2014; Joshi, and Ruparel, 2016).
In addressing the problem of lack of capital, the government of Indian should consider providing business start-ups with funds (Bharti, 2016). It suffices that this can be achieved through setting up some funds for start-up businesses. As a matter of fact, this credit guarantee will go a long way in helping the flow of venture debts (Joshi, and Ruparel, 2016). This will be from the banking system to the business start-ups hence providing a guarantee against risks.
Secondly, there is lack of entrepreneurial ecosystem and support. Most entrepreneurs in India face the problem of unfavorable entrepreneurial system and support. As a matter of fact, quite some start-ups fail because there is no external support to help in generating new ideas (Joshi, and Ruparel, 2016). Additionally, most entrepreneurs are not willing to accept failure, and as such, they find themselves under enormous pressure. Research has shown that most Indians prefer formal employment to business start-ups (Bharti, 2016). Furthermore, evidence of scarcity relating to start-up competitions, accelerators, and incubators is common. Incubation, start-up competition, and accelerators are essential because they motivate and boost the morale of entrepreneurs. In essence, entrepreneurs become more innovative and creative as well.
In solving the problem of lack of entrepreneurial ecosystem and support, the government should seriously consider establishing business start-up hub so that entrepreneurs can access funding and business knowledge much more easily (Goyal et al., 2014). Further, entrepreneurs need to be trained on business management and dynamics to forestall any unprecedented failures (Hatten, 2015). Within the business start-up hubs, there should be programs that emphasize on innovations for the young entrepreneurs. Experience is indispensable in managing business activities (Goyal et al., 2014). In this case, good ideas will have no value if they are not implemented as required. Further, most people lack market knowledge, business experience, and industry expertise (Gupta 2015). Business mentors are integral in providing links, contacts, and networks for the start-up business.
Third, there is the problem of exorbitant taxes levied by the government. Most young entrepreneurs are faced with several challenges in managing their start-up businesses (Hatten, 2015). Taxation affects business start-ups considerably. It is worth noting that there are entrepreneurs with innovative and unique creative ideas, but they cannot implement them because of the exorbitant taxes that are levied on business start-ups by the government. Currently, the government is levying taxes such as the Capital Gains Tax and income tax on start-up businesses.
As a matter of fact, to curb the problem of exorbitant taxes, the government should develop a raft of policy measures that are aimed cushioning business start-ups. It suffices to the point that for start-ups to thrive in India; the government should do away with numerous taxes that are levied on businesses (Joshi, and Ruparel, 2016). First, start-ups need to be exempted from the Capital Gains Tax. This tax is levied on investments that are made by the incubators in start-up businesses. Secondly, these businesses need to be exempted from paying income tax at least for three years from the time of the business inception. The reduction in taxation will be critical in promoting the growth of start-up businesses (Cooke, Saini, and Wang, 2014).
Fourth, most business start-ups swelter under tough government policies. It is worth noting that government policies affect business start-ups in India. There is a plethora of literature that supports the notion that the government in crucial in providing the conducive atmosphere for businesses to thrive (Gupta 2015). However, it is important to note that in India, the government has done very little to support business start-ups. The government has set up several laws, policies, and regulations that make it hard for start-up businesses to thrive. There is a lot of bureaucracy in acquiring the legal documents for setting up businesses in the country (Goyal et al., 2014).
To mitigate against the tough government policies, the government of India should consider reducing the regulatory burden on business start-ups (Gupta 2015). In this case, self-certification option ought to be provided. Further, there is the need to remove registration by manually filling up forms. In this case, the government ought to develop an online platform for registering start-business. These forms should also be availed through mobile applications. This will help in reducing the time and cost spent on the registration processes. The government should endeavor to provide start-up businesses with the legal support aimed at fast-tracking patent examinations. The legal services should be at lower cost.
Fifth, there is the challenge of government indifference and rampant corruption. In India, there is runaway corruption that has affected the economy. Many government institutions are riddled with corruption. It is imperative to mention that corruption affects business start-up because it is increasing the cost of doing business (Ahmad and Sinha, 2016). Entrepreneurs are in most cases forced to bribe government official so as to get their businesses cleared. Corruption kills the spirit of entrepreneurship.
It must be noted that corruption in India affects start-up businesses. There is the need to deal with this challenge. As much as it is a fact that eradicating corruption is impossible, the government should develop strategies for curbing it. In many cases, corruption exists as a result of long bureaucratic systems (Cooke, Saini, and Wang, 2014). The government has to scale down the level of bureaucracies associated with start-up businesses.
Sixth, fear of competition for large multinational corporations and anti-competitive activities. With the impact of globalization, companies are striving to acquire new global markets. India has seen a surge in the number of foreign companies. These companies are always in completion with local businesses (Gupta 2015). Given the fact that these companies are well established with strong economic foundations, they minimize the productivity of business start-ups. As a matter of fact, they enjoy enormous economies of scale, and therefore they produce goods and services very cheaply. In essence, they drive start-ups out business.
Evidence from all over the world has revealed that multinational corporations hinder the growth of local start-ups. The government must develop policies that are aimed at protecting local business from stiff competition (Cooke, Saini, and Wang, 2014). In some cases, these multinational corporations engage in anti-competitive behaviors, and it is the responsibility of the government to ensure that there is a level playing ground.
In conclusion, Indian is a prospective business country with numerous opportunities. However, the government should come up with strategies to ensure the business start-up environment is conducive for growth.
Ahmad, I. and Sinha, J., 2016. E-Commerce: Adoption Barriers in Small and Medium-Sized Enterprises (SMEs) in India. SMS Journal of Enterpreneurship & Innovation, 2(2).
Bharti, N., 2016. Microenterprise as a Livelihood Source and Factors Affecting their Success: A Study from India. Journal of Entrepreneurship and Management, 5(1).
Cooke, F.L., Saini, D.S. and Wang, J., 2014. Talent management in China and India: A comparison of management perceptions and human resource practices. Journal of World Business, 49(2), pp.225-235.
Goyal, S., Esposito, M., Kapoor, A., Jaiswal, M.P. and Sergi, B.S., 2014. Linking up: inclusive business models for access to energy solutions at base of the pyramid in India. International Journal of Business and Globalisation, 12(4), pp.413-438.
Gupta, K., 2015, April. Study of Incubation Centres & Its Role In Fostering Entrepreneurship In India With Special Reference To Centres Set Up In IIMs/IITs. National Conference on Make in India–Emerging Trends in Trade & Innovations for Effective Entrepreneurship–MI-ETTIEE 2015.
Hatten, T.S., 2015. Small business management: Entrepreneurship and beyond. Nelson Education.
Joshi, A. and Ruparel, P., 2016. India. In Angel Financing in Asia Pacific: A Guidebook for Investors and Entrepreneurs (pp. 151-169). Emerald Group Publishing Limited.