On 15^th August 2015 the Prime Minister of India, Mr. Narendra Modi, in commemoration of the country’s 69^th Independence day, announced the Startup India Initiative. The initiative is comprised of 19 action plans all geared toward helping the country’s startup scene flourish. Its particulars are now in the light, five months after the initial announcement. However, in order to understand the action plan itself we must first understand India.

The Indian Economy at a Glance

India’s economy is booming. According to World Bank projections, the country’s real GDP is expected to grow to 7.9% by the end of 2016, effectively making it the fastest-growing country in the world. Its working population (ages 15-64) is also expected to increase, from 761 million to 869 million, by 2025, (Source: Census of India projections) while the median age of these workers is expected to be 29 years old.

The aforementioned GDP growth is largely due to the country’s thriving service sector, which has a GDP contribution of more than 50% (source: Data Platform of the Indian Government). The service sector is in turn dominated by IT and ITeS which generates a large amount of exports for the country (NASSCOM). Over FY 2015 USD 98 Billion worth of IT based products were exported while the IT sector generated almost USD 146 Billion in revenues.

This emergence of IT as a key industry and the shifting demographic of the Indian population, together, are paying dividends. As young workers flood the scene, brimming with new, innovative ideas, the culture shifts from settling for a 9-5 job to opening up one’s own business and being their own boss. Thus, the startup culture is born, and, due to the popularity of tech-based startups, the economy booms; at least in theory.

The Indian Startup Scene

India is THE place to be for innovation right now. It has one of the fastest-growing startup ecosystems, with over 800 startups created yearly, and has the 4th largest number of startups in the world. Most of the startups exist in Bangalore and New Delhi while budding startup scenes are also popping up in Hyderabad, Chennai, and Pune. Furthermore, the predominant trend is in favor of tech startups. 27% of startups in the country are tech-based while 36% of startup founders are solely engineers (NASSCOM Startup Report 2014).

Source: Innovation is Everywhere

Following the trend of young blood in the working class, we find that the majority of startup founders are also pretty young. According to a NASSCOM report, 73% of startup founders were below the age of 36 while 48% of founders have prior experience at MNCs.

There are however various challenges faced by startups. Firstly, there is an apparent lack of mentoring. The number of incubators, although high, is unable to keep pace with the sheer number of startups being founded yearly.

Next, the registration process for a new business is very tedious. According to a study conducted by the World Bank Group, it takes an average of 29 days to set up a business in India, with around 12-14 procedures that the founder needs to go through. These are very high figures when we compare them to the average of South Asia, which stands at 15.7 days and 7.9 procedures respectively.

The Action Plan

The Startup India action plan aims to address these challenges, along with some others. The plan has 19 key points which focus mainly on making the process of startup founding much easier while providing mentorship, tax breaks, and funding for startups as well. Some of the key initiatives are as follows.

How are things on our end?

Bangladesh’s startup ecosystem holds some similarities to that of India. Like India, Bangladesh’s population is also dominated by the working class with 70% of the population under the age of 35. Both countries are also becoming increasingly tech-savvy with the number of cell phone users going up at a rapid pace.

Source: BTRC, TRAI

This growth is mirrored by the country’s IT and ITeS industry which, like India’s IT and ITeS, is also burgeoning. Bangladesh currently has over 800 companies in the IT sector generating over USD 600 Million in revenue yearly and creating more than 30,000 jobs (BASIS report). This contributes to the service sector which counts for 53.6% of Bangladesh’s GDP (CIA World Factbook).

As we can see, India and Bangladesh have similar dynamics dominating their respective economies. This is both a boon and a bane as it leaves us with a lot of the same opportunities as India, but with the same challenges as well. The following is a brief look into how current Bangladeshi policies compare to the Indian Initiative,

• Tax Holiday for Startups: India is providing all startups with a three-year tax holiday to ease the pressure that businesses go through at the initial stages. Bangladesh offers similar tax benefits but it is extended only to tech companies and is offered for 10 years.
• Simplification of Startup Process: An app will be launched in April which will allow founders in India to register their startups within a single day. Bangladesh has no such app, in fact, it takes twenty days and nine procedures to set up a new business (Source: World Bank).
• Patent Protection: Fast-tracking the IPR process and providing rebates on it. The 80% rebate for startups, proposed by the action plan will pull down the cost of filing a patent to around USD 20-40 (Source: Patent in India). In Bangladesh IPR reforms have taken place in 2000, 2009, and 2013, to include more products, but none of the reforms have fast-tracked the IPR process significantly. Currently, it takes two to three weeks for the IPR process to finish and costs around USD 25 to 125 with USD 40-200 for renewals (Source: DPDT), making it more expensive than it is in India.
• New Incubators: According to ISBA there are more than 70 incubators in India with the action plan bringing in 35 more. Bangladesh on the other hand has only a hand full of incubators, the first being Bizcube which was established as early as 2013, and a more recent example being the GP Accelerator, in association with SD Asia. So there is a need for more mentorship programs and accelerators in the ecosystem in Bangladesh as of now.
• Corpus of Funds: India is creating a fund of INR 10,000 Crore (USD 1.4 Billion) solely for startups. Such a fund does not exist in Bangladesh although there is something comparable; the Equity and Entrepreneurship Fund (EEF) which is held by the ICB. The fund is geared towards financing SMEs in the agriculture, food processing, and IT sectors of the country (Source: EEF). However, the EEF currently has a mere BDT 3.16 Billion (USD 40 Million), leaving the need for more financing sources from concerned stakeholders.

Going Forward

World Bank projections pit Bangladesh’s GDP growth rate among the highest in the Global Economy. Bangladesh is classified as the Next 11 and is expected to closely shadow the searing growth being experienced by neighbors China and India.

However, this growth in GDP can only be fostered by invigorating the tech startup scene, which will play an integral role in the country’s revenue generation through the IT and ITeS sectors (more than 50% of the country’s GDP comes through services).

Given the sheer number of increasingly young, educated, online people in Bangladesh, the time is ripe for all resources to align and collectively help the startup ecosystem in Bangladesh, and in turn, the country itself reach the next level; and the action plan outlined in the Startup India Initiative may provide a good framework to start with.

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