World Economy

Modi Offers Fund, Tax Breaks for Startups

Modi Offers Fund, Tax Breaks for Startups
Modi Offers Fund, Tax Breaks for Startups

India said it will set up a 100-billion-rupee ($1.5 billion) fund to encourage startup businesses and pledged to ease regulations for entrepreneurs, as Prime Minister Narendra Modi strives to create the jobs needed in a developing nation of 1.3 billion people.

Startups will get tax breaks such as income-tax exemptions for the first three years, quicker patent applications, a credit guarantee program and easier routes to wind up if they fail, Modi said at a government conference for entrepreneurs in New Delhi. The fund will be established over four years, Bloomberg reported.

“The government should not interfere in startups,” Modi said on Saturday to an audience that included billionaire Masayoshi Son, the founder of Japan’s SoftBank Group Corp., and Uber Technologies Inc. Chief Executive Officer Travis Kalanick. “India’s youth should be a job creator, not a seeker.”

Asia’s No. 3 economy is in the midst of an Internet startup boom that’s lured billions of dollars and raised questions about whether valuations are becoming stretched. Much of the money is coming from foreign investors such as SoftBank. A lack of tax breaks has curbed the involvement of local investors.

 “About 70-80% of the funding is coming from overseas,” said Harish Visweswara, a partner at consultant Grant Thornton India LLP. The government needs to curb red tape and get rid of the numerous permits and licenses required to run a simple business, he said.

The administration’s objective is to reduce obstacles from complex rules, Finance Minister Arun Jaitley said at the conference.

“Our effort over the last few years has been to restrict the role of the state essentially as a facilitator,” Jaitley said.