CanIndiaBuildItsOwnSiliconValley?

Ithasthepopulationandthepotential.Canitdeliveronthenecessaryreforms?
ByMohamedZeeshan
September11,2015

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FollowinguphisMakeinIndiaclarioncalllastyear,IndiasPrimeMinisterNarendraModi,inhis
IndependenceDayaddressthisyear,calleduponthecountrysyouthtoStartUpIndia.Theideawas
tospuranentrepreneurialrevolutioninIndia,aimedatcreatingjobsandinnovation.
Thismightnotseemliketherighttimeforsuchaslogan.Chinascurrencydevaluationandconsequent
stockmarketslidelastmonthsentjittersacrosstheglobaleconomy.TheIndianrupeelostaround4
percentofitsvalueandGDPgrowthestimateshavebeentrimmed.ButifIndiawantstobuilditsown
SiliconValley,nowisprobablytherighttime.Ithasthepopulationforit,withtwothirdsofitspeople
withintheworkingagebracketandproducingawhopping1.5millionengineeringgraduatesannually.
AndwithChinaseconomyslowing,muchoftheworldshopeforfutureeconomicgrowthnowrestson
countrieslikeIndia.Percapitaincomeisstillatonly$1600,comparedtoChinas$7600,leavingIndia
withsubstantialroomtogrowfurther.
Sincecomingtopower,Modihasintroducedanumberofreformstofurtherthiscause,includinga
financialinclusionschemeaimedatmobilizingruralsavingsforentrepreneurialinvestment.Last
month,theReserveBankofIndia(RBI)approvedtheestablishmentof11paymentbanksasanother
stepforward.
Therehasevenbeenmovementinintellectualpropertyrights(IPRs)anissueonwhichIndiahas
oftendrawnflakfromtheWest.PatentlawshavebeenadjustedinaccordancewiththeTradeRelated
AspectsofIntellectualPropertyRights(TRIPS)Agreement,andtrademarkandcopyrightlawshave
beenamendedtoaccommodateIndiascommitmentsintheWTO.
Still,muchmorereformisneededifIndiaistodevelopastartupcultureofitsown.Despitethe
positivelegislativemoves,theU.S.ChamberofCommercesGlobalIntellectualPropertyCenterranked
India29thoutof30countriesinitsInternationalIPIndex2015,aboveonlyThailand.Businessesstill
complainaboutIndiasquagmireoflaborlaws44atthenationalleveland150inthestateswhich,
theysay,arecostly,timeconsuming,andaltogetherdiscouragingforstartupentrepreneurs.
Anothermajorchallengeisfundingitself.Ina2013essay,KiranMazumdarShaw,headofIndiastop
biotechcompanyBiocon,lamentedthelackofaventurefundingecosysteminIndiaforinnovativenew
startupideas.ShashiTharoor,thentheministerofStateforHumanResourcesDevelopment,
acknowledgedasmuch,sayingthatIndiastillspendsjust1percentofitsGDPonresearchand
development.Asmuchas80percentofthatmoney,hesaid,comesfromthegovernment.Inmost
OECDcountries,bycontrast,about75percentoftheirresearchfundscomefromtheprivatesector.
UnlikeintheWest,collaborationbetweenuniversitiesandcorporateenterprisesisstillminimalin
India,creatingagapbetweeninstitutionscapableofresearchandstartupcompaniesthatdesperately
needit.Today,Indiaputsoutlessthan3percentoftheworldsresearchandlittleofthatis
translatedintocommercialventures.
Tobefair,manyofthesechallengeshavebeenmetatdifferentlevelsbytheModigovernment.Earlier
thisyear,ModilaunchedtheMicroUnitsDevelopmentandRefinanceAgency(MUDRA)Bankinorder
tofurnishfundsformicro,smallandmediumenterprises.Thentherewastheattemptatloosening

laborlaws:Aproposedamendmentmakesiteasierforfirmswithasmanyas300workerstofire
employeeswithoutgovernmentapproval,raisingthecapfrom100.
Butmanyothermeasureshavemetwithstrongopposition,bothwithinandoutsideparliament.
Millionsofworkerswentonstrikethisweek,protestingagainsttheproposedlaborreforms.TheGoods
andServicesTax(GST)bill,whichwillfacilitatethemovementofgoodsandservicesacrossstates,is
stillstuckinparliament,asaretheproposedamendmentstothelandacquisitionlawwhichwillmake
iteasierforinvestorstobuyfarmland.(Modihadissuedasmanyasthreeexecutiveordersontheland
lawbeforedecidingtoallowitlapserecently.)
Despitethemyriadchallenges,Indiastillhasthepopulationandeconomytokickstartastartup
revolution.Whatitneedsisthedeliveryofalonglistofreformsthatwillturnitstradersinto
businessmenandgraduatesintoentrepreneurs.ThatsonModi.