wadhwani-foundation-blog

[wadhwani-foundation-blog]

Demographic Dividend or Disaster? A Hobson's Choice for India

It was heartening to see that the Union Budget 2016-17 had 'education, skill development and job creation' as one of the nine pillars envisaged to transform the Indian economy. Skill development as a dire need for high-quality job fulfillment is a hot button topic across the globe today, and with its low labor-cost, rich talent pool, and a young, ever burgeoning workforce, India sits at the cusp of a great opportunity to become the 'human resource capital of the world'. India's potential to power its global competitiveness as a knowledge-based society is well-known. Therefore, higher education & training as a feeder to workforce, and an unwavering focus on skill development are strategic necessities for the country today.

Each year, 12 million Indians join the workforce in India but a majority of them are unskilled. It is estimated that more than 94% of the workforce has no technical education and merely 8% in rural and 30% in urban areas have general education of higher secondary and above. Hence, the urgent task at hand is to enhance the current skilling and technical education capacity in the country from ~4 million to ~15 million [including training requirements of the existing workforce]. Emphatic planning to fuel technical education and skill-sets will play a crucial role in the success of far-reaching initiatives like Skill India, Make in India, Digital India and Jan-Dhan Yojana.

The recent Union Budget 2016-17 has acknowledged the significance of higher education and skill development, and the allocations in this regard are noteworthy:

Allotment of Rs. 28,840 crores to improve higher education under the aegis of Ministry of Human Resource Development (MHRD) as against Rs. 26,855 crores in 2015-16, an increase of 7.4%. By 2030, India will be amongst the youngest nations in the world and with nearly 140 million people in the college-going age group, one in every four graduates in the world will be a product of the Indian higher education system. To enhance vertical and horizontal mobility of students today will create intellectual, economic and social value for tomorrow, and foster a culture of innovation.Setting up of the not-for-profit, 'Higher Education Financing Agency (HEFA)' with an initial capital base of Rs. 1,000 crores; this avatar of a non-banking financial company is slated to provide interest-free loans to higher educational institutions for constructing new campuses, expanding or renovating existing infrastructure in top institutes like IITs and IIMs, and creating state-of-the-art laboratories. Over the next five years, the capital base of HEFA is projected to grow to Rs. 20,000+ crores through leveraging of the markets and CSR contributions. HEFA is a novel idea that recognizes the role of private sector in the education sector, but its operative and regulatory mechanisms will be crucial to smooth implementation. We will have to wait for a framework currently being developed by MHRD. The proposal of making all central and state higher educational institutions eligible as members of HEFA [with riders] could be far-reaching. However, there is no doubt that HEFA will benefit both the students as well as the financing system.Allotment of Rs. 1,700 crores for establishing 1500 multi-skill training institutes (MSTIs) to train youngsters for jobs and also to startup. This is a radical change from traditional ITIs. MSTIs are envisaged as the new generation ITIs focused on reach and penetration of skill development efforts at block and district levels and public-private partnerships (PPP) for better quality and ease of delivery. However, a constant realignment of skill expectations with high-demand jobs will be essential.A slew of measures, in addition to the multi-skill training institutes (MSTIs), have resulted in the Government's ambitious target of skilling one crore youth over the next three years under the Pradhan Mantri Kaushal Vikas Yojana [PMKVY]; the National Skill Development Mission has created an elaborate skilling eco-system and imparted training to 76 lakh youth; entrepreneurship is being encouraged and democratized with plans to provide entrepreneurship education and training in 2200 colleges, 300 schools, 500 Government ITIs and 50 Vocational Training Centers through Massive Open Online Courses [MOOCs]. Aspiring entrepreneurs, particularly from remote parts, will be connected to mentors and credit markets; tax benefits will be given to training institutes till 2020; setting up of a National Board for Skill Development Certification in partnership with the industry and academia; model skill centers planned across 500+ districts in the country. PMKVY is the engine that will steer the skilling ecosystem in the country and the Government's positive intent is clear with substantial funds allocation. A strong industry linkage to ensure high-quality employment opportunities can be a game changer here.

Government's focus on higher education and skill development along with the PPP nature of multi-skill institutes and Higher Education Financing Agency is likely to spur interest in Corporate India to fulfil their CSR obligations though focused spending in these two areas. There are precedents like partnering with the National Skill Development Corporation (NSDC) in delivery. Also this is nothing new. In 2014-15 too, education and skill development were key areas that attracted large CSR spending. A total of Rs. 6,338 crores were spent on CSR by 460 companies in FY15, and education and skill development attracted 23% of the CSR spending, according to data from the Ministry of Corporate Affairs (MCA). Therefore, in FY 17, there is every likelihood of the CSR spends increasing in this space.

With 54% of our population below 25 years of age, we are sitting on a substantial but mainly unemployable workforce. By 2020, almost 60% of India's population of 1.3 billion will be in the working age group of 15-59 years. Of these, barely 2 to 3 % are expected to have usable skills. So we are looking at two scenarios here; a massive wave of unemployment that could sweep India or generation of an unprecedented human capital resource which will outpace much of the world, catapulting India into a skills factory supplying talent to all corners of the globe.

[wadhwani-foundation-blog]

Its amazing how Absolut made its bottle the most recognizable in the world, despite having nothing distinct about it !

Dissecting the longest uninterrupted advertising campaign ever Its amazing how Absolut made its bottle the most recognizable in the world, despite having nothing distinct about it !

Look at their ad above, which features bottles swinging merrily in the wild and was so successful that it didn’t stop running for 25 years. It's the longest running uninterrupted ad campaign ever and comprises over 1,500 separate ads over print and video - all of them  showing the bottle with a halo above the two word tagline “Absolut Perfection”.

The efficacy of this campaign was can be judged by the fact that initially Absolut had a meagre 2.5% of the vodka market, but in the late 2000's, Absolut began importing almost 5 million cases per year which amounted to half of the entire imported vodka in the U.S.

So what was the strategy behind a most successful ad campaign?

#Absolut team understood the core point that they were selling vodka and not the ad. The hero of their messaging is the bottle - The Absolut Star.

#Absolut positioned itself as “a smart, stylish, contemporary, creative, unexpected, witty brand of superior quality” with its positioning strongly reinforcing this brand identity.

Even after two decades, there’s plenty of life left in the Absolut advertising stable. So as a marketer, what is the lesson here?

The boring looks of your product may not be an impediment if you can weave an interesting story around it. After all,  Absolut created 1500 ads of one bottle! An amazing brand journey that inspires all of us to focus on product differentiation

[wadhwani-foundation-blog]

India needs to create multiple Silicon Valley-style entrepreneurial ecosystems that foster innovation and solutions

Dr. Romesh Wadhwani’s success story is the kind most Indians dream of. Listed as #612 on the ‘billionaires of the world (2016)’ list by Forbes, Wadhwani is Chairman and CEO of Symphony Technology Group (STG), a strategic private equity firm that partners with companies to build software, and provide Internet and technology-enabled services, with an annual revenue of $3 billion.

Wadhwani is an alumnus of the Indian Institute of Technology, Bombay and Carnegie Mellon University. He was conferred with the 2013 Forbes India ‘Non-Resident Philanthropist Award’. He sits on the boards of the Kennedy Center for the Performing Arts and the Center for Strategic and International Studies at Washington, D.C.

The sharp businessman, entrepreneur, and well-known philanthropist founded The Wadhwani Foundation in 2000 with the chief aim to accelerate economic development in emerging economies through large-scale job creation. Currently, the Foundation’s footprints are in India, Indonesia, Pakistan, and Malaysia.

Wadhwani’s net worth as per Forbes is $2.8 billion. In July 2015, Wadhwani announced plans to commit up to $1 billion to the Wadhwani Foundation to create 25 million jobs in India by 2020, through entrepreneurship and skill development. This aligns with the Foundation’s mission and supports government initiatives like the ‘Make in India’, ‘Skill India’ and ‘Start-up India’ campaigns. The Foundation claims that its expansion will enable more than 5,00,000 new entrepreneurs and 1,000,000 MSMEs in India.

The Wadhwani Foundation’s initiatives and impact

Dr. Ajay Kela is the President & CEO of the Wadhwani Foundation. With 30 years of experience managing global software businesses under his belt, Ajay came on board the Wadhwani Foundation in 2009, full time. Ajay now spearheads the Foundation’s initiatives across the globe. Ajay is an alumnus of IIT Bombay and the University of Rochester.

“The desire to transform lives by enabling the less privileged to attain high-quality jobs has been a constant nag after having personally experienced such a transformation in my own life. When the opportunity arose to potentially transform millions of lives, it was a no-brainer. The kick you get from changing lives, far exceeds any incremental wealth accumulation opportunity”, says Ajay.

Ajay shares his thoughts on the Wadhwani Foundation’s initiatives, entrepreneurship in India, challenges, and the growth accelerators needed to unleash the true potential that India holds.

To drive the vision, the Foundation laid out five initiatives that would give the required impetus through innovation, entrepreneurship, and skill development. It operates in association with governments, corporates, and educational institutes.

National Entrepreneurship Network (NEN) inspires, educates, and supports student entrepreneurs, startups, and SMEs for creating high-value jobs. Ajay says that NENhas trained over 3,000 faculty across 500 institutes, who now regularly offer entrepreneurship courses to more than 100,000 students, annually. Coupled with classroom education, providing hands-on support through 400 student clubs to aspiring entrepreneurs has resulted in over 2,000 startups to-date.

Skills Development Network (SDN) aims to equip non-college-bound high-school graduates with sufficient work-skills to earn Rs 12,000-15,000 per month and above to support their families. Today, SDN works across 1,400 high schools and with over 100,000 students, and is embarking on scaling this to 15,000 schools over the next three-five years, in partnership with the Indian government. SDN is working with the Central and state governments to transform ITIs to modern manufacturing training hubs and multi-skill institutes.

Opportunity Network for Disabled (OND) mainstreams the educated disabled into sustainable high-quality corporate jobs through a business value proposition. According to Ajay, 8,000 people have been placed through this initiative and OND, in partnership with the government and industry, is building capacity to place 100,000 over the next five years with the ultimate goal of corporates recognising the business value of hiring and mainstreaming the disabled.

Research and Innovation Network (RIN) aims to create a world-class innovation ecosystem in India with the goal of propelling India towards the top ten innovative nations in the world. The Wadhwani Research Centre for Biotechnology (WRCB) at IIT Bombay and Shanta Wadhwani Centre for Cardiac and Neural Research (SWCCNR) at NCBS, Bengaluru, are the two pioneer centres setup by RIN. The Start-up and Small Business Innovation (SSBI) initiative aims to create national ecosystems in critical and sectors of high importance.

Policy Research Centre provides data-driven research inputs for informed policy action towards accelerating economic growth. PRC has assessed the performance of two of India’s most comprehensive and largest programmes initiated by the Department of Biotechnology and administered by Biotechnology Industry Research Assistance Council (BIRAC) – SBIRI and BIPP. Ajay adds, “The assessment has led to evidence-based recommendations for policymakers to improve impact and scale of innovation programmes in small- and medium-scale industries. The Foundation envisions creating partnerships with various central government organisations to initiate innovation grants to 25,000 companies over five years as part of the SSBI Initiative.”

Entrepreneurship in India

Ajay says that high-potential entrepreneurship that drives jobs at scale is borne out of a culture of innovation and risk-taking. He adds that while Indians excel at jugaad, they shy away from world-class innovation and are generally risk-averse.

The good news is that there has been a drastic change in that especially with the best brains from prestigious institutes in the country choosing entrepreneurship and joining startups over the conventional and lucrative desk jobs. In 2015, 5,000 new startups emerged and collectively created ~80,000 jobs. Ajay adds, “India is adding seven to eight million people a year to the workforce and given 70 per cent of all jobs, globally, were created by startups and SMEs, our challenge is to scale this mindset and culture pronto.”

Accelerating growth

India is often quoted as the land with demographic dividend, but it is also a country where every single day, thousands of problems are screaming for a better solution. Ajay says that the solution lies in India creating multiple Silicon Valley style entrepreneurial ecosystems that support the full lifecycle of entrepreneurs, who in turn can produce innovative local and national solutions. He stresses on the solution, which also adds to the challenge,

Challenges and solutions for the Foundation

He says that the Foundation has developed a tried and tested model for job creation and job fulfillment, and now needs to scale it pan India. He details two major challenges – building national-level capacity and flawless execution in a very diverse national environment and culture. The Foundation’s strategy to overcome the first challenge is to leverage technology, build networks, and deeply engage with the government. To manoeuvre the second challenge, they are working to create a few diverse “role-model” Indian states for job creation and top talent acquisition with the goal of producing working prototypes and playbooks that other states can replicate.

Creating a million jobs and a prosperous India

‘Startup India’ has brought startups centre stage even within government circles and policymakers. On a parting note, Ajay shares his thoughts on how India can reprise its lost glory,

“The slew of policy announcements such as registration through mobile app, Fund of Funds, friendly tax regime for startups, etc., are directionally brilliant, but need some tweaks, such as extending tax-holidays beyond the first three years as most startups are barely profitable during the first three to five years. Government attention and support has the power to pave the way for creating many Silicon Valleys in India, boosting economic growth and creating millions of jobs.

www.wadhwani-foundation.org

[wadhwani-foundation-blog]

'Stand Up’ of Entrepreneurship and a Union Budget of Hope

The formal launch of ‘Startup India, Standup India’ on January 16th was path-breaking. For once, here was an establishment promise that held sway beyond expectations. A ‘leap-forward policy’ and recognition of startups as engines of wealth and job-creation will now provide momentum towards strengthening the backbone of the startup ecosystem – a well-trained & accessible mentor network, mushrooming of accelerators and incubators and a healthy growth in investments by VC firms and angel investors.

This effort of the Government in bringing entrepreneurship to the forefront of Indian economy raised expectations from Union Budget 2016-17. The budget did have a series of announcements aimed at allaying challenges that startups face and ensuring MSMEs in the country get a boost. Here are the top reforms, essentially a first step take-away from the ‘Startup India’ policy aimed at transforming the way Indian startups do business today.

Tax Reforms: A three year tax holiday on profits for startups. The Budget also proposes to insert a new Section 54EE to provide exemption from capital gains tax, subject to conditions.  However, it is common knowledge that startups normally take minimum five years to break even. Hence, an extension of the holiday tenure will lead to more benefits intended.

Allocation of Rs 500 crore for SC/ST and women entrepreneurs: Aimed to stimulate startup activity in these categories, this is likely to benefit 2.5 lakh entrepreneurs. Women are at the tipping point of entrepreneurship in India and make up slightly over a third of the workforce. Their increased contribution to GDP and the ability to create employment could be a game changer for India’s economy.

Promotion of Innovation: A special patent regime has been proposed with a 10% rate of tax on income from worldwide exploitation of patents developed and registered in India. This is perhaps for the first time that Intellectual Property is being addressed an an asset for the startup ecosystem.

Fund of Funds: Plans to raise Rs 2,500 crore annually for four years to finance the startups. This corpus will definitely enhance the special propensity of an entrepreneur for risk-taking.

Ease of doing business: The ability to register in a day will be a boon for aspiring entrepreneurs allowing them to focus on building disruptive products and services. This will help India climb rapidly in the World Bank ‘Ease of Doing Business’ Index and resultant flow of  investment.

MOOCs: Entrepreneurship learning through Massive Open Online Courses will provide access to educational resources across the country.

With technology democratising entrepreneurship and the brightest from IITs and IIMs pursuing it, India is witnessing a positive and vibrant entrepreneurial revolution.

[wadhwani-foundation-blog]

LAYOFFS IN STARTUPS, the new and disturbing trend - A 6 point reality-check for employees

“ The startup industry is replete with failures. However, the point to ponder is while a startup has every opportunity to rise from the ashes once again, what happens to the career graph of startup employees in such cases? “

Tiny Owl, Grabhouse, Zomato, Helpchat, Snapdeal and many more have fired employees recently. It is another matter that the capital intensive food delivery startups are more in news for the wrong reasons. In October 2015, Google India head, Rajan Anandan and Amazon country manager, Amit Agarwal invested in meal delivery startup DAZO which shut down recently due to lack of capital.This is a marked change from the previous trend where firing an employee was unheard of.  The employee was simply called and told to look for another job but was also comforted that he/she could freely work till the time another job was at hand.

Hence, its imperative that before you join a startup, you remember theinevitable risks involved which are also taken by one and all including venture capitalists and angel investors. For those interested in joining startups, here is a 6 point reality-check:

#Startups have immense focus on higher revenues at minimum overheads, leading to extra pressures - fewer hands to do more work.

# Startup funding is 100% milestone linked and hence there is little flexibility or buffer in terms of performance.

# Unstructured and open-ended work culture may entail long hours and uncertain routine.

# Stock option is obviously a high risk option.

# Ownership changing hands is a distinct possibility due to ever increasing requirements of funding–this brings in strong possibilities of redundancy.

# HR is never a last resort here. Do not depend on structured policies - take the unknown in your stride.

Even in Silicon Valley, the mecca of startups, it is worth noting that the failure rate is 70% - so much so that failure is worn on the sleeve as a badge of ultimate success. So failures and startups are 2 sides of the same coin and if you want to join a startup, then keep this in mind. It will prepare you for the strong kick and glorious uncertainties that the startup ecosystem offers.

Read On: https://www.linkedin.com/pulse/layoffs-startups-new-disturbing-trend-6-point-employees-atul-raja?published=t

[wadhwani-foundation-blog]

The ‘Stand Up’ of Entrepreneurship and a Budget of Hope

The formal launch of ‘Startup India, Standup India’ on January 16th was path-breaking. For once, here was an establishment promise that held sway beyond expectations. A ‘leap-forward policy’ and recognition of startups as engines of wealth and job-creation will now provide momentum towards strengthening the backbone of the startup ecosystem – a well-trained & accessible mentor network, mushrooming of accelerators and incubators and a healthy growth in investments by VC firms and angel investors.

This effort of the Government in bringing entrepreneurship to the forefront of Indian economy raised expectations from Union Budget 2016-17. The budget did have a series of announcements aimed at allaying challenges that startups face and ensuring MSMEs in the country get a boost. Here are the top reforms, essentially a first step take-away from the ‘Startup India’ policy aimed at transforming the way Indian startups do business today.

Tax Reforms: A three year tax holiday on profits for startups. The Budget also proposes to insert a new Section 54EE to provide exemption from capital gains tax, subject to conditions.  However, it is common knowledge that startups normally take minimum five years to break even. Hence, an extension of the holiday tenure will lead to more benefits intended.

Allocation of Rs 500 crore for SC/ST and women entrepreneurs: Aimed to stimulate startup activity in these categories, this is likely to benefit 2.5 lakh entrepreneurs. Women are at the tipping point of entrepreneurship in India and make up slightly over a third of the workforce. Their increased contribution to GDP and the ability to create employment could be a game changer for India's economy.

Promotion of Innovation: A special patent regime has been proposed with a 10% rate of tax on income from worldwide exploitation of patents developed and registered in India. This is perhaps for the first time that Intellectual Property is being addressed an an asset for the startup ecosystem.

 Fund of Funds: Plans to raise Rs 2,500 crore annually for four years to finance the startups. This corpus will definitely enhance the special propensity of an entrepreneur for risk-taking.

Ease of doing business: The ability to register in a day will be a boon for aspiring entrepreneurs allowing them to focus on building disruptive products and services. This will help India climb rapidly in the World Bank ‘Ease of Doing Business’ Index and resultant flow of  investment.

MOOCs: Entrepreneurship learning through Massive Open Online Courses will provide access to educational resources across the country.

With technology democratising entrepreneurship and the brightest from IITs and IIMs pursuing it, India is witnessing a positive and vibrant entrepreneurial revolution.

https://wadhwani-foundation.org/’

[wadhwani-foundation-blog]

User Experience Is Not Just About interface or interaction design

Its about people and technology: customization to suit the target audience and the technological interventions to create an interactive ecosystem is a must.

 User Experience Is Product Focused

Its a design driven experience: While marketing makes people want things. Design is about making things that people want.

 User Experience Is Inevitable, It's All About Whether You Get To Design It

Its role is to fill gaps and correct the imbalance : The gap/imbalance between product capability and delivery, and customer expectations is typically filled by user experience modules.

 User Experience Thrives On Intensive Research

Its all about qualitative design research: to understand consumer needs and their satisfaction levels with a well-designed product. This is in direct contrast to marketing focused research that uses quantitative methods.

 User Experience Is Connecting People and Technology

Conversations in digital media are seeing a paradigm shift: There is a rising trend of conversations happening between product and product, and product and people. The interaction between people and people is slowly but surely diminishing.

[wadhwani-foundation-blog]

Importance of user experience in digital landscape

User Experience Is Not Just About interface or interaction design

Its about people and technology: customization to suit the target audience and the technological interventions to create an interactive ecosystem is a must.

 User Experience Is Product Focused

Its a design driven experience: While marketing makes people want things. Design is about making things that people want.

 User Experience Is Inevitable, It's All About Whether You Get To Design It

Its role is to fill gaps and correct the imbalance : The gap/imbalance between product capability and delivery, and customer expectations is typically filled by user experience modules.

 User Experience Thrives On Intensive Research

Its all about qualitative design research: to understand consumer needs and their satisfaction levels with a well-designed product. This is in direct contrast to marketing focused research that uses quantitative methods.

 User Experience Is Connecting People and Technology

Conversations in digital media are seeing a paradigm shift: There is a rising trend of conversations happening between product and product, and product and people. The interaction between people and people is slowly but surely diminishing.

[wadhwani-foundation-blog]

I. Startups and SMEs as a solution to India’s Economic and Job   Growth Challenges As India replaces China to become the fastest growing emerging economy, it is important to understand the nature of India’s economic and job growth over the last several years and its implications for the longer term. Growth hiccups notwithstanding, India’s cumulative GDP growth in the 2005- 2012 period was a remarkable 54%. During that same period India’s net new cumulative job growth was only 3% or 15 million net new jobs, a little over 2.0 million per year¹. This is an extraordinary disconnect, especially since the workforce was growing by 6-7 million job-seekers annually. Given India’s current trajectory, job growth is the primary challenge for India’s policymakers, a challenge that will grow dramatically in the next ten years. Here’s why. At an annual growth rate of 7%-8%, the GDP will roughly double in the next 10 years². Meanwhile the number of workers entering the workforce will increase to 8 million each year i.e. 80 million net new job-seekers through 2025. At the current job creation rate of 2-3 million jobs/year, a maximum of 30 million new jobs will get created over the period. This implies a job creation gap of about 50 million jobs in the next 10 years, with at least 30-35 million of these in manufacturing and services.With the rising expectations of the workforce and India’s need for more skilled labor, most of these jobs will have to be Quality Jobs i.e. paying at least Rs. 15,000 per month3. Notwithstanding India’s rejuvenated growth impetus, the economic situation, therefore, is far from comforting. The current economic and job growth trajectories are not going to fulfill the aspirations and even bare requirements of India’s growing and youthful population. Existing business entities and traditional sources of employment are proving to be woefully short in providing the thrust needed, particularly in today’s competitive, globalized and fast-changing environment. Globally, it is a well-established fact that 60-70% of all new jobs in every economy are created through small businesses, whereas large businesses tend to optimize their growth through productivity increases. The need of the hour is to build a vibrant and innovative ecosystem in India that is attuned to the ever-changing demands of the current national and world economies and the new processes of satisfying them. A mushrooming of startups and accelerated growth of established SMEs all over the country is, virtually, the only way out. II. Major Gaps in India’s Startups and SME Policies If India’s much discussed rank of 130 out of 189 in the World Bank’s Ease of Doing Business is unacceptable, it is worth pointing out that India ranks far worse in the Ease of Starting a New Business (one of the components of the Ease of Doing Business) – 155 out of 189. A few of the reasons for the current dismal state of affairs are discussed below: 1. India’s economic growth planning and policies are largely devoid of any emphasis on job growth planning and policies: Much of India’s current woes regarding economic and job growth stem from a virtually complete lack of entrepreneur-friendly approach to economic planning over the decades. Entrepreneurs were all but harassed during the socialist era, but even after liberalization, successive regimes have done little to explicitly champion entrepreneurship and create an environment conducive for new businesses or accelerating growth of existing small 1  Mehrotra, Santosh, Jajati Parida, Sharmistha Sinha, Ankita Gandhi (2014), Explaining Employment Trends in the Indian Economy: 1993-93 to 2011-12, Economic and Political Weekly, Vol XLIX, No. 32, August 9, 2014. 2  Estimates made for the Wadhwani Foundation by Professors Santosh Mehrotra and Jajati Parida. Available upon request. ³ Just about enough to ensure $2 per head per day for a family of four. 5Translating India’s Economic Growth to High Value Jobs businesses. While “new business starts” is routinely used as an economic indicator for conducting monetary and fiscal policy in many developed countries, in India neither has the concept ever been used in policy making, nor is there an attempt or mechanism to record and measure the new business starts happening in the country. 2. Lack of financial access for startups: Even after more than half a century of economic policy making, startups find it difficult to access institutional funding and hence new business starts of mentionable scale remains restricted to entrepreneurs with access to family funding. The Indian angel funding and venture capital industry remains rudimentary and the multiple government agencies providing subsidized, priority-sector loans to small businesses remain inaccessible to startups owing to severe red-tape and procedural delays. 3. Two decades’ post-liberalization, India is still a maze of red-tape for an entrepreneur: Stemming from a lack of forethought to support the entrepreneur and sensitization to the grass-root challenges of setting up new businesses as well as the inevitable desire for rent-seeking, the process of obtaining the necessary permits for starting a new business remains a landmine for any entrepreneur. Stories of potential entrepreneurs that have given up mid-way through the regulatory process are fairly common. 4. Failure to remove multiple obstacles to entrepreneurship & growth of SMEs: Much needs to be done to improve the ease of doing business in India, especially for SMEs. It takes too long to start a business, operate a business or close a business, due to multiple formalities involved. Archaic size restrictions continue to pigeon-hole enterprises into unviable, ineffective and inflexible categories. A well-crafted Startup Policy, free from errors of the past, should be able to effectively unlock the situation. 5. Failure to provide adequate infrastructure in Modern Industry Clusters: In the 1,100 modern clusters lies the best opportunities for business and job growth. There is an urgent need to provide a serious policy incentive for the development of these modern industry clusters, which requires a focus on brown field (not just green field) sites. Therefore, a higher allocation needs to be made than what is being presently allocated under the cluster development program in India, as SIDBI has limited resources/finance for its industry clusters. It is the brownfield sites of the 1100 modern clusters that must grow for the manufacturing output/ employment to expand in India, which requires public investment in infrastructure – both physical and social – that must focus on the middle-tier cities instead of mega and large cities. At this stage, it is critical to have synergy in planning for the cluster program and the AMRUT program, so that the objective of job creation is one of the outcome objectives. III. Proposed Startup Vision & Strategies The policy vision should: • Make India a world leader in job creation, especially for quality jobs by empowering startups and entrepreneurs, and enabling small and medium businesses (SMEs) to grow without shackles • Make India a nation of entrepreneurs where every potential entrepreneur feels it safe to attempt a startup, is supported by a regulatory and financing ecosystem designed with the entrepreneur at the center, and make a quick and honorable exit if the venture fails 6 Deriving from the above policy vision, it is imperative that the Government of India adopts a stated policy goal to create 50 million additional quality non-agricultural jobs above the current baseline trajectory over the next 10 years. Strategy 1: Jobs Advisor at the PMO: One of the best ways to achieve this would be to create an office of a Startup/SME focused Jobs Advisor to the PM, based in the PMO. The Startup/SME Advisor would be responsible for ensuring alignment between economic and job growth policies to achieve the overall startup creation and SME acceleration objectives, recommending policies for facilitating startup growth, adopting best practices from States with successful job growth programs, reviewing the performance of startups and SMEs in the subject, and monitoring the outcomes actually being achieved overall and in each ministry and State. Strategy 2: Enable Startup India through an integrated approach: From the startup through growth phase, there should be an integrated set of policies and investments for specially empowering startup and SME entrepreneurs. Startups need help from multiple ministries across all three levels of federal administration, most importantly at the State and local level. The celebrated “single-window” approach has so far worked better in some States than others. Coordination across silos and ministries have always remained a challenge for Indian policy implementation. The need here will be to design policy with the entrepreneur at the center, not the ministries in question. Strategy 3: Help Startups and SMEs become more innovative: As the marketplace is becoming increasingly globalized and competitive with fast-changing technology quickening obsolescence of products and processes, only the most and continually innovative enterprises survive and succeed. Most developed nations have specific competitive programs to fund and reward research and innovation among startups. Indian startups deserve the same support to operate in a level playing field. The Government – both at the Center and in the States – acts as an engine of growth in most sectors, which for a country like India, have the size of many national markets, for instance, Defence and Railways ecosystems. These and other such large footprint ministries ought to run competitive programs rewarding innovation in startups and SMEs. Innovation in startups and SMEs would certainly take India a long way in realizing major initiatives such as Make in India, Smart Cities and Digital India. Strategy 4: Create an Integrated Vocational Training & Education (VTE) Ecosystem along with an entrepreneurship education emphasis. One of the biggest challenges that entrepreneurs across the country face today – at the same level as financing and regulatory red-tape – is access to skilled manpower. While startups may not be the only businesses feeling this pinch, they are more likely to lose out because of this. Skilling of India’s labor force, therefore, is a key pro-entrepreneur step that the government needs to urgently take by creating high quality education and skilling ecosystems across high schools, ITIs, community colleges, polytechnics, degree colleges, vocational training providers (VTPs) and employers. Strategy 5: Leverage technology to accelerate both job creation and skills initiatives at massive scale, by adopting innovative ways of doing things (like teaching, training etc.) and benefitting the overall community at large. IV. Policy Framework for Creating Startups and Accelerating Growth  of SMEs India needs a million growth-focused startups and several million of its small businesses to become dynamic growth businesses, each ideally creating at least between 10 and 50 jobs. The Government 7Translating India’s Economic Growth to High Value Jobs of India through a clearly enunciated Startup policy should play the role of an enabler and facilitator with an integrated policy framework that encourages and enables business growth at all stages of the business lifecycle, from startup to small and medium businesses, rather than penalizing businesses with ever stricter rules and regulations as they grow. This framework should include the following policies: 1. Make Entrepreneurship Education Ubiquitous: India needs a world class entrepreneurship education curriculum, which should ideally be a blend of both online and experiential learning. Educating and equipping of potential and early stage entrepreneurs through entrepreneurship education would certainly help India in the long run. We applaud the recent policy announcement by MSDE to integrate entrepreneurship education in the mainstream curriculum for 3000 colleges across India. This would create a pool of 250,000 to 500,000 prospective entrepreneurs each year, over 2.5 million over 10 years. If only 10% start their own companies and hire 5-10 formal workers each, this would add more than 1.25 million high quality jobs, plus the indirect job growth in their suppliers. It would be really beneficial to make entrepreneurship education as a part of the core curriculum at all engineering and business colleges. On the other hand, internship opportunities with startups would certainly help students acquire skills & necessary experience, as to what it takes to start an enterprise. From the larger perspective, an Introduction of Massively Open Online Courses (MOOCs) on entrepreneurship would certainly help businesses & students in widening their knowledge base and grow. 2. Make it Easy for Startups. To actively contribute towards the Indian growth trajectory, we need millions of startups, mostly outside the tech sector. Presently, the system is very complicated. So, there is an immediate need to introduce a whole package of policies that makes it easy to do business like an online single-window 24-hour registration and clearance, simplified online reporting to local, State and Central authorities, IP protection, flexibility in hiring and firing, relief from labor laws regardless of scale, bankruptcy etc. The Government of India is already taking necessary steps to improve the ease of doing business, which we hope would certainly give encouraging results in the long run. 3. Reward Small and Medium Business Growth: SMEs are the backbone of any nation & their development is integral to achieve long-run and sustainable economic growth. As the labour-capital ratio is much higher in MSME sector (contributing significantly to manufacturing output, exports and employment), focusing on the growth of MSMEs will definitely provide a stimulus to the manufacturing sector employment. Like China, adopting the cluster approach, availability of bank credit would enhance competitiveness of the MSME sector in India. In India, 70% of the job growth in the 7-year period through 2012 came from businesses with more than 6 employees i.e. from the Small & Medium Businesses (SMB) sector, not from micro-enterprises. In all other developing economies SMBs are the primary engines of growth. Yet our policies favor micro-enterprises, many of which are sub-scale and low productivity, and penalize SMBs. There is a need to eliminate the archaic boundaries which defines the India’s MSME sector classifies businesses as Micro if their capital investment is < 25 lakhs; Small if < 1 crore, Medium if < 10 crores, and then provides direct and indirect incentives to just micro and certain small businesses. Thus, incentives should be provided for achieving growth and not based on size. If a capital limit is somehow necessary we should make it 100 crores, which is only $15 million, a small number in today’s capital intensive economy. We should try to eliminate the differences between manufacturing and services businesses, all quality jobs should be welcomed. In addition, there are certain products that are reserved for manufacturing only by the micro sector, even if subscale and unproductive. Let’s provide tax credits based on the number of new quality jobs created. 8 4. Increase Funding to the Small & Medium Business Clusters (as defined by MSME) with the Highest Growth Potential: The existing Cluster Development Program (CDP) aims at addressing the needs of industries, through well-defined clusters and geographical areas to enable them to achieve economies of scale in terms of deployment of resources as well as focusing on the specific needs of similar industries. An effective Cluster Development Program, with efficient funding, skill development & technological support will definitely enhance labour productivity, which in turn would facilitate international trade. Cluster development is a very good initiative but all the clusters are not created equal. Thus, The segmentation of 1,100 Small & Medium Business (SMB) clusters based on their products & services, economic and jobs growth potential, and provision of 10- 20 times more funding to clusters with the highest growth potential would definitely boost the quality Jobs. 5. Establish a Startup & SMB Growth Corporation: A Public-Private Partnership (PPP) model based corporation can be formed to help startups and Small and Medium Businesses (SMBs) grow, especially those outside the technology sector. This corporation should expand, upgrade and manage the Entrepreneur Incubator Program, help in making each incubator a local center for entrepreneur and small business development. It can also help in developing Small and Medium Enterprises (SMEs) growth programs, including training programs and can provide a platform to mentors, angel investors, infrastructure, low cost facilities and other resources. 6. Startup & Small Business Innovation (SSBI) Initiative. Government of India should accelerate growth of startups and Small & Medium Enterprises (SMEs) by providing annual innovation grants to develop IP-based products, which have high-growth and job creation potential. These projects should be selected on an open, competitive basis. This would help in accelerating Startup India and growth in SMEs. Currently, this kind of program is being implemented on a limited scale, only in the Department of Biotechnology, Government of India. Various GOI ministries, including Defence, Railways, Transportation, Energy, and Science & Technology should each fund 1,000 innovation grants annually for the next 5 years, focused on accelerating innovation in areas of importance to their ministries and that serve the needs of their sectors. This initiative drives innovation for several of PM Modi’s initiatives, including Make in India, Startup India, Smart Cities and Digital India. 7. Build SME Ecosystems for High Value Manufacturing for Defence, Railways and Digital Infrastructure, in support of Make in India, Smart Cities and Digital India initiatives. Smart cities provide environments to experiment technologies & applications, therefore potential for business creation & entrepreneurship should be stimulated. The manufacturing growth can be further boosted by focusing on SMEs, which have good baseline. Their domain expertise can be accelerated with policies that include long term contracts that are not subject to annual changes and re-negotiations. Access to Intellectual Property from DRDO and defence labs, quick approval of Joint Ventures with global partners (who will transfer Intellectual Property to India), and simplified policies for use of defence procurement offset funds will go a long way in supporting Indian SMEs. 8. Tax Incentives to Angel Investors for Long-term Investments in startups and small businesses can be provided, based on the number of permanent jobs they create-introducing financial incentives for startups, on the lines of a ten years tax holiday, which was originally provided to the software companies in India. A similar fiscal benefits to startups may also prove to be beneficial. It is also recommended to incorporate ‘tax pass through’ for angel and venture capital funds, and incentives for R&D. 9. Provide Low Cost Debt Capital to SMEs: According to the Global Competiveness Report, India performs relatively better in terms of the development of financial markets. The Doing Business Report also finds getting credit relatively easier. In contrast, the existing reports focusing 9Translating India’s Economic Growth to High Value Jobs on MSME/informal sector invariably find finance a major hurdle in their functioning. Thus funding is essentially a problem of the MSME sector. There is a need to further incentivize all the existing commercial and government owned banks to provide low cost debt to businesses that meet certain performance and growth criteria, even if they don’t have hard or tangible assets, by guaranteeing 80-90% of this debt. This is especially necessary in the new world in which IP and intangible assets may far exceed hard assets. V. Policy Framework for Skilling Workers for Quality Jobs Created   within Startups and SMEs Skill Development is a key requirement for startups to succeed and a challenge that requires a set of wide-ranging and consistent policy measures rather than a single “silver bullet” as a solution. Many economists estimate India’s skilling needs in terms of hundreds of millions of workers. Yet the reality is that India created only 15 million net new jobs in a recent 7-year period, about 2.5 million/year. So it is not the large numbers that are critical. It is about making sure that we are providing the right kind of skills to add value to employers, particularly startups that innovate and experiment with new technology and processes. Over the next 10 years India needs to skill about 50 million for quality jobs, with 70-75% of these in Manufacturing and Services, above the existing baseline. Policy ideas to achieve this objective include: 1. Vocationalization of High Schools: There are important lessons to be learnt from China’s successful Technical and Vocational Education and Training (TVET) initiative and its continuous improvement to respond to changing market-driven, localized services and manufacturing industry needs. 2. Reinvention of ITIs: India needs to massively transform the ITIs to make them more market responsive to local needs, upgrade the curriculum, provide competency-based skills including soft-skills necessary for successful placement, leverage technology to improve curriculum delivery and increase scale, more than double their training capacity, and increase sustainable placement rates for quality jobs to 75-80%. 3. Worker and Employer Centric Engagement with VTPs: GOI should provide incentives to students, employers and VTPs based on the actual long-term placement of VTP graduates in quality jobs. 4. Massive Apprenticeships Initiative: Apprenticeship opportunities in India are presently insignificant when compared to the size of the economy, unlike China which has a large and effective apprenticeships program. One policy solution to this could be to pay students a stipend for up to 12 months of apprenticeship training, to make the apprentices available to employers at no cost, and to provide a tax credit or CSR credit for each such apprentice who is formally certified by the employer as being employment-ready. Employers would not be asked to make commitments to hire their apprentices. 5. New Approach to Vocational Training & Education (VTE) Curriculum: The National Council for Vocational Training should strengthen the VTE curriculum by adopting the following measures: • On the lines of China, create a standardized core curriculum and pedagogy, for 200-250 high-demand job roles, but allow flexibility for local market-responsive, customization of 33% of the curriculum based on the inputs of local Skills Advisory Boards that meet certain governance requirements 10 • Provide general skills (work-skills, soft-skills, English, IT and basic entrepreneurial skills) and job-oriented competency skills • Enable national mobile platforms for open delivery of interactive video curriculums at all high schools, colleges, ITIs, VTE institutes and employers • Sector Skill Councils (SSCs) could define national-level curriculum requirements and standardized tests 6. Professionalization & Expansion of VTE Faculty: The proposed policies will require at least 100,000-200,000 faculty to professionally train 50 million individuals for new high quality jobs in the next ten years. In addition, another 100,000 -200,000 trained and accredited faculty are needed to upgrade existing VTE capacity. This will require 100 to 250 VTE faculty training institutes. This core faculty will need to be supplemented with 100,000 -200,000 adjunct faculty, most of whom would be senior employees of local employers and deeply experienced in the VTE topics being taught. 7. VTE Policy Governance: In order to ensure effective policy governance, GOI should appoint a separate UGC-equivalent governance body under MSDE / MHRD for vocational training and education, so as to bring curriculum, faculty accreditation, student and faculty testing under one ambit for all VTE-related schools, colleges, ITIs, VTPs, Kaushal Kendra, B.Voc. VTE research, Teacher Training and Accreditation, curriculum design, e-content creation, impact measurement, programmatic support and full industry participation. 8. Create a National VTE Outcomes & Impact Database: Success and continuous improvement requires measurement of outcomes, not just inputs. GOI should establish a Center of Excellence in VTE to document and disseminate best practices across the entire VTE ecosystem, to measure training and job outcomes across all VTE delivery channels, provide an information platform for all critical VTE-related information, including local and national market needs, placement rates, average salaries by skill, occupation, region, type of employer etc. VI. Recent Policy Initiatives Two recent policy initiatives of the current government have direct impact on many of the points discussed above. These are: 1. The Skill India mission 2. The Startup India mission We welcome these two timely initiatives. We believe that the underlying principles of these two initiatives are very well aligned with our own thinking and both these initiatives have the potential of being game-changers in their respective areas. But more needs to be done. While the Skill India Initiative and the recent PMO directive to set up 7,000 new ITIs are steps in the right direction, ensuring quality of the existing and new ITIs will be a critical challenge. Today industry often does not distinguish between a class X dropout and an ITI graduate when it comes to wages. Vocationalization of school curricula, while included in the mission, will require close monitoring and efforts in delivery. 11Translating India’s Economic Growth to High Value Jobs The Startup India initiative holds within itself the promise of absolutely transforming the start-up ecosystem and success rate. However, from a purely job creation perspective, we find that more jobs are created in SMEs than startups, and that too in the expansion phase of medium size industry. The mission therefore needs to be supplemented with similar enabling policy initiatives in the high-employment sectors to have an appreciable impact on job creation. VII. Closing Thoughts The policy journey for achieving startup creation and success at massive scale will not be easy. Some of the policies and initiatives proposed in this paper are new, while some are refinements of existing policies or ideas. They span multiple ministries and require coordination between the Central, State and local administrations as well as partnership with the private sector and other facilitating stakeholders. These are serious challenges in the current policy process. The key to success here will be policy integration, simplicity, effective execution and continuous improvement based on measuring outcomes. We need to do it, we can do it and we must do it.

[wadhwani-foundation-blog]

A White paper by Dr. Romesh Wadhwani and Wadhwani Foundation

I. Startups and SMEs as a solution to India’s Economic and Job   Growth Challenges As India replaces China to become the fastest growing emerging economy, it is important to understand the nature of India’s economic and job growth over the last several years and its implications for the longer term. Growth hiccups notwithstanding, India’s cumulative GDP growth in the 2005- 2012 period was a remarkable 54%. During that same period India’s net new cumulative job growth was only 3% or 15 million net new jobs, a little over 2.0 million per year¹. This is an extraordinary disconnect, especially since the workforce was growing by 6-7 million job-seekers annually. Given India’s current trajectory, job growth is the primary challenge for India’s policymakers, a challenge that will grow dramatically in the next ten years. Here’s why. At an annual growth rate of 7%-8%, the GDP will roughly double in the next 10 years². Meanwhile the number of workers entering the workforce will increase to 8 million each year i.e. 80 million net new job-seekers through 2025. At the current job creation rate of 2-3 million jobs/year, a maximum of 30 million new jobs will get created over the period. This implies a job creation gap of about 50 million jobs in the next 10 years, with at least 30-35 million of these in manufacturing and services.With the rising expectations of the workforce and India’s need for more skilled labor, most of these jobs will have to be Quality Jobs i.e. paying at least Rs. 15,000 per month3. Notwithstanding India’s rejuvenated growth impetus, the economic situation, therefore, is far from comforting. The current economic and job growth trajectories are not going to fulfill the aspirations and even bare requirements of India’s growing and youthful population. Existing business entities and traditional sources of employment are proving to be woefully short in providing the thrust needed, particularly in today’s competitive, globalized and fast-changing environment. Globally, it is a well-established fact that 60-70% of all new jobs in every economy are created through small businesses, whereas large businesses tend to optimize their growth through productivity increases. The need of the hour is to build a vibrant and innovative ecosystem in India that is attuned to the ever-changing demands of the current national and world economies and the new processes of satisfying them. A mushrooming of startups and accelerated growth of established SMEs all over the country is, virtually, the only way out. II. Major Gaps in India’s Startups and SME Policies If India’s much discussed rank of 130 out of 189 in the World Bank’s Ease of Doing Business is unacceptable, it is worth pointing out that India ranks far worse in the Ease of Starting a New Business (one of the components of the Ease of Doing Business) – 155 out of 189. A few of the reasons for the current dismal state of affairs are discussed below: 1. India’s economic growth planning and policies are largely devoid of any emphasis on job growth planning and policies: Much of India’s current woes regarding economic and job growth stem from a virtually complete lack of entrepreneur-friendly approach to economic planning over the decades. Entrepreneurs were all but harassed during the socialist era, but even after liberalization, successive regimes have done little to explicitly champion entrepreneurship and create an environment conducive for new businesses or accelerating growth of existing small 1  Mehrotra, Santosh, Jajati Parida, Sharmistha Sinha, Ankita Gandhi (2014), Explaining Employment Trends in the Indian Economy: 1993-93 to 2011-12, Economic and Political Weekly, Vol XLIX, No. 32, August 9, 2014. 2  Estimates made for the Wadhwani Foundation by Professors Santosh Mehrotra and Jajati Parida. Available upon request. ³ Just about enough to ensure $2 per head per day for a family of four. 5Translating India’s Economic Growth to High Value Jobs businesses. While “new business starts” is routinely used as an economic indicator for conducting monetary and fiscal policy in many developed countries, in India neither has the concept ever been used in policy making, nor is there an attempt or mechanism to record and measure the new business starts happening in the country. 2. Lack of financial access for startups: Even after more than half a century of economic policy making, startups find it difficult to access institutional funding and hence new business starts of mentionable scale remains restricted to entrepreneurs with access to family funding. The Indian angel funding and venture capital industry remains rudimentary and the multiple government agencies providing subsidized, priority-sector loans to small businesses remain inaccessible to startups owing to severe red-tape and procedural delays. 3. Two decades’ post-liberalization, India is still a maze of red-tape for an entrepreneur: Stemming from a lack of forethought to support the entrepreneur and sensitization to the grass-root challenges of setting up new businesses as well as the inevitable desire for rent-seeking, the process of obtaining the necessary permits for starting a new business remains a landmine for any entrepreneur. Stories of potential entrepreneurs that have given up mid-way through the regulatory process are fairly common. 4. Failure to remove multiple obstacles to entrepreneurship & growth of SMEs: Much needs to be done to improve the ease of doing business in India, especially for SMEs. It takes too long to start a business, operate a business or close a business, due to multiple formalities involved. Archaic size restrictions continue to pigeon-hole enterprises into unviable, ineffective and inflexible categories. A well-crafted Startup Policy, free from errors of the past, should be able to effectively unlock the situation. 5. Failure to provide adequate infrastructure in Modern Industry Clusters: In the 1,100 modern clusters lies the best opportunities for business and job growth. There is an urgent need to provide a serious policy incentive for the development of these modern industry clusters, which requires a focus on brown field (not just green field) sites. Therefore, a higher allocation needs to be made than what is being presently allocated under the cluster development program in India, as SIDBI has limited resources/finance for its industry clusters. It is the brownfield sites of the 1100 modern clusters that must grow for the manufacturing output/ employment to expand in India, which requires public investment in infrastructure – both physical and social – that must focus on the middle-tier cities instead of mega and large cities. At this stage, it is critical to have synergy in planning for the cluster program and the AMRUT program, so that the objective of job creation is one of the outcome objectives. III. Proposed Startup Vision & Strategies The policy vision should: • Make India a world leader in job creation, especially for quality jobs by empowering startups and entrepreneurs, and enabling small and medium businesses (SMEs) to grow without shackles • Make India a nation of entrepreneurs where every potential entrepreneur feels it safe to attempt a startup, is supported by a regulatory and financing ecosystem designed with the entrepreneur at the center, and make a quick and honorable exit if the venture fails 6 Deriving from the above policy vision, it is imperative that the Government of India adopts a stated policy goal to create 50 million additional quality non-agricultural jobs above the current baseline trajectory over the next 10 years. Strategy 1: Jobs Advisor at the PMO: One of the best ways to achieve this would be to create an office of a Startup/SME focused Jobs Advisor to the PM, based in the PMO. The Startup/SME Advisor would be responsible for ensuring alignment between economic and job growth policies to achieve the overall startup creation and SME acceleration objectives, recommending policies for facilitating startup growth, adopting best practices from States with successful job growth programs, reviewing the performance of startups and SMEs in the subject, and monitoring the outcomes actually being achieved overall and in each ministry and State. Strategy 2: Enable Startup India through an integrated approach: From the startup through growth phase, there should be an integrated set of policies and investments for specially empowering startup and SME entrepreneurs. Startups need help from multiple ministries across all three levels of federal administration, most importantly at the State and local level. The celebrated “single-window” approach has so far worked better in some States than others. Coordination across silos and ministries have always remained a challenge for Indian policy implementation. The need here will be to design policy with the entrepreneur at the center, not the ministries in question. Strategy 3: Help Startups and SMEs become more innovative: As the marketplace is becoming increasingly globalized and competitive with fast-changing technology quickening obsolescence of products and processes, only the most and continually innovative enterprises survive and succeed. Most developed nations have specific competitive programs to fund and reward research and innovation among startups. Indian startups deserve the same support to operate in a level playing field. The Government – both at the Center and in the States – acts as an engine of growth in most sectors, which for a country like India, have the size of many national markets, for instance, Defence and Railways ecosystems. These and other such large footprint ministries ought to run competitive programs rewarding innovation in startups and SMEs. Innovation in startups and SMEs would certainly take India a long way in realizing major initiatives such as Make in India, Smart Cities and Digital India. Strategy 4: Create an Integrated Vocational Training & Education (VTE) Ecosystem along with an entrepreneurship education emphasis. One of the biggest challenges that entrepreneurs across the country face today – at the same level as financing and regulatory red-tape – is access to skilled manpower. While startups may not be the only businesses feeling this pinch, they are more likely to lose out because of this. Skilling of India’s labor force, therefore, is a key pro-entrepreneur step that the government needs to urgently take by creating high quality education and skilling ecosystems across high schools, ITIs, community colleges, polytechnics, degree colleges, vocational training providers (VTPs) and employers. Strategy 5: Leverage technology to accelerate both job creation and skills initiatives at massive scale, by adopting innovative ways of doing things (like teaching, training etc.) and benefitting the overall community at large. IV. Policy Framework for Creating Startups and Accelerating Growth  of SMEs India needs a million growth-focused startups and several million of its small businesses to become dynamic growth businesses, each ideally creating at least between 10 and 50 jobs. The Government 7Translating India’s Economic Growth to High Value Jobs of India through a clearly enunciated Startup policy should play the role of an enabler and facilitator with an integrated policy framework that encourages and enables business growth at all stages of the business lifecycle, from startup to small and medium businesses, rather than penalizing businesses with ever stricter rules and regulations as they grow. This framework should include the following policies: 1. Make Entrepreneurship Education Ubiquitous: India needs a world class entrepreneurship education curriculum, which should ideally be a blend of both online and experiential learning. Educating and equipping of potential and early stage entrepreneurs through entrepreneurship education would certainly help India in the long run. We applaud the recent policy announcement by MSDE to integrate entrepreneurship education in the mainstream curriculum for 3000 colleges across India. This would create a pool of 250,000 to 500,000 prospective entrepreneurs each year, over 2.5 million over 10 years. If only 10% start their own companies and hire 5-10 formal workers each, this would add more than 1.25 million high quality jobs, plus the indirect job growth in their suppliers. It would be really beneficial to make entrepreneurship education as a part of the core curriculum at all engineering and business colleges. On the other hand, internship opportunities with startups would certainly help students acquire skills & necessary experience, as to what it takes to start an enterprise. From the larger perspective, an Introduction of Massively Open Online Courses (MOOCs) on entrepreneurship would certainly help businesses & students in widening their knowledge base and grow. 2. Make it Easy for Startups. To actively contribute towards the Indian growth trajectory, we need millions of startups, mostly outside the tech sector. Presently, the system is very complicated. So, there is an immediate need to introduce a whole package of policies that makes it easy to do business like an online single-window 24-hour registration and clearance, simplified online reporting to local, State and Central authorities, IP protection, flexibility in hiring and firing, relief from labor laws regardless of scale, bankruptcy etc. The Government of India is already taking necessary steps to improve the ease of doing business, which we hope would certainly give encouraging results in the long run. 3. Reward Small and Medium Business Growth: SMEs are the backbone of any nation & their development is integral to achieve long-run and sustainable economic growth. As the labour-capital ratio is much higher in MSME sector (contributing significantly to manufacturing output, exports and employment), focusing on the growth of MSMEs will definitely provide a stimulus to the manufacturing sector employment. Like China, adopting the cluster approach, availability of bank credit would enhance competitiveness of the MSME sector in India. In India, 70% of the job growth in the 7-year period through 2012 came from businesses with more than 6 employees i.e. from the Small & Medium Businesses (SMB) sector, not from micro-enterprises. In all other developing economies SMBs are the primary engines of growth. Yet our policies favor micro-enterprises, many of which are sub-scale and low productivity, and penalize SMBs. There is a need to eliminate the archaic boundaries which defines the India’s MSME sector classifies businesses as Micro if their capital investment is < 25 lakhs; Small if < 1 crore, Medium if < 10 crores, and then provides direct and indirect incentives to just micro and certain small businesses. Thus, incentives should be provided for achieving growth and not based on size. If a capital limit is somehow necessary we should make it 100 crores, which is only $15 million, a small number in today’s capital intensive economy. We should try to eliminate the differences between manufacturing and services businesses, all quality jobs should be welcomed. In addition, there are certain products that are reserved for manufacturing only by the micro sector, even if subscale and unproductive. Let’s provide tax credits based on the number of new quality jobs created. 8 4. Increase Funding to the Small & Medium Business Clusters (as defined by MSME) with the Highest Growth Potential: The existing Cluster Development Program (CDP) aims at addressing the needs of industries, through well-defined clusters and geographical areas to enable them to achieve economies of scale in terms of deployment of resources as well as focusing on the specific needs of similar industries. An effective Cluster Development Program, with efficient funding, skill development & technological support will definitely enhance labour productivity, which in turn would facilitate international trade. Cluster development is a very good initiative but all the clusters are not created equal. Thus, The segmentation of 1,100 Small & Medium Business (SMB) clusters based on their products & services, economic and jobs growth potential, and provision of 10- 20 times more funding to clusters with the highest growth potential would definitely boost the quality Jobs. 5. Establish a Startup & SMB Growth Corporation: A Public-Private Partnership (PPP) model based corporation can be formed to help startups and Small and Medium Businesses (SMBs) grow, especially those outside the technology sector. This corporation should expand, upgrade and manage the Entrepreneur Incubator Program, help in making each incubator a local center for entrepreneur and small business development. It can also help in developing Small and Medium Enterprises (SMEs) growth programs, including training programs and can provide a platform to mentors, angel investors, infrastructure, low cost facilities and other resources. 6. Startup & Small Business Innovation (SSBI) Initiative. Government of India should accelerate growth of startups and Small & Medium Enterprises (SMEs) by providing annual innovation grants to develop IP-based products, which have high-growth and job creation potential. These projects should be selected on an open, competitive basis. This would help in accelerating Startup India and growth in SMEs. Currently, this kind of program is being implemented on a limited scale, only in the Department of Biotechnology, Government of India. Various GOI ministries, including Defence, Railways, Transportation, Energy, and Science & Technology should each fund 1,000 innovation grants annually for the next 5 years, focused on accelerating innovation in areas of importance to their ministries and that serve the needs of their sectors. This initiative drives innovation for several of PM Modi’s initiatives, including Make in India, Startup India, Smart Cities and Digital India. 7. Build SME Ecosystems for High Value Manufacturing for Defence, Railways and Digital Infrastructure, in support of Make in India, Smart Cities and Digital India initiatives. Smart cities provide environments to experiment technologies & applications, therefore potential for business creation & entrepreneurship should be stimulated. The manufacturing growth can be further boosted by focusing on SMEs, which have good baseline. Their domain expertise can be accelerated with policies that include long term contracts that are not subject to annual changes and re-negotiations. Access to Intellectual Property from DRDO and defence labs, quick approval of Joint Ventures with global partners (who will transfer Intellectual Property to India), and simplified policies for use of defence procurement offset funds will go a long way in supporting Indian SMEs. 8. Tax Incentives to Angel Investors for Long-term Investments in startups and small businesses can be provided, based on the number of permanent jobs they create-introducing financial incentives for startups, on the lines of a ten years tax holiday, which was originally provided to the software companies in India. A similar fiscal benefits to startups may also prove to be beneficial. It is also recommended to incorporate ‘tax pass through’ for angel and venture capital funds, and incentives for R&D. 9. Provide Low Cost Debt Capital to SMEs: According to the Global Competiveness Report, India performs relatively better in terms of the development of financial markets. The Doing Business Report also finds getting credit relatively easier. In contrast, the existing reports focusing 9Translating India’s Economic Growth to High Value Jobs on MSME/informal sector invariably find finance a major hurdle in their functioning. Thus funding is essentially a problem of the MSME sector. There is a need to further incentivize all the existing commercial and government owned banks to provide low cost debt to businesses that meet certain performance and growth criteria, even if they don’t have hard or tangible assets, by guaranteeing 80-90% of this debt. This is especially necessary in the new world in which IP and intangible assets may far exceed hard assets. V. Policy Framework for Skilling Workers for Quality Jobs Created   within Startups and SMEs Skill Development is a key requirement for startups to succeed and a challenge that requires a set of wide-ranging and consistent policy measures rather than a single “silver bullet” as a solution. Many economists estimate India’s skilling needs in terms of hundreds of millions of workers. Yet the reality is that India created only 15 million net new jobs in a recent 7-year period, about 2.5 million/year. So it is not the large numbers that are critical. It is about making sure that we are providing the right kind of skills to add value to employers, particularly startups that innovate and experiment with new technology and processes. Over the next 10 years India needs to skill about 50 million for quality jobs, with 70-75% of these in Manufacturing and Services, above the existing baseline. Policy ideas to achieve this objective include: 1. Vocationalization of High Schools: There are important lessons to be learnt from China’s successful Technical and Vocational Education and Training (TVET) initiative and its continuous improvement to respond to changing market-driven, localized services and manufacturing industry needs. 2. Reinvention of ITIs: India needs to massively transform the ITIs to make them more market responsive to local needs, upgrade the curriculum, provide competency-based skills including soft-skills necessary for successful placement, leverage technology to improve curriculum delivery and increase scale, more than double their training capacity, and increase sustainable placement rates for quality jobs to 75-80%. 3. Worker and Employer Centric Engagement with VTPs: GOI should provide incentives to students, employers and VTPs based on the actual long-term placement of VTP graduates in quality jobs. 4. Massive Apprenticeships Initiative: Apprenticeship opportunities in India are presently insignificant when compared to the size of the economy, unlike China which has a large and effective apprenticeships program. One policy solution to this could be to pay students a stipend for up to 12 months of apprenticeship training, to make the apprentices available to employers at no cost, and to provide a tax credit or CSR credit for each such apprentice who is formally certified by the employer as being employment-ready. Employers would not be asked to make commitments to hire their apprentices. 5. New Approach to Vocational Training & Education (VTE) Curriculum: The National Council for Vocational Training should strengthen the VTE curriculum by adopting the following measures: • On the lines of China, create a standardized core curriculum and pedagogy, for 200-250 high-demand job roles, but allow flexibility for local market-responsive, customization of 33% of the curriculum based on the inputs of local Skills Advisory Boards that meet certain governance requirements 10 • Provide general skills (work-skills, soft-skills, English, IT and basic entrepreneurial skills) and job-oriented competency skills • Enable national mobile platforms for open delivery of interactive video curriculums at all high schools, colleges, ITIs, VTE institutes and employers • Sector Skill Councils (SSCs) could define national-level curriculum requirements and standardized tests 6. Professionalization & Expansion of VTE Faculty: The proposed policies will require at least 100,000-200,000 faculty to professionally train 50 million individuals for new high quality jobs in the next ten years. In addition, another 100,000 -200,000 trained and accredited faculty are needed to upgrade existing VTE capacity. This will require 100 to 250 VTE faculty training institutes. This core faculty will need to be supplemented with 100,000 -200,000 adjunct faculty, most of whom would be senior employees of local employers and deeply experienced in the VTE topics being taught. 7. VTE Policy Governance: In order to ensure effective policy governance, GOI should appoint a separate UGC-equivalent governance body under MSDE / MHRD for vocational training and education, so as to bring curriculum, faculty accreditation, student and faculty testing under one ambit for all VTE-related schools, colleges, ITIs, VTPs, Kaushal Kendra, B.Voc. VTE research, Teacher Training and Accreditation, curriculum design, e-content creation, impact measurement, programmatic support and full industry participation. 8. Create a National VTE Outcomes & Impact Database: Success and continuous improvement requires measurement of outcomes, not just inputs. GOI should establish a Center of Excellence in VTE to document and disseminate best practices across the entire VTE ecosystem, to measure training and job outcomes across all VTE delivery channels, provide an information platform for all critical VTE-related information, including local and national market needs, placement rates, average salaries by skill, occupation, region, type of employer etc. VI. Recent Policy Initiatives Two recent policy initiatives of the current government have direct impact on many of the points discussed above. These are: 1. The Skill India mission 2. The Startup India mission We welcome these two timely initiatives. We believe that the underlying principles of these two initiatives are very well aligned with our own thinking and both these initiatives have the potential of being game-changers in their respective areas. But more needs to be done. While the Skill India Initiative and the recent PMO directive to set up 7,000 new ITIs are steps in the right direction, ensuring quality of the existing and new ITIs will be a critical challenge. Today industry often does not distinguish between a class X dropout and an ITI graduate when it comes to wages. Vocationalization of school curricula, while included in the mission, will require close monitoring and efforts in delivery. 11Translating India’s Economic Growth to High Value Jobs The Startup India initiative holds within itself the promise of absolutely transforming the start-up ecosystem and success rate. However, from a purely job creation perspective, we find that more jobs are created in SMEs than startups, and that too in the expansion phase of medium size industry. The mission therefore needs to be supplemented with similar enabling policy initiatives in the high-employment sectors to have an appreciable impact on job creation. VII. Closing Thoughts The policy journey for achieving startup creation and success at massive scale will not be easy. Some of the policies and initiatives proposed in this paper are new, while some are refinements of existing policies or ideas. They span multiple ministries and require coordination between the Central, State and local administrations as well as partnership with the private sector and other facilitating stakeholders. These are serious challenges in the current policy process. The key to success here will be policy integration, simplicity, effective execution and continuous improvement based on measuring outcomes. We need to do it, we can do it and we must do it.

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