Streamlining the Patent Process in Startups: A Pressing Priority

India has leveraged the startup ecosystem by offering a conducive environment to make them powerhouses of innovation. According to the Economic Survey 2021-22, the number of new recognised start-ups increased to over 14,000 in 2021-22 up from 733 in 2016-17. The survey further emphasized that intellectual property (IP), notably patents, was the key to a robust knowledge-based economy.

Similar to any other business undertaking, startups interact with various stakeholders, including employees, who regularly exchange ideas and develop key IP. Hence, business operations that significantly rely on IP exchange need an optimized and watertight structure of intellectual property rights protection, especially when they aspire to cater to international markets. In line with the growing importance of startups and IP, the government of India has launched the “Start-up India, Stand-up India Scheme” to support early-stage startups.

 

Recognition as a ‘Startup’

 

Entities to qualify as a ‘startup’ need to be recognized by the competent authority under the START-UP INDIA initiative and fulfil all the criteria for the same. For the sake of more clarity, the Department of Promotion of Industry and Internal Trade issued a notification in 2019[1] according to which an entity incorporated as a private limited company, a partnership firm, or a limited liability partnership in India can be considered a startup for up to ten years if its turnover since its incorporation has not exceeded one hundred crore rupees.

Further, such an entity should be actively working towards “innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential for employment generation or wealth creation.” Notably, an entity formed due to restructuring or splitting up an existing business cannot be deemed a startup.

A foreign entity can also be considered a start-up if it fulfils the criteria of turnover and specified period of incorporation/registration and submits a valid declaration to substantiate the requisites as per the provisions of the START-UP INDIA initiative.

 

Minding the IP of Business

 

An important criterion for getting startup registration is that the entity should be working to innovate, develop or improve products, processes or services. To protect technical innovation, patent registration is crucial, especially for startups, where the start-up’s success is tied to the novelty of their product and process. The DPIIT has recognised a total of 69,492 startups to date. In addition, startups have filed a total of 6000+ patent applications.7

A product or process with patent protection helps create a solid business model, enabling them to earn a good market reputation, a return on investment (ROI), and access new opportunities for expansion and generate funds.

To this effect, businesses can undertake the following best practices to optimise their inventions and ideas:

  1. Build an IP culture that drives innovation in the organization. For instance, implementing rewarding ownership strategies, implementing IP incentive schemes, encouraging teams to research and identify areas where valuable IP protection can be secured, etc.
  2. Foster IP awareness within the organization.
  3. Build an IP protection system that is driven by strong policy and practice. Organisations should focus on structuring agile protection strategies that prevent knowledge leaks. Undertaking regular IP audits and compressive risk analysis should be the focus.
  4. Once the IP is protected, its commercialization should be the focus. Additionally, organisations should be aware of their IP infringement and take proactive measures to enforce their rights effectively.

 

Gaining Traction with DPIIT Recognition

 

Benefits from Intellectual Property Rights (IPR)

 

A startup recognised by the DPIIT is eligible for tax breaks on:

  • Prior Turnover
  • Prior Experience
  • Earnest Money Deposit

DPIIT recognised startups can now get listed as sellers on the government e-Marketplace.

Self-certification Under Labour & Environment Laws

  • Startups are allowed to self-certify their compliance with nine labour and three environmental laws for 3 to 5 years from the date of incorporation.
  • In respect of three environmental laws, units operating under 36 white category industries (as published on the website of the Central Pollution Control Board) do not require clearance under three Environment-related Acts for three years. Hence, startups can focus on their core business and keep compliance costs low.

Fund of Funds for Startups (FFS)

  • The government has set up a corpus fund of INR 10,000 Cr. INR 5409.45 cr has been committed to 71 VC firms. In total, INR 5811.29 Cr was invested in 443 startups. 

Faster Exit for Startups

  • As per the Govt Notification, startups are now notified as “fast track firms”, enabling them to wind up the operations of their startups in 90 days.

Seed Fund Scheme

  • Grant up to INR 20 lakh to validate proof of concept, prototype development, or product trials.
  • Grant up to INR 50 lakh for market entry, commercialisation, or scaling up.

Tax Relief

  • Recognised startups are exempted from Income Tax for 3 consecutive years out of the 10 years since incorporation.
  • Startups incorporated on or after April 1 2016, but before April 1 2022, can apply for an income tax exemption under Section 80-IAC of the Income Tax Act.

 

Patent Incentives for Start-ups in India

 

Patent Facilitators

 

The government has identified over 226 local patent facilitators[2] to extend their expertise to DPIIT-recognised startups. The government would reimburse these facilitators for their services.

Patent facilitators are responsible for:

  • Providing general advisory services on a pro bono basis
  • Providing pro bono assistance with IPR filings
  • Assisting with the filing and disposal of IP applications at the National IP offices under CGPDTM
  • Drafting specifications (provisional and final)
  • Preparing and filing responses to examination reports and other queries, notices or letters by the IP offices
  • Appearing at hearings as may be scheduled
  • Contesting opposition, if any, by other parties
  • Final disposal of the IP application. 

 

Fee

 

The government has provided 80% rebate on the patent filing fee to make the process more attractive.

 

Expedited patent registration process:

 

Expedited Examination can be made by filing Form 18A accompanied by Form 9 (Publication). A request filed under a Regular Examination request via Form 18 (rule 24B) can be converted to an Expedited Examination by submitting Form 18A and Form 9.

The IPO has significantly reduced the duration of the patent timeline.

  • Publication: Within 1 month from the date of filing of Form 9.
  • Issuance of the First Examination Report (FER) to the Applicant: Within one month, but no more than two months, from the date the patent application is assigned to the Examiner; and within 45 days from the date, the Examiner submits the FER to the Patent Controller.
  • Response to the First Examination Report by Applicant: Within 6 months of receiving the FER from the IPO.
  • Disposal of the First Examination Report (FER) by the Controller: Within 3 months from the receipt of the last reply from the Applicant.

 

Conclusion

 

The objective of innovation and promoting patent filing by startups is simple, i.e., a patent is directly related to innovation and contributes to significant economic growth for a startup. The upsurge of startups has also led to massive employment generation, with over 5,60,000 jobs in 2016-2020. Hence, it is imperative to have an enabling ecosystem where entrepreneurs are encouraged to file more IPs seamlessly. While launching incentivized schemes and actively working towards reducing the compliance burden for new businesses when filing IP applications is a step in the right direction, there is still a pressing need to address the issues of procedural delays and complex patent processes to tap into the intellectual prowess of the country.

References: 

[1] https://dpiit.gov.in/sites/default/files/notification_Definition_StartupIndia_06July2021.pdf

[2] https://www.startupindia.gov.in/content/sih/en/facilitator.html 

 

Image Credits: Photo by Med Badr Chemmaoui on Unsplash

The objective of innovation and promoting patent filing by startups is simple, i.e., a patent is directly related to innovation and contributes to significant economic growth for a startup. The upsurge of startups has also led to massive employment generation, with over 5,60,000 jobs in 2016-2020. Hence, it is imperative to have an enabling ecosystem where entrepreneurs are encouraged to file more IPs seamlessly.

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India is Innovating Faster than Before - and That’s Good News

India needs to radically rethink and modernize delivery of various public services to improve reach, scale, and quality. I believe this process, which began a decade ago, has gathered momentum in recent days. This, I believe, is the direct result of our innovation ecosystem maturing and scaling rapidly. Two news reports I recently read have reinforced my belief that not only has the pace of technology-led innovation has picked up across sectors in India, it has also become more broad-based.

The first report was on how Narayana Healthcare (founded by renowned cardiac surgeon Dr. Devi Shetty) has fitted 700 beds at its cardiac hospital in Bangalore with sensors. When connected to patients using these beds, these sensors can monitor vital parameters. Data such as each patient’s temperature, blood pressure, SPO2/oxygen levels, pulse rate, ECG, breathing etc. are regularly measured and transmitted to dedicated computers and smartphones. Nurses and doctors can monitor each patient’s health and take quick action as and when necessary.

The idea is not new, as many factories in India (and elsewhere) that have embraced “Industry 4.0” have already gone down a similar path. Real-time data from an array of sensors fitted to various machines on shop floors are securely streamed to devices so that supervisors and managers are instantly alerted to breakdowns, abnormal variations in energy consumption or sub-optimal performance in terms of productivity or quality.

What is perhaps new- or at least becoming more visible across India- is the ability to cross-pollinate ideas and best practices across industries and evolve innovative solutions that are powered by technology so that reliability is improved. Dr. Shetty has often spoken about the impending shortage of healthcare professionals in India, and the need to train youth for jobs as medical technicians, so that the load on doctors is reduced and more patients can get their attention for treatment instead of performing tasks such as conducting tests etc. Dr. Shetty also pointed out that with this new system, nurses will no longer need to awaken sleeping patients just to measure and record vital signs. When innovations like this are replicated across hospitals in India, the quality of care will improve- even in government hospitals. The initial investment too will come down as more companies offer such automated, real-time health monitoring solutions.

A second report that provides evidence in support of my view was on drone startups. Thanks to an expanding vista of applications (e-commerce delivery, telecom, energy, disaster management, defence etc.) and various government policies (PLI, Drone Shakti etc.), this sector is attracting significant investments. Reports suggest that the twelve months ending 30 June 2022 saw twice the number of VC deals related to drones as in the preceding twelve-month period. At an estimated US$87 Million, the quantum of investment too in the 1 July 2021- 30 June 2022 period was more than 3.6X the US$24 Million invested in the preceding year. Trends indicate that India will soon be home to a rapidly-growing vibrant drone industry.

As our world grapples with multiple threats including climate change, a reduced emphasis on traditional models of globalization and new geopolitical fault lines, new technologies in critical areas emerging rapidly. These technologies will soon alter societies and security paradigms. In such a milieu, no country can afford to remain dependent on foreign technology. India must ensure that we build a large, robust and sustainable base of domestic capabilities in areas such as AI/ML, robotics, drones, healthcare, high-tech manufacturing etc.

To keep up with the changes (including in laws, business models/strategies, hybrid working arrangements, war for talent etc.), professional services firms too need to evolve to up their game. Siloed capabilities and solution approaches that worked even five years ago are no longer enough- but that’s perhaps a topic for a future write-up.

India must ensure that we build a large, robust and sustainable base of domestic capabilities in areas such as AI/ML, robotics, drones, healthcare, high-tech manufacturing etc.

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Layoffs, Contracts and Lawyers: Connecting the Dots

In recent weeks, there has been a lot of news about startups laying off employees. Edtech companies like UnAcademy and Vedantu, used car sales companies like Cars 24 and E-commerce players like Meesho have all reportedly laid off people. As many as 8000 people have been laid off in the first four months of 2022. The irony is that this is happening even as the startup ecosystem raised more than US$10 Billion in capital during the Jan-March 2022 quarter. IVCA-EY data indicates that in April 2022, the capital raised was around US$1.6 Billion- less than half the sum in the corresponding period in 2021. Last year saw a record number of Indian unicorns emerge.

It is not that there is a sudden scarcity of risk capital. What is happening is that VC funds and other investors are taking a long hard look at business models and valuations. Cash burn rates and unit economics, which were always important elements of valuation, have become front and centre again, after a prolonged period of time that saw some investors take their eyes off the ball as they frenetically looked for ventures to invest in. This long bull run for startups also encouraged many executives to throw their hats into the ring; they relied on their personal expertise and experience to attract investors.

There are also external factors whose unfortunate confluence in the last couple of months has contributed to this situation and exacerbated the stressors. The Ukraine invasion has undoubtedly impacted energy prices; the lockdown of large Chinese cities including Shanghai and Beijing has further disrupted global supply chains that were already affected due to the pandemic. These have thrown unit economics out of gear. Inflation rates around the world have soared- in some countries, the prevailing inflation is at the highest level in over a decade or even longer. In response, central banks around the world have raised interest rates; in India too, the RBI raised interest rates more than anticipated and ahead of when such action was expected. Further increases in interest rates are expected, as central banks seek to suck out the money supply to cool inflation. This means that in the short term, growth expectations will need to be moderated. This affects valuations (something that is also visible in how stock prices of listed companies are fluctuating).

Investors and company managements are therefore looking for ways to cut costs. Rationalizing the workforce is one way to achieve this goal. During a euphoric phase, businesses tend to hire more than they need, often at higher compensation levels than are sustainable. Many companies that have laid off their people continue to advertise extensively on national television. Logically, cutting down on TVCs and using lower-cost digital marketing will be another cost-cutting lever. As the market tightens, business plans will need to be revised. Growth will moderate, and high valuations will get harder to defend. The lack of clarity surrounding when various events will be resolved adds to the uncertainty around when an economic rebound will occur and what the new operating environment will look like. Indeed, Y Combinator, the highly successful Silicon Valley accelerator has advised founders of the companies in its portfolio to “plan for the worst” and focus all efforts in the next month on extending their runway. They are advising ventures to ensure survival even if fresh funds cannot be raised for 24 months.

Sometimes, there are contractual constraints on implementing cost-cutting actions. While some of these clauses may be legitimate and the result of deliberate negotiations between the parties, I have also seen “cut-paste” clauses in contracts; these are taken directly from other contracts downloaded from the internet or obtained in other ways. Many entrepreneurs succumb to taking this shortcut because it saves them the lawyer’s fees for drafting customized contracts. While some money can be saved, doing so creates risk because the business context in which a contract is drafted varies- and blindly lifting clauses can render the entire contract meaningless, hard to implement or leave entities open to expensive litigation.

Founders and leadership teams need to make better-informed decisions around every facet of their business strategy and operations. This includes the kind of capital to be raised, the timing, quantum and terms. Depending on the nature of business, expensive office space may not be needed; the savings on rentals/lease payments can be deployed elsewhere. Hiring frenzies must be avoided just because someone good is available. If the candidate is indeed likely to add value to the venture, maybe the compensation can be structured differently, so that risk of losing a good resource is reduced. Lawyers and Business Advisors who understand business- especially in the world of startups- can guide entrepreneurs so that they don’t pay a high price later, since a stitch in time saves nine!

Image Credits: Photo by aymane jdidi from Pixabay 

Founders and leadership teams need to make better-informed decisions around every facet of their business strategy and operations. This includes the kind of capital to be raised, the timing, quantum and terms. Depending on the nature of business, expensive office space may not be needed; the savings on rentals/lease payments can be deployed elsewhere. Hiring frenzies must be avoided just because someone good is available. If the candidate is indeed likely to add value to the venture, maybe the compensation can be structured differently, so that risk of losing a good resource is reduced. 

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Education in India: Time to Connect the Dots and Look at the Big Picture

In the last few days, I read news reports that are seemingly unrelated on the surface. However, I think there exists a deeper connection for those willing to think outside the box. I thought I would use this article to articulate my thoughts on the connections and their possible implications for India. 

India’s New Education Policy expected to gain traction

The first item was about various initiatives announced by the Union government on the first anniversary of India’s National Education Policy (NEP). While internationalization, multiple entry/exit options, and digital education will be key pillars, one other important component is to enable students to pursue first-year Engineering courses in Indian languages.

In the context of the broad-brush changes envisioned to India’s education system, it is time to rethink the role of the UGC as a body that enables the nation’s higher education system in ways beyond disbursing funds to be recognized universities. There also ought to be more harmony between the various Boards that govern school education. The roles of bodies responsible for governing professional education in India- e.g., AICTE, NMC (which replaced the MCI), ICAI, ICSI, ICWAI, Bar Council of India etc. should also be redefined to ensure that India’s professionals remain in tune with the needs of a fast-changing world.

English will play an important role in our continued growth

The second report that caught my attention was on two main points made by Mr. Narayana Murthy (the Founder of Infosys), in a recent media interaction. He stated that it is high time that English be formally acknowledged and designated as India’s official link language, and greater emphasis is given to its teaching and learning in Indian schools. He said that his opinion is based on his first-hand knowledge of many technically qualified students in Bangalore/Karnataka who lose out in the job market largely because they lack a certain expected level of proficiency in English.

In the same interview, Mr. Murthy went on to say that on a priority basis, India needs overseas universities and vocational educational institutions to set up facilities in India to train students and teachers in key areas like nursing. This too makes sense because our healthcare infrastructure needs massive upgrades- and human resources will be critical.

China’s tightening regulations threaten its US$100 Billion EdTechc industry

The third report was on China’s recent decision to tightly regulate its online tutoring companies. The new rules bar online tutoring ventures from going public or raising foreign capital. There are also restrictions on the number of hours for which tutors can teach during weekends and vacations. In fact, the rules go so far as to make online tutorial businesses “not for profit”.

Different views have been expressed on why Chinese authorities have taken this step. Some see it as a means to reduce the cost of children’s education- and thus encourage couples to have more children. They point to this as a logical enabler of the recent relaxations in China’s two-child policy. Others view it as a step designed to clip the wings of Chinese tech companies that are deeply entrenched in many consumer segments, and have, over the past decade, acquired significant financial muscle.

To put into perspective the size of Chinese EdTech companies, consider this data point: Byju’s, arguably India’s largest EdTech company, was valued at over US$16.5 Billion as of mid-June 2021. Despite this high valuation, Byju’s would have been smaller than the top 5 Chinese EdTech players (on the basis of valuations that existed before the recent draconian rules came into effect).

Implications for India

The majority of China’s EdTech ventures are financed through significant venture capital investments from the west. Analysts expect that China’s sudden actions will, at least in the short run, divert capital to other locations. India could be a potential beneficiary because it already fosters a large EdTech ecosystem.

Given our demographics, we have a significant domestic market for education across all levels- primary, secondary, and college. Since digital education will likely become the norm, this space is ripe for newfangled innovations in the days ahead. If online education can bridge the gaps that employers currently perceive in our fresh graduates, unemployability rates shall notably decline. . This will not only contribute directly to our GDP but also indirectly stimulate innovation and entrepreneurship.

India has a large technical skill base. Some of these resources can easily be harnessed to develop next-gen education solutions using cutting-edge technologies such as AI, ML, Language Processing, Augmented Reality, etc. To begin with, Indian start-ups can build, test, and scale EdTech platforms and solutions for our domestic market. Over time, these can be refined and repurposed for global markets. Similarly, features built for the global market can be adapted to Indian markets, thus creating a virtual cycle. Such a trend will not only proffer legs to implementing India’s NEP but will also enable us as a society to improve access to education to underprivileged sections of the society. This is critical to sustaining our growth on the path of socio-economic development.

By taking the right decisions now, we can attract capital, talent, and world-famous institutional brands to this critical sector. EdTech in India has the potential to become a powerful engine of growth for our services sector. Done right, I have no doubt that in a few years, India can become a “Vishwaguru” not just in the spiritual sense, but also literally.

PS: As with many other sectors in India, the legal framework that governs education too needs to be made more contemporary and relevant, but that’s for another time.

Image Credits: Photo by Nikhita S on Unsplash

By taking the right decisions now, we can attract capital, talent and world-famous institutional brands to this critical sector. EdTech in India has the potential to become a powerful engine of growth for our services sector. Done right, I have no doubt that in a few years, India can become a “Vishwaguru” not just in the spiritual sense, but also literally.

 

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Sports and Business: Long Term Thinking is Vital for Success in Both

India’s sportspersons have returned to India after a fantastic performance at the Tokyo Olympic Games. Neeraj Chopra’s javelin throw gave India its first ever gold medal in athletics (and second in an individual event). Weightlifter Mirabai Chanu and wrestler Ravi Dahiya won us two silver medals, while boxer Lovlina Borgohain, badminton player P V Sindhu, wrestler Bajrang Punia and the men’s hockey team won bronze medals. Our overall tally of 7 medals is the highest at any Olympics. Overall, a very creditable performance the nation should be proud of.

As a proud Indian, I too am hopeful that the exposure and “big stage” experience gained by our sportspersons in Tokyo, combined with better training, practice infrastructure and facilities will help India better its 2021 performance. However, I worry about the flurry of speculative discussions in the media about how many medals India will win at the 2024 Paris Olympic Games.

The media is full of expert analysis and recommendations on what the government and sports federations need to do to ensure a higher medal tally in 2024. Sportsperson I am not; nor am I a seer. Therefore, I do not know what individuals and teams need to sustainably enhance their performance and win medals for India in the future. But I do know that ad hoc actions will not suffice.

A structured, long-term approach is essential for sustaining success in sports and business

I see a clear parallel between the world of sports and the corporate world, with which I am more familiar. No matter how talented and skilled an individual athlete or player is, skills alone are not enough to win him/her a medal. They need the right coaching, top quality training facilities, regular opportunities to compete with the world’s best, the right nutrition, inputs on biomechanics, mental conditioning etc. Having all this also does not guarantee a medal-winning performance, because, on the day, anything can happen.

Similarly, individual brilliance or an innovative new idea or product alone will not guarantee success in business. India needs to strengthen its ecosystem for business, with a particular emphasis on startups and young ventures. Coaching and mentoring to give better shape to business ideas, access to risk capital, support during the early stages of the business, tax breaks, the right kinds of sector-specific laws and regulations that will help businesses become viable sooner are all elements of what our business ecosystem requires.

Just as world-class sports infrastructure cannot come up in every state or city in the next year or two, incubators cannot come up everywhere. Junior talent identification and nurturing programs too can take 8-10 years to produce top-class sportspeople who are ready to compete on the global stage. Even if physical infrastructure comes up, finding equally qualified coaches for all locations will not be easy.

Although we know that Artificial Intelligence, Cybersecurity, Clean Energy, Electric Vehicles etc. are all critical emerging areas, it is naïve to expect that overnight India will become a leader in these sectors. The same is true of our performance in sports as well. Countries prioritize participation in those sporting events that afford them their best chances of winning medals; India is no exception. This same thinking needs to be applied to business as well. The first step is to mindfully identify sectors that are critical to our future- for example, clean energy, healthcare, space, drones, defence equipment (aircraft carriers, submarines, 6th generation fighter aircraft, anti-missile systems), electronic chips etc.

Then, just as countries identify individuals with promise in the “priority sports”, the government of India (and the private sector) must identify/agree on ventures with the potential to become world-class and nurture them. Within the national business ecosystem, smaller regional ecosystems need to be created across the country, based on resource availability and other strategic considerations. Individual states must compete with each other to build such ecosystems and attract the best entrepreneurial talent. Doing all this will definitely give India a stronger and more vibrant domestic industry, besides acting as prime movers for overall socio-economic development, employment generation and GDP growth.

Spotting and nurturing young talent in various sports must be part of our education system

Also, our education system has focused on academics, with sports and other activities labeled as “extra-curricular”. This needs to change in two ways. First, right from the primary school level, children must be encouraged to participate in different sporting activities. Trained teachers and specialist staff must spot talent and at the right ages, enable specialized training. This obviously must be done with the parents’ active cooperation. Second, for super talented children who wish to pursue sports as a possible career option, specialized institutions must be set up (either by state/central governments or in PPP mode). Children in these institutions must be given extra coaching and training, while also being allowed to pursue a basic level of academics that will help them once their sporting careers end. Seasoned athletes must be invited to train at these facilities so that young aspirants can learn and benchmark against the country’s best. The National Education Policy 2020 seeks to make sports and physical fitness more central to school education, but the proof of the pudding lies in the eating. Only time will tell how seriously this is taken in a country that values grades and marks over excellence in a chosen field.

Concerted action is essential not just for a US$5 Trillion economy but also a richer medal haul in the future

Winning in sports is not easy- and neither is succeeding in business. If we are not quick to act, flight of entrepreneurial talent to other countries is a distinct possibility, and in time, our businesses (and athletes) may end up competing with rivals who also had their origins in India- and could perhaps have been part of our sports contingents and GDP. What is worse, we may be ranked as poorly on innovation in critical areas as we have been in world sports.

Image Credits: https://www.pexels.com/photo/city-dawn-dusk-night-236937/

Just as countries identify individuals with promise in the “priority sports”, the government of India (and the private sector) must identify/agree on ventures with the potential to become world-class and nurture them. 

 

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India Needs New Regulations - But Simplification of Compliance is Just as Critical

In earlier posts, I have touched upon the need for Indian laws to be updated to better reflect the current environment and foreseeable changes to it brought about by various forces, primarily technology-led innovation. This is not just because of the need to plug legal loopholes that are exploited to the nation’s detriment but also with the objectives of streamlining compliance and better enforcement.

 

Recently, the union government did exactly this when it announced a new set of rules to govern the operations of drones in India. A new draft of the Drone Rules, 2021, now out for public consultation, will, when approved and notified, replace the UAS Rules, 2021, which were announced in March 2021. The fact that the government has come out with a new set of rules within 4 months of issuing the earlier version is a welcome sign of change, as it signals recognition of a rapidly-changing environment as well as the importance of timely and appropriate responses.

Changes are aimed at simplification and less regulatory control

The new rules are remarkable for other reasons as well. At about 15 pages in length, the new rules are only a tenth of the earlier rules. The changes are not limited to the form; there are substantive changes too. The new rules seek to do away with a large number of approvals (e.g., Unique Authorization Number, Unique Prototype Identification Number etc.).  Licensing for micro drones for non-commercial use has been done away with. Recognizing the immense potential for drones to revolutionize our society and economy, the government proposes to develop “drone corridors” for cargo delivery. Prior authorization of drone-related R&D organizations is being removed. A drone promotion council is to be set up, in order to create a business-friendly regulatory regime that spurs innovation and use of drones. All this augurs well for the development of a robust drone ecosystem in India.

Implementing the “spirit” of underlying regulations is vital

The change to the drone rules is a welcome step- just as the consolidation of 29 of the country’s labour laws into four Codes during 2019 and 2020 was. But rationalization becomes futile if there is no element of reform- e.g., doing away with requirements that have outlived their utility or need significant changes to remain relevant in the current environment? There were many expectations around the Labour Codes, but in the months that followed, it is fair to say that there was also much disillusionment amongst industry stakeholders because sticky issues, such as the distinction between “employees” and “workers”, payment of overtime, role of facilitator-cum-inspector etc., remained.

Simplifying compliance is necessary to improve “ease of doing business” further

The World Bank’s 2020 “ease of doing business” report ranks India 63rd; we were ranked 130 in 2016. The 2020 report considered three areas: business regulatory reforms (starting a business, paying taxes, resolving insolvency etc.); contracting with the government, and employing workers. 

But there are miles to go before we sleep. To ensure that India’s entrepreneurial energies and creative intelligence are directed to areas that will be critical in the years to come- e.g., space, AI, robotics, electric vehicles, clean energy etc. all need new regulations or revamp of existing legislations and rules. But this alone will not suffice. Implementing the spirit, and not just the letter of the law and rules and the simplification of regulatory compliance are important angles that government must pay attention to. These are going to be key determinants in improving our “ease of doing business”.

 

Technology is a necessary enabler but it is not sufficient

All regulatory filings- whether for approvals or compliance- should ideally be enabled in digital format. Digital dashboards in the government and other regulatory bodies should facilitate real-time monitoring. Only exceptions or violations should need further actions. To be sure, the government has initiated some steps in this direction- e,g., “faceless” interactions between business and the Income Tax authorities with the intention to reduce human interventions and thus, the possibility of corruption. But if the underlying income tax portal itself is not working properly, as was widely reported soon after it was launched, the desired outcomes will not be achieved.

Moreover, it is not just about having the right technology platforms in place. It is equally critical to bring about a mindset change in the administrative machinery that helps political leadership formulate policy and thereafter, enable implementation and performance monitoring.

Given India’s large domestic market and attractiveness as a base for exports, we as a nation stand on the threshold of a phase of significant economic growth. Many Indian entrepreneurs are establishing businesses overseas; this means that the benefits of jobs, tax revenues and IPR creation all move to other jurisdictions. The longer anachronistic and irrelevant laws remain on our books, and the harder regulatory compliance remains, the more we stand to lose. In a world where global investment flows, trade and supply chains are facing significant change under the influence of numerous forces, it would truly be unfortunate if India loses out largely because of continued difficulties in regulatory compliance.

Image Credits: Photo by Medienstürmer on Unsplash

The longer anachronistic and irrelevant laws remain on our books, and the harder regulatory compliance remains, the more we stand to lose. In a world where global investment flows, trade and supply chains are facing significant change under the influence of numerous forces, it would truly be unfortunate if India loses out largely because of continued difficulties in regulatory compliance.

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