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iSPIRT Foundation’s Official Response to Union Budget 2019

The budget has some relief for startups, but not an outsized role in the $5 Trillion plan
 
In her first budget presented today by the newly-appointed Finance Minister Nirmala Sitharaman started her speech with strong words stating that “We do not look down on legitimate profit-making. Gone are the days of policy paralysis and license-quota-control regime”. Given the resounding mandate of the people, this government has the political capital to execute a bold budget and this is what the country was expecting. While the vision is bold, the recommendations made by the government were a mixed bag – some solid announcements, but also notable for its omissions.

Startups may, at last, see the end of the dreaded “Angel Tax” that has plagued them since 2012. The creation of an e-verification process and “special administrators” whose permission would be required before an Assessing Officer can begin inquiries against start-ups who have already received orders should extend relief to those who were excluded from the February 2019 circular by DPIIT. This can also solve for section 68 – wrt unexplained cash credits – which was the more onerous section by ensuring verification of investors. Extending the exemption of section 56(2)(viib) to Cat II AIFs also brings parity and greater participation between AIFs. The tax deduction for investments into startups saw relaxations in the holding period (5 to 3 years), reduction in the minimum threshold (50% to 25%) and extending the time period.

In this budget, the government recommitted to its ideal of a less-cash economy. By allowing digital payments to the government, they are essentially legitimizing the use of digital payment methods. Further, by disincentivizing cash withdrawals by applying TDS and mandating digital payment acceptance without charges for firms over turnover Rs 50 Crores, they will further “nudge” users into preferring paying digitally. The approach just provides for a reduction in cost and discourage cash expense. This is hardly a definite fiscal measure for incentivizing digital payment. Most importantly, the government is eating its own dogfood, and starting to make digital payments through a dedicated payments platform to its own MSME suppliers and contractors, not only boosting digital payments but providing a critical lifeline to MSMEs by reducing their working capital requirements. In fact, the government has announced a significant boost to improve the availability of credit to the economy.  This includes providing Rs 70,000 Crore to the banking system, as well as a partial credit guarantee for the purchase of Rs 1 Lakh crore of pooled assets from the NBFC system. These measures should improve the availability of credit to the private sector, and boost growth!  The govt has also announced an amendment to enable all NBFCs to lend against invoices through TReDs. These are steps in the right direction and will free up much-needed working capital for the industrial sector.

It is encouraging to see the government adopt technology to improve convenience and simplification for tax-payers. Currently, there are nearly 40 crore citizens in India with a PAN in contrast to 120 crore Indians with Aadhaar. “Interchangeability of PAN and Aadhaar” was announced by Nirmala Sitaraman which has the potential to increase the tax filing base to all Aadhar holders. The details about implementation are specified as follows. Income Tax Department shall allot PAN to every person who will be filing tax with Aadhaar and currently do not have a PAN. The demographic verification will be carried out using data from the Unique Identification Authority of India (UIDAI). Additionally, citizens who have both PAN and Aadhaar can choose to use either of the options to file their returns. While the move of interoperability clearly seems to increase ease of filing taxes, whether it would also increase the number of tax-payers in informal sectors is still a question that needs examination. Further, understanding the implications of increased data linkage includes the discussion of data security.

What was missing was an indication of “Startup India 2.0” – the new phase of Startup India. The Rs 20,000 Cr Startup Seed Fund wasn’t announced, nor were fresh incentives for investments into VC Funds or startups, rationalisation of ESOP taxation, amongst others. Lowering the LTCG ( Long term capital gain) rate on startups shares, which was alluded to in the Economic Survey, also doesn’t find mention in the Budget. Additionally, there have been no measures to help our startups list in Indian exchanges. Overall, this budget has also not delivered on promoting Rupee Capital Formation which would help local startups wean off volatile foreign capital.

Despite the Economic Survey’s focus on Data as a public good, no significant announcement was made to leverage the Data assets of the country. In the speech about soft power, while Yoga and Artisans rightfully got their place, new-age digital platforms like Aadhaar, BHIM-UPI and India Stack, which are truly world-class, did not see a mention. Recognizing these Digital Public Goods as elements of soft power that can be exported to other countries would also give a massive boost to India’s start-ups in markets abroad.

Reach out to Sanjay Jain ([email protected] ) in case you would like to know more details.

Special thanks to our volunteers Saranya Gopinath, Rakshitha Ram, Siddarth Pai, Tanuj Bhojwani, Sudhir Singh, Sanjay Jain, Nakul Saxena, Sharad Sharma, Karthik KS.
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Data Empowerment and Protection Architecture Explained – Video

More commonly known as the ‘Consent Layer of the India Stack’, Data Empowerment and Protection Architecture (DEPA) is a new approach, a paradigm shift in personal data management and processing that transforms the currently prevalent organization-centric system to a human-centric system. By giving people the power to decide how their data can be used, DEPA enables the collection and use of personal data in ways that empower people to access better financial, healthcare, and other socio-economically important services in a safe, secure, and privacy-preserving manner.

It gives every Indian control over their data, democratizes access and enables the portability of trusted data between service providers. This architecture will help Indians in accessing better financial services, healthcare services, and other socio-economically important services.The rollout of DEPA for financial data and telecom data is already taking place through Account Aggregators that are licensed by RBI. It covers all asset data, liabilities data, and telecom data.

We, at iSPIRT, organised a learning session on the 18th of May, to give relevant and interested stakeholders a detailed primer on DEPA. We had 60-odd very animated and engaging people in the audience. The purpose of the session was to understand the technological, institutional, market and regulatory architecture of DEPA, it impacts on existing data consuming businesses and how people could contribute to this new data sharing infrastructure that’s being built in India.

The session was anchored by Siddarth Shetty, Data Empowerment And Protection Architecture Lead & Fellow, iSPIRT Foundation (Email – sid@ispirt.in). Please feel free to reach out to him for any queries regarding DEPA.

For other queries, please write to [email protected].

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#5 What is the Federated PHR Component of the Health Stack?

PHR – Personal Health Record – is a mechanism to access a longitudinal view of a patient’s health history and be able to use it for different purposes. It is a component of the health stack:


It relies on two building blocks – (a) registries, to know the source of the data; and (b) health identifier, to know whom the data belongs to. Separating out the building blocks with each serving singular functions helps design a more scalable and sustainable system. We follow certain principles for both of these building blocks:

1. Registries are master databases with information about different entities in the healthcare ecosystem, for example, of hospitals, doctors, care beneficiaries, etc. There should be checks and balances built to ensure correctness of data (such as digital signatures, audit trails, etc.), and this information should be made accessible for different use cases (through open APIs, and consent). Opening access to this information will have a positive effect of increased demand, thus improving quality and leading to convergence towards singular sources.

2. Health identifier is a mechanism to integrate a patient’s health records. This identifier should incorporate the following features:

  • The identifier need not be unique. This means that a patient should have the ability to create multiple health identifiers for different health records – think of different digital folders for mental health cases and cancer cases (a common practice in the physical world).
  • The power to unify health records should lie with the patient. In the physical world, this would translate to the patient having the right to either keep two folders or merge them into one. The same should be allowed digitally.
  • Patients should be allowed to use any identifier to verify themselves. However, since we are creating an electronic system of health records, it is important that these be digitally verifiable – such as mobile number, email ID or Aadhaar.

3. Electronic consent, as specified by MeitY, is a mechanism to give consent electronically in a manner that follows the ORGANS Principles – Open, Revocable, Granular, Auditable, Notifiable, Secure.

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With these building blocks in place, we come to features of the PHR architecture:

1. Federated – instead of having a centralised repository of all health records, we propose a federated framework where data resides at the source of generation. This has many benefits – (i) ease of operations, as data is not stored with a single entity (ii) lower costs, as no additional repository is being built (iii) better security, as data is stored at different nodes; and (iv) patient empowerment, as data is being shared directly with the patient.

2. Schema level standardisation – we believe that only standardising the schema without enforcing codification standards (which require a significant behavioural shift) should be sufficient for a number of use cases. Since this standardisation is at an IT systems level, it only requires a one-time mapping and does not require any change in clinical workflows.

3. Health data access fiduciaries – these would be entities that would route the consent and data requests between information users and information providers. In doing so, they would play the role of privacy protection, consent management and user education.

4. Health data vault – this is an option for the patient to store his/ her records in a personal storage space. While most hospitals that capture data continue to store it for a long period of time,  an individual might still choose to store this information separately (for long-term access, trust-deficit between patient and provider, etc.). In such a case, the patient can request a copy of the record to be pushed to his/her health data vault.

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Proposed architecture:

Workflow:

Patient goes to a healthcare provider. At the time of issuance:

Option 1: patient shares mobile number/ email id/ aadhaar no.
1. Provider authenticates user using one of the digital identifiers
2. (a) Provider sends a link to patient for downloading the report. Patient can later link these records with his/ her HDAF; or
2. (b) Patient can sign up with HDAF and search for provider to link records

Option 2: patient shares HDAF ID
1. Provider links patient records to the HDAF

Post linkage, patient can approve requests from data consumers through the HDAF for different use cases.

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We believe that building PHR as a public good will enable interesting use cases to come to life, that would together improve the healthcare ecosystem. While we will continue our quest for these, we would love to receive feedback on our thinking! If you work in this space and have comments, or would like to understand how this could help your product, please drop me a line at [email protected].

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India’s new Software Products Policy marks a Watershed Moment in its Economic History – Can the nation make it count?

India is on the glide path of emerging as one of the economic powerhouses of the world – its economy is ranked sixth in size globally (and slated to climb to second by 2030); it has the fastest growing annual GDP growth rate amongst (major) countries; the country ranked in the world’s top 10 destinations for FDI in 2017-18. With a population of 1.3 billion and a large middle class of ~300 million+, it is one of the most attractive markets globally. Specifically in the digital economy – India has a huge $ 167 billion-sized IT industry; it boasts of a 55% market share in global IT services & outsourcing; 1140 global corporations run their tech R&D centres in India. In the tech startup space, India has attracted Private Equity (PE) & Venture Capital (VC) investments of $33 billion in 2018, and it has over a dozen unicorns (startups with over $1 billion valuations).

These data-points are truly impressive and would make any country proud, but they belie one of the glaring historical paradoxes of the Indian economic story – the sheer absence of world-beating products from India. Ask Indians to name three truly world class, globally loved Indian products or brands – chances are they’ll struggle to name even one. Check out the Global Innovation Index 2018 from the World Intellectual Property Organization (WIPO) – India doesn’t figure in the top 50 countries. Or the Interbrand 2018 Top 100 Global Brands Ranking – there’s no Indian name on that list. Leave aside brick & mortar industries, the Indian IT & Digital sector doesn’t fare any better on this count. IT services, which forms its lion’s share comprises largely of low end, commoditized services or cost arbitrage based outsourcing contracts. Most of the new age tech unicorns in India are based on ideas and business models that are copied from foreign innovators (with some local tweaks) – their outsized valuations are a result of them being the gatekeepers to the large Indian market, rather than from having created path-breaking products from first principles. So the overall trend is that India has a large domestic market, and it is a big supplier of technical brain power on the world stage, but when it comes to building innovative products, we come to a total cropper. This is best reflected in the Infosys Co-Founder, Narayan Murthy’s candid quote – “There has not been a single invention from India in the last 60 years that became a household name globally, nor any idea that led to the earth-shaking invention to delight global citizens”.



The launch of the National Software Products Policy (#NSPS):

It is in this light that the recently rolled out National Software Products Policy (#NSPS) by the Ministry of Electronics & IT (MeitY), Government of India marks a watershed moment. For the very first time, India has officially recognised the fact that software products (as a category) are distinct from software services and need separate treatment. So dominated was the Indian tech sector by outsourcing & IT services, that “products” never got the attention they deserve – as a result, that industry never blossomed and was relegated to a tertiary role. Remember that quote – “What can’t be measured, can’t be improved; And what can’t be defined, can’t be measured”. The software policy is in many ways a recognition of this gaping chasm and marks the state’s stated intent to correct the same by defining, measuring and improving the product ecosystem. Its rollout is the culmination of a long period of public discussions and deliberations where the government engaged with industry stakeholders, Indian companies, multinationals, startups, trade bodies etc to forge it out.

#NSPS will bring into focus the needs of the software product industry and become a catalyst in the formulation of projects, initiatives, policy measures etc aimed at Indian product companies. One of its starting points is the creation of a national products registry that’s based on a schematic classification system. Other early initiatives that will help in operationalizing the policy – setting up of a Software Products Mission at MeitY, dedicated incubators & accelerators for product startups, development of product-focused industrial clusters, preferential procurement by the government from product companies, programs for upskilling and talent development etc.

The Indian IT / Software Industry Landscape:

To understand the product ecosystem, one needs to explore the $ 167 billion-sized Indian IT / Software sector into its constituent buckets. The broad operative segments that emerge are –

1) IT Services & ITES: This is by far the largest bucket and dominates everything else. Think large, mid & small sized services companies throughout the country servicing both domestic & foreign markets. e.g. TCS, Infosys, Mindtree, IBM, Accenture, GE etc
2) Multinationals / Global Development Centers: These are foreign software companies serving Indian markets and/or using India as a global R&D development centre. e.g. Microsoft, Google, Netapps, McAfee, etc
3) Domestic Product Companies: This is a relatively small segment of Indian software product companies selling in domestic or overseas markets e.g. Quickheal, Tally etc.
4) Startups – E-commerce / Transactional services: This is the large, fast-growing segment of startups into direct (or aggregated) transactional businesses like e-commerce, local commerce, grocery shopping, food delivery, ride sharing, travel etc. e.g. BigBasket, Flipkart, Amazon, Grofers, Milkbasket, Swiggy, Dunzo, Uber, Ola, Yulu, Ixigo, MMT etc. You could also include the payment & fintech companies in this bucket – e.g. Paytm, Mobikwik, PhonePe, PolicyBazaar, Bankbazaar etc. This segment has absorbed the maximum PE & VC investments and is poised to become bigger with time.
5) Product Startups – Enterprise / CoreTech / Hardware: This is comprised of companies like InMobi, Zoho, Wingify, Freshdesk, Chargebee, Capillary, electric vehicle startups, drone startups etc. They could be serving Indian or foreign B2B markets.
6) Product Startups – Consumer Internet: This segment is composed of media/news companies, content companies, social & professional networking, entertainment, gaming etc. e.g. Dailyhunt, Inshorts, Sharechat, Gaana, Spotify, YouTube, video/photo sharing apps, Dream11 etc.

(N.B. Off course, this segmentation schema is not water-tight and there could be other ways to slice and/or label it)

Why India lags behind in Software Products?

The global software products industry has a size of $ 413 billion, and it is dominated by US & European companies. India’s share in that pie is minuscule – it is a net importer of $ 7 billion worth software products (India exports software products worth $ 2.3 billion, while it imports $ 10 billion). “Software is eating the world” – entire industry segments are being re-imagined and transformed using the latest developments in cloud computing, artificial intelligence, big data, machine learning etc. In this scenario, it is worth understanding why India seems to have missed the software products bus. The reasons are multifarious, cutting across cultural, economic, market, behavioural and societal factors –

a) The cultural aversion to Risk, Ambiguity & Failure: Indian society has traditionally valued conformity and prepares people not to fail. Our family and educational environments are geared for teaching us to eschew risk-taking and avoid ambiguity. But building products is all about managing risk and failure. When you take a product to market from scratch, you take on multiple types of risk – market risk, execution risk, product risk. For many people in India, this is in stark contrast to their social/attitudinal skills and expectancies they have built up over a lifetime.

b) “Arbitrage” offers the Path of Least Resistance: If you pour water down a heap of freshly dug mud, it will find the path of least resistance and flow along it. Human behaviour is similar – it is conditioned to look for the path of least resistance. And “arbitrage” offers that least resistance path in the IT industry – be it cost arbitrage, labour arbitrage, geographical arbitrage, concept arbitrage et al. The IT services industry leverages the cost arbitrage model via cheaper labour costs. Many of the transactional e-commerce startups in India have used geographical arbitrage to their advantage – once a successful product or model is created in another market, they bring it to India to capitalize on a local first mover advantage, build a large valuation and become the gatekeeper to the market before the (original) foreign innovators arrive in India many years later! But arbitrage means, that while you are taking on market & execution risk, you are not assuming the product risk. These dynamics played out at scale over the years has meant it is easier for a wannabe entrepreneur in India to go the arbitrage way and quickly build out a business using a readymade template than go down the software products path, which has a much longer gestation & higher risks associated with it.

IMHO, this “arbitrage” factor represents the single biggest reason why India has seen a virtual explosion in e-commerce startups, at the expense of product startups. Look around the startup ecosystem and you’ll see all kinds of transactional businesses involving activities like buying, selling, trading etc. Why… this almost reminds of that famous 17th-century quote by Napolean when he described Britain as a “nation of shopkeepers”🙂

c) Tech isn’t enough – you need design, marketing skills: To build great software products, you not only need strong technical abilities but also good design, marketing & branding skills to carve out a compelling product offering. Ask any startup in India – one of their most common problems is the inability to hire good designers and UX professionals. This puts Indian companies at a comparative disadvantage – even if they have the engineers to build the technology, their inability to translate that technology into an appealing user experience often means the difference between success and failure.

d) Lack of “patient” venture capital: This is a complaint you hear often from Indian product startups – the lack of venture capital that’s willing to be patient over the longer gestation cycles software products demand. While there is some truth to it, the more likely explanation is that software product companies present a “chicken & egg problem” for Indian startup investors. Investors are driven by financial returns – if they see returns from product companies, they’ll bet their monies on them. It just so happens, that Indian investors haven’t yet seen venture sized returns from software product companies. Hopefully, this dynamics will even out as the ecosystem grows.

e) Inadequate Domestic Market Potential: Many software products are monetized via subscription models, where the market’s ability (and propensity) to explicitly pay for the service is critical for success. Sometimes (SAAS/enterprise) companies try their model in India, only to discover there just aren’t enough paying customers. These startups may then be left with no choice but to either target foreign markets, or in extreme cases just move abroad for business continuity. Thus it has become imperative for the Indian domestic market to grow in size and scale to ensure the viability of product startups.

Platform companies from India are a non-starter: One aspect that needs calling out specifically is the sheer absence of any platform companies from India. Platforms are the next evolutionary step for scaled software product companies – if you get to the stage, where other industry stakeholders start building on top of the plumbing you’ve provided (thereby becoming totally dependent on you), that’s an immensely powerful position to be in e.g. AWS, Android, iOS etc. This factor assumes even greater importance given upcoming trends in AI, machine learning, deep learning, automation, robotics – the companies which emerge as platform providers may offer strategic advantages to the country of their origin. As depicted by the graphic below, India is as yet a non-starter on this count. This is deeply worrying – imagine a scenario 10-15 yrs out, when Indian software companies start dominating the domestic markets and also are a force to reckon with globally, but it’s all built on intellectual property (IP) & platforms created & owned by foreign companies!!

Some Suggested Action Areas for the National Software Policy:

MeitY in consultation with industry stakeholders is likely to create an implementation roadmap for #NSPS. Here are some specific action points I’d like to call out for inclusion in that roadmap:

Domestic Market Development: As explained earlier, the Indian domestic market needs curated development to reach a potential that makes product startups viable without having to depend on overseas markets. This calls for a series of steps, such as policy support from sectoral regulators, funding support via special go-to-market focused venture capital funds etc. The government could also help by announcing a preferential procurement policy from domestic software product companies. The Government e Marketplace (GeM) can help in institutionalizing these procurement norms.

Creating Early Awareness (Catch ‘em young): Fed by constant news in media about IT services, ITES, BPOs, outsourcing etc the average person in India is likely to be aware of IT services, but not necessarily software products. Many people may have friends and family members who work at TCS, Infosys, Wipro, IBM etc, but the same can’t be said about product companies. Given this scenario, it is important to create early awareness about products in schools, colleges, universities across metros, Tier 1, Tier 2 & 3 towns. Some of the world’s biggest product innovators like Bill Gates, Steve Jobs started writing software before they had reached high school – so if we can catch people young, we actually get a much longer runway to get them initiated into the product ecosystem. If they learn about products after they’ve started working in the industry, or when planning a mid-career shift from services to products, it might be quite late.

Reducing entry barriers for starting Software Product Companies: As shared earlier, one of the big problems in the Indian software product space is that there just aren’t enough entrepreneurs starting up product businesses. E-commerce & transactional services actually absorb (or suck in) a lot of entrepreneurial talent by virtue of having lower barriers to entry. To make a serious dent in products, you need a much larger number of product companies started off the ground. This can happen only by systematically bringing down the entry barriers – driving awareness, providing funding support, providing market development support etc. Advocacy and evangelism by software product industry role models also can help develop confidence and conviction in people to think products instead of services or e-commerce.

Building domestic Software Product Companies atop public goods: Silicon Valley has shown how you can build successful commercial applications on top of public goods (e.g. Uber built on top of GPS, Google maps & mobiles). In a similar way, public goods in India like IndiaStack, or HealthStack can be the base (or the plumbing) over which commercial applications get built for mass scalability. The good news is this trend has already been kickstarted, though its still early days.

This blog was first published at Webyantra.com

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Scaling Good Advice In India’s Startup Ecosystem – A Research Paper On PNGrowth Model

In January 2016 iSPIRT ran the largest software entrepreneur school in India, called PNgrowth (short for Product Nation Growth).  The central vision of PNgrowth was to create a model of peer learning where over 100 founders could give each other one-on-one advice about how to grow their startups. With peer learning as PNgrowth’s core model, this enterprise was supported by a volunteer team of venture capitalists, founders, academics, and engineers.  See iSPIRT’s volunteer handbook (https://pn.ispirt.in/presenting-the-ispirt-volunteer-handbook/)

However, unlike a regular “bootcamp” or “executive education” session, the volunteers were committed to rigorously measuring the value of the peer advice given at PNgrowth. We are excited to announce that the findings from this analysis have recently been published in the Strategic Management Journal, the top journal in the field of Strategy, as “When does advice impact startup performance?” by Aaron Chatterji, Solène Delecourt, Sharique Hasan, Rembrand Koning (https://onlinelibrary.wiley.com/doi/10.1002/smj.2987).

TLDR: Here’s a summary of the findings:

1. There is a surprising amount of variability in how founders manage their startups.  To figure out how founders prioritized management, we asked them four questions:

“…develop shared goals in your team?”
“…measure employee performance using 360 reviews, interviews, or one-on-ones?”
“…provide your employees with direct feedback about their performance?”
“…set clear expectation around project outcomes and project scope?”

Founders could respond “never,” “yearly,” “monthly,” “weekly,” or “daily.”

Some founders never (that’s right, never!) set shared goals with their teams, only did yearly reviews, never provided targets, and infrequently gave feedback. Other, super-managers were more formal in their management practices and performed these activities on a weekly, sometimes daily, basis. Not surprisingly, the supermanagers led the faster-growing startups.  Most founders, however, were in the middle: doing most of these activities at a monthly frequency.

2. Since PNGrowth was a peer learning based program, we paired each founder (and to be fair, randomly) with another participant. For three intense days, the pairs worked through a rigorous process of evaluating their startup and that of their peer. Areas such as a startup’s strategy, leadership, vision, and management (especially of people) were interrogated. Peers were instructed to provide advice to help their partners.

3. We followed up on participating startups twice after the PNgrowth program. First ten months after the retreat, and then we rechecked progress two years afterwards.

We found something quite surprising: the “supermanager” founders not only managed their firms better but the advice they gave helped their partner too.  Founders who received advice from a peer who was a “formal”  manager grew their firms to be 28% larger over the next two years and increased their likelihood of survival by ten percentage points. What about the founders who received advice from a laissez-faire manager? Their startup saw no similar lift. Whether they succeeded or failed depended only on their own capabilities and resources.

4. Not all founders benefited from being paired up with an effective manager though. Surprisingly, founders with prior management training, whether from an MBA or accelerator program, did not seem to benefit from this advice.

5. The results were strongest among pairs whose startups were based in the same city and who followed up after the retreat. For many of the founders, the relationships formed at PNgrowth helped them well beyond those three days in Mysore.

So what’s the big take away: While India’s startup ecosystem is new and doesn’t yet have the deep bench of successful mentors, the results from this study are promising. Good advice can go a long way in helping startups scale.   iSPIRT has pioneered a peer-learning model in India through PlaybookRTs, Bootcamps, and PNgrowth (see: https://pn.ispirt.in/understanding-ispirts-entrepreneur-connect/).

This research shows that this model can be instrumental in improving the outcomes of India’s startups if done right. If peer-learning can be scaled up, it can have a significant impact on the Indian ecosystem.

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India powers up its ‘Software Product’ potential, Introduces National Policy on Software Products (NPSP)

This is an exciting occasion for our indigenous software industry as India’s National Policy on Software Products gets rolled out. This policy offers the perfect framework to bring together the industry, academia and the government to help realise the vision of India as a dominant player in the global software product market.

For ease of reference, let us summarise some of the major things that the policy focuses on

  • Single Window Platform to facilitate issues of the software companies
  • specific tax regime for software products by distinguishing  them from software services via HS code
  • enabling Indian software product companies to set off tax against R&D  credits on the accrual basis
  • creation of a Software Product Development fund of INR 5000 crores to invest in Indian software product companies
  • grant in aid of  INR 500 Crores to support research and innovation on software products
  • encouragement to innovation via 20 Grant Challenges focusing on Education, Healthcare & Agriculture thus further enabling software products to solve societal challenges
  • enabling participation of Indian software companies in the govt. e-marketplace to improve access to opportunities in the domestic market
  • developing a framework for Indian software product companies in government procurement.
  • special focus  on Indian software product companies in international trade development programmes
  • encouraging software product development across a wide set of industries by developing software product clusters around existing industry concentrations such as in automobile, manufacturing, textiles etc.
  • nurturing the software product start-up ecosystem
  • building a sustainable talent pipeline through skilling and training programmes
  • encouraging entrepreneurship and employment generation in tier II cities
  • creating governing bodies and raising funds to enable scaling of native software product companies.

There is good cause for cheer here. The policy offers to address many of the needs of the Software Product Ecosystem. For the first time, HS codes or Harmonised Codes will be assigned to Indian software product companies that will facilitate a clear distinction from ‘Software Services’ facilitating availing of any benefits accruing under the ‘Make in India’ programme. In addition, this will enable Indian software product companies to participate in govt contracts through registration on GeM (Govt. eMarketplace).

Considering that we remain a net importer of software products at present, steps such as the inclusion of Indian software products in foreign aid programmes, setting up of specialised software product incubators in other geographies and promoting our software product capabilities through international exhibitions definitely show intent in the right direction. With a commitment to develop 10000 software product start-ups, with 1000 of them in tier II cities, technology entrepreneurs building IP driven product companies can now look forward to infrastructural and funding support. The policy also aims to go beyond metro-centric development with a commitment to develop tech clusters around existing industry concentrations, enable skilling and drive employment in non-metros and tier II cities while actively encouraging Indian software companies to solve native problems.  

This policy could not have been possible without the vision of the Honourable Minister Shri Ravi Shankar Prasad, and continuous engagement and discussions with Shri Ajay Prakash Sawhney, Rajeev Kumar and Ajai Kumar Garg from MEITY and their team.

We have seen software companies solving native problems do exceptionally well, just look at what Paytm has been able to achieve while driving digital payments in India. There is now an understanding ‘Make in India’ can help us bridge the digital divide given that Indian entrepreneurs have a greater understanding of local issues and the challenges that are unique to us.

Setting up bodies such as the National Software Products Mission in a tripartite arrangement with the industry, academia and govt. to enable creation and monitoring of schemes beneficial to native software product companies is another much-needed step that will create a forum distinct to our software product companies and help give them a strong voice.

We would like to thank Lalitesh Katragadda, Vishnu Dusad, Sharad Sharma, Rishikesha T Krishnan, Bharat Goenka, T.V. Mohandas Pai, Arvind Gupta for their diligent efforts on the continuous dialogue and inputs for the policy.

While launching the policy is a great start, its implementation is what we all will have our eyes on. Now is the moment of action. We all look forward to fast-tracking of the various proposed measures under this policy for the benefits to start showing!

Website link to the official policy –  (https://meity.gov.in/writereaddata/files/national_policy_on_software_products-2019.pdf)

References

J​ANUARY​​ 15, 2019​ – ​https://tech.economictimes.indiatimes.com/news/internet/india-needs-to-win-the-software-products-race/67533374

DECEMBER 8, 2016​ – ​https://pn.ispirt.in/what-to-expect-from-draft-national-policy-on-software-products/

NOVEMBER 13, 2016​ – ​https://pn.ispirt.in/national-software-policy-2-0-needed/

MAY 10, 2016​ – ​https://pn.ispirt.in/taxation-and-digital-economy/

APRIL 29, 2016​ – ​https://pn.ispirt.in/saas-the-product-advantage-and-need/

JULY 16, 2014​ – ​https://pn.ispirt.in/government-recognizes-the-software-product-industry/

DECEMBER 11, 2013​ – ​https://pn.ispirt.in/three-waves-of-indian-software/

JULY 16, 2013​ – ​https://pn.ispirt.in/smbs-and-indian-software-product-industry-intertwined-fortunes/

JULY 4, 2013​ – ​https://pn.ispirt.in/8-truths-why-it-services-organizations-cannot-do-software-products/

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Clipping The Wings Of Angel Tax

 

2000 startups. 100 meetings. 25 articles. 7 years. 3 WhatsApp groups. 2 whitepapers.

1 unwavering ask:

No More Angel Tax.

This evening, when we first got to see the circular from DPIIT/CBDT that formalized key recommendations suggested with respect to Angel Tax or section 56(2)(viib), we admit our minds went blank for a moment. After all, this one document represents the tireless, collaborative efforts of iSPIRT, the entrepreneurial community of India and ecosystem partners like IVCA, Local Circles, IAN, TiE, 3one4 Capital, Blume Ventures etc., and the proactive support from the government. It has been one relentless outreach initiative that has seen us become a permanent fixture at Udyog Bhavan and North Block (I even checked with the guards regarding the possibility of a season pass). My colleagues Sharad Sharma, TV Mohandas Pai, and partners such as Siddharth Pai, Nikunj Bubna, Sreejith Moolayil, Monika, Ashish Chaturvedi and Sachin Taporia deserve a big shout out for their diligent efforts at connecting with various ecosystem partners and initiating a regular cadence of dialogue with the government.

The key takeaways from the circular are as below –

  • Blanket exemption for up to INR 25Cr of capital raised by DIPP registered startups from any sources
  • Amendment in the definition of startups in terms of tenure from 7 to 10 years
  • Increase in the revenue threshold for the definition of startups from INR 25Cr to INR 100 Cr
  • Breaking the barrier for listed company investments by excluding high-traded listed companies and their subsidiaries, with a net-worth above INR 100Cr or a Turnover of 250 cr, from section 56(2)(viib)’s ambit

Each of these points is a major win for the startup community. If one looks at the data from the LocalCircles startup survey in January 2019, nearly 96% of startups that had received notices regarding angel tax, had raised below the permissible limit of INR 10cr. Expansion of this limit to INR 25cr is a huge boost and instantaneously removes thousands of startups from the reach of angel tax. There is an effort here to critically analyse, define and differentiate genuine startups from shell corporations. It includes measures such as increase in the revenue and tenure threshold that will not only help startups with respect to the challenges posed by angel tax but also open up eligibility for benefits under Startup India schemes and policies. We have been talking about the need to encourage and protect domestic investments and the government has paid heed to our concerns by introducing accredited investor norms and by breaking the barrier for listed company investments.

Initiated in 2012 by the UPA government, Section 56(2)(viib) or the “angel tax” section has been a relentless shadow on the entrepreneurial ecosystem. It taxed as income any investment received at a premium by an Indian startup. This provision saw many entrepreneurs clash with the tax officials about the true value of their business and pitted unstoppable entrepreneurial zeal against the immovable tax department.

All of us from the policy team at iSPIRT have been at the forefront of this issue since 2015 when we began petitioning the government to exclude startups from section 56(2)(viib) as taxing investments from Indian sources would cripple the startup ecosystem. We laud the government for appreciating the urgency of the situation and prioritizing this issue.

We first had an inkling of things to come at the February 4th, 2019 meeting held by DPIIT. It was unprecedented as it saw a direct dialogue between government and entrepreneurs wherein both sides could better understand the issues facing each other – how section 56(2)(viib) was hampering founder confidence and how it is a needed tool in the government’s arsenal for combatting the circulation of unaccounted funds.

After this, a smaller working group was constituted on February 9th, to review the proposals made by DPIIT to address this issue, in consultation with the CBDT and the startup ecosystem. iSPIRT were part of both meetings and contributed actively to the discussion.

We can now heave a sigh of relief as we have finally achieved to a large extent what we had set out to do. We finally have a solution that ensures genuine startups will have no reason to fear this income tax provision and the CBDT can continue to use it against those attempting to subvert the law.

This could not have been possible without the help of well-wishers in government departments like Mr Nrpendra Misra, Mr Sanjeev Sanyal, Mr Suresh Prabhu, Mr Ramesh Abhishek, Mr Anil Chaturvedi, Mr Rajesh Kumar Bhoot, Mr Anil Agarwal, who patiently met the iSPIRT policy team and helped develop a feasible solution.

At long last, domestic pools of capital will no longer be disadvantaged as compared to foreign sources. At long last, Indian entrepreneurs will no longer have to fear the questioning of the valuations of their businesses and taxation of capital raised.

Who knows, someday we might have a movie on this. On a more serious note, it is a step that will go down in the chronicles of India’s startup story. This puts the startup engine back on track. More importantly, it shows what can be achieved when citizens and the government get together.

By Nakul Saxena and Siddharth Pai, Policy Experts – iSPIRT

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An Afternoon With Don Norman In Bengaluru

Are you building products for the everyday user? Is it becoming harder and harder to manage complexity while maintaining usability? How do you design a sustainable system for a complex multi-stakeholder environment? How do you teach a user to use your product with good design? How do you reinvent an established business model in light of rapidly evolving markets and technological possibilities? How do you design a product to be truly human-centric?

If any of these questions sound relevant to you, here’s an opportunity to seek answers on 22nd February in Bengaluru! 

About Don Norman

Dr Don Norman is a living legend of the design world having operated in the field for over 40 years. He has been Vice President of Apple in charge of the Advanced Technology Group and an executive at both Hewlett Packard and UNext (a distance education company). Business Week has listed him as one of the world’s 27 most influential designers. Dr Norman brings a unique mix of the social sciences and engineering to bear on everyday products. At the heart of his approach is human and activity-centred design, combining knowledge of cognitive science, engineering, and business with design.

Presently, he is Director of the recently established Design Lab at the University of California, San Diego where he is also professor emeritus of both psychology and cognitive science and a member of the Department of Electrical and Computer Engineering. He is also the co-founder of the Nielsen Norman Group, an executive consulting firm that helps companies produce human-centred products and services.

ProgrammeTalk

Don will share valuable insights about his interactions with Indian people, products and experiences.

Fireside Chat

An informal discussion with Don about his learnings and experiences spanning his long and illustrious career.

How to participate?

We’re inviting engineers, product managers, designers and everyone else who is building for large scale impact.

If you would like to further your understanding of human-centric design and hear straight from the horse’s mouth, please register here by 18th February. (An invite will be sent out to selected participants by 21st February)

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#2 Federated Personal Health Records – The Quest For Use Cases

Last week we wrote about India’s Health Leapfrog and the role of Health Stack in enabling that (you can read it here). Today, we talk about one component of the National Health Stack – Federated Personal Health Records: its design, the role of policy and potential use cases.

Overview

A federated personal health record refers to an individual’s ability to access and share her longitudinal health history without centralised storage of data. This means that if she has visited different healthcare providers in the past (which is often the case in a real life scenario), she should be able to fetch her records from all these sources, view them and present them when and where needed. Today, this objective is achieved by a paper-based ‘patient file’ which is used when seeking healthcare. However, with increasing adoption of digital infrastructure in the healthcare ecosystem, it should now be possible to do the same electronically. This has many benefits – patients need not remember to carry their files, hospitals can better manage patient data using IT systems, patients can seek remote consultations with complete information, insurance claims can be settled faster, and so on. This post is an attempt to look at the factors that would help make this a reality.

What does it take?

There are fundamentally three steps involved in making a PHR happen:

  1. Capture of information – Even though a large part of health data remains in paper format, records such as diagnostic reports are often generated digitally. Moreover, hospitals have started adopting EMR systems to generate and store clinical records such as discharge summaries electronically. These can act as starting points to build a PHR.
  2. Flow of information- In order to make information flow between different entities, it is important to have the right technical and regulatory framework. On the regulatory front, the Personal Data Protection Bill which was published by MeitY in August last year clearly classifies health records as sensitive personal data, allows individuals to have control over their data, and establishes the right to data portability. On the technical front, the Data Empowerment and Protection Architecture allows individuals to access and share their data using electronic consent and data access fiduciaries. (We are working closely with the National Cancer Grid to pilot this effort in the healthcare domain. A detailed approach along with the technical standards can be found here.)
  3. Use of information – With the technical and regulatory frameworks in place, we are now looking to understand use cases of a PHR. Indeed, a technology becomes meaningless without a true application of it! Especially in the case of PHR, the “build it and they will come” approach has not worked in the past. The world is replete with technology pilots that don’t translate into good health outcomes. We, in iSPIRT,  don’t want to go down this path. Our view is that only pilots that emerge from a clear focus on human-centred design thinking have a chance of success.

Use cases of Personal Health Records

Clinical Decision Making

Description: Patient health records are primarily used by doctors to improve quality of care. Information about past history, prior conditions, diagnoses and medications can significantly alter the treatment prescribed by a medical professional. Today, this information is captured from any paper records that a patient might carry (which are often not complete), with an over-reliance on oral histories – electronic health records can ensure decisions about a patient’s health are made based on complete information. This can prove to be especially beneficial in emergency cases and systemic illnesses.

Problem: The current fee-for-service model of healthcare delivery does not tie patient outcomes to care delivery. Therefore, in the absence of healthcare professionals being penalised for incorrect treatment, it is unclear who would pay for such a service; since patients often do not possess the know-how to realise the importance of health history.

Chronic Disease Management

Description: Chronic conditions such as diabetes, hypertension, cardiovascular diseases, etc. require regular monitoring, strict treatment adherence, lifestyle management and routine follow-ups. Some complex conditions even require second opinions and joint decision-making by a team of doctors. By having access to a patient’s entire health history, services that facilitate remote consultations, follow-ups and improve adherence can be enabled in a more precise manner.

Problem: Services such as treatment adherence or lifestyle management require self-input data by the patient, which might not work with the majority. Other services such as remote consultations can still be achieved through emails or scanned copies of reports. The true value of a PHR is in providing complete information (which might be missed in cases of manual emails/ uploads, especially in chronic cases where the volume and variety of reports are huge) – this too requires the patient to understand its importance.

Insurance

Description: One problem that can be resolved through patient records is incorrect declaration of pre-existing conditions, which causes post-purchase dissonance. Another area of benefit is claims settlement, where instant access to patient records can enable faster and seamless settlement of claims. Both of these can be use cases of a patient’s health records.

Problem: Claim settlement in most cases is based on pre-authorisation and does not depend solely on health records. Information about pre-existing conditions can be obtained from diagnostic tests conducted at the time of purchase. Since alternatives for both exist, it is unclear if these use cases are strong enough to push for a PHR.

Research

Description: Clinical trials often require identifying the right pool of participants for a study and tracking their progress over time. Today, this process is conducted in a closed-door setting, with select healthcare providers taking on the onus of identifying the right set of patients. With electronic health records, identification, as well as monitoring, become frictionless.

Problem: Participants in clinical trials represent a very niche segment of the population. It is unclear how this would expand into a mainstream use of PHR.

Next steps

We are looking for partners to brainstorm for more use cases, build prototypes, test and implement them. If you work or wish to volunteer in the Healthtech domain and are passionate about improving healthcare delivery in India, please reach out to me at [email protected].

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iSPIRT’s Response to Union Interim Budget 2019

Our policy team tracks the interest of Software product industry

INDIA, Bangalore, Feb 1st, 2019 – Proposals for Union budget of 2019 have been announced today by Finance Minister.

Being an interim budget not many announcements were expected. Some of the important announcements that may affect the expansion of the economy, in general, owing to increased income and ease of living in the middle class are as follows:

  1. Within two years tax assessment will be all electronic.
  2. IT return processing just in 24 hours
  3. Rebate on taxes paid for those with an income below 5 lakhs
  4. TDS threshold on interest income by woman on bank/post office deposits raised from Rs. 10,000 to 40,000
  5. Increase in standard deduction from Rs. 40,000 to 50,000
  6. Rollover of Capital gains tax benefit u/s 54 from investment in one house to two houses, for a taxpayer having capital gains up to Rs. 2 crore
  7. Recommendation to GST Council for reducing GST for home buyers
  8. Exemption from levy of tax on notional rent, on unsold inventories, from one year to two years
  9. Many benefits announced for Agriculture and Rural sector

The coining of the phrase “Digital Village” and placing it second on the list of ten-dimension vision statement in budget speech is a welcome step. The statement nudges the next Government to improve access to technology in rural India, a welcome step. We expect “Digital India” and easy and quality access to the internet for every citizen will remain a focus area, irrespective of which government comes to power.

The government has announced a direct cash transfer scheme for farmers. We are happy to see that technologies like the India Stack are being used by policymakers for effective policy-making irrespective of political ideology. Cash transfers promise to be more efficient initiatives that directly benefit our poor without needing them to run from pillar to post trying to prove their identity and eligibility. “Similarly, startups and SMEs remains a focus area in the vision statement. These are very important for a healthy ecosystem built up.

Similarly, focused phrases such as “Healthy India”, “Electric Vehicle” and “Rural Industrialisation using modern digital technologies” are welcome ideas in ten-dimension vision for Indian Software product industry and startup ecosystem.

However, among key issues for Startups and Investments which need to be addressed but have been missed out are Angel tax and Tax parity between listed and unlisted securities. Angel Tax is a very important issue which needs to be addressed conclusively at the earliest. We need to ensure gaps between policy declaration and implementation do not cause entrepreneurs and investors to relocate themselves aboard.

About iSPIRT Foundation

We are a non-profit think tank that builds public goods for Indian product startup to thrive and grow. iSPIRT aims to do for Indian startups what DARPA or Stanford did in Silicon Valley. iSPIRT builds four types of public goods – technology building blocks (aka India stack), startup-friendly policies, market access programs like M&A Connect and Playbooks that codify scarce tacit knowledge for product entrepreneurs of India. visit www.ispirt.in

For further queries, reach out to Nakul Saxena ([email protected]) or Sudhir Singh ([email protected])

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Angel Tax Notification: A Step In The Right Direction, But More Needs To Be Done

There have been some notifications which have come out last week, it is heartening to see that the government is trying to solve the matter. However, this is a partial solution to a much larger problem, the CBDT needs to solve for the basic reason behind the cause of Angel Tax (Section 56(2)(viib)) to be able to give a complete long-term solution to Indian Startups.

While the share capital and share premium limit after the proposed issue of share is till 10 crores and helps startups for their initial fundraising, which is usually in the range of Rs 5-10 Cr. Around 80-85% of the money raised on LetsVenture, AngelList and other platforms by startups is within this range, but the government needs to solve for the remaining 15-20% as startups who are raising further rounds of capital, which is the sign of a growing business, are still exposed to this “angel tax”. Instead, the circular should be amended to state that Section 56(2)(viib) will not apply to capital raises up to Rs 10 Cr every financial year provided that the startups submit the PAN of the investors.

The income criteria of INR 50 lakhs and net worth requirement of INR 2 crores is again a move by the government that requires further consideration for the investing community. Therefore, to further encourage investments by Angels or to introduce new Angels to the ecosystem, there is a need to look towards a reduced income criterion of INR 20 Lakhs or a net worth of INR 1 crore, enabling more investors for a healthier funding environment. We also, need to build a mechanism to facilitate investments by corporates and trusts into the startups.

Most importantly, any startup who has received an assessment order under this section should also be able to for the prescribed remedies and submit this during their appeal. They should not be excluded from this circular since its stated scope is both past and future investments. The CBDT should also state that the tax officers should accept these submissions during the appeals process and take it into consideration during their deliberation.

So, to summarise:

  • Section 56(2)(viib) should not apply to any investment below Rs 10 crore received by a startup per year or increase the share premium limit to Rs 25 Crores, from Indian investors provided that the startup has the PAN of the investors
  • Section 56(2)(viib) should not apply to investors who have registered themselves with DIPP as accredited investors, regardless of the quantum of investment
  • The threshold stated should be either a minimum income of Rs 25 lakhs or a net worth of at least Rs 1 crore
  • Any startup who has received an assessment order should be able to seek recourse under this circular during their appeal

Through this circular, the government has reaffirmed its commitment to promoting entrepreneurship and startups in India. With these suggestions, the spectre of the “angel tax” will end up as a footnote in the history of the Indian startup ecosystem.

We look forward to the early resolution of these pending matters. For any suggestions, Do write to us [email protected]

The article is co-authored with Siddarth Pai, Policy Expert – iSPIRT Foundation and Founding Partner – 3one4 Capital.

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White Paper On The Analysis Of High Share Premium Amongst Startups In India

“High share premium is not the basis of a high valuation but the outcome of valid business decisions. This new whitepaper by our iSPIRT policy experts highlights how share premia is a consequence of valid business decisions, why 56(2)(viib) is only for unaccounted funds and measures to prevent valid companies from being aggrieved by it”

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What lies beyond the horizon: Digital Sky & the future of drones in India

Drones have been around for a long time, going back as far as World War II. For most of their history, they were considered part of the military arsenal and developed and deployed almost exclusively by the military.

However, the past decade has seen a tremendous amount of research and development in the area of using drones for civilian purposes. This has led industry experts to predict that drones will be disrupting some of the mainstay industries of the global economy such as logistics, transportation, mining, construction and agriculture to name a few. Analysts estimate a $100 billion market opportunity for drones in the coming few years  [1]. In spite of the overwhelming evidence in favour of the value created by drones, it has taken quite a few years for the drone industry to take off in a commercial sense globally.

The main reason for this has been the regulatory challenges around what is allowed to fly in the air and where is it allowed to fly. A common theme around the world is the unconventional challenges that old governmental structures have to face as they try to understand and regulate new technologies. Hence the default approach so far for governments has been reactionary caution as they try to control what are, essentially, flying robots in the sky.

However, with electronic costs coming down, the hardware becoming more accessible and the software interpreting data becomes more powerful a number of humanitarian, civilian and industrial application have emerged and as governments across the world are realizing the potential of drones, we are starting to see the first version of regulations being drafted and adopted across the globe.[2]

Closer home India has a relatively adverse approach to drones or more lackadaisical rather. [3]

But as India continues to drive to become a more technology-oriented economy the role of drones in the worlds fastest growing economy and the potential benefits it can bring are hard to ignore.[4]

However, India’s approach to drone regulations cannot be that of other major economies that have the luxury of friendly neighbours and a large network of monitoring apparatus, India has had to take an approach that has to be novel and robust. Something that balances the security landscape while also being designed to allow maximum utilization of the potential that drones offer. Out of this need to both regulate secure how and where a drone can fly and keep multi-ministerial stakeholder interests accounted for was born the Digital Sky, India’s foundational framework for all things drones.

What is the Digital Sky and how does it work?

What the Digital Sky accomplishes beautifully is to fill the institutional void that needs to be collectively fulfilled by so many institutions and make it easier for the industry and consumers to interface with the government legally through one platform. Permission to fly drone no longer requires a 90-day intimation with an arbitrary number of NOCs to be approved by umpteen number of ministerial bodies at the central and federal level. The industry and the public now know one place to interact with in order to register their drone, get recognised as a certified operator and apply for permissions and all concerned government agencies ensure their overarching interests do not interfere with the large-scale adoption of drones.  

There are crucial components required for the Digital Sky concept to work, the most central being that drone operators should not be able to fly drones if they are not approved by the government. To accomplish this the Drone 1.0 regulations revolve around the concept of No-Permission-No-Takeoff (NPNT).

Our maven Tanuj Bhojwani explaining NPNT at the DigitalSky RoundTable on 4 Dec 2018 in Bengaluru

What this implies is that unless a drone has got valid permission for a particular flight through tamper-proof digitally signed permission tokens, it will not be able to take off. The Digital Sky is the platform to automate the processing of these permission tokens as they flow in from different parts of the country without overwhelming the authorities through a flight information management system (one of only three countries to build this nationally after China and the USA). In order for this vision to come true, there will be an enormous change in the way drones are manufactured and operated. Entire new industry verticals around getting existing drones compliant, developing interfaces that interact with the Digital Sky platform and making applications for India’s needs will develop. Hence this begs the question.

How are the current state of the industry are changing with 1.0 regulations

Until the introduction of the regulations companies especially in the UAV operations were doing non-restricted work and end up becoming the jack-of-all-trades. Companies in the manufacturing domain were unclear of who is their target customer and what they needed to build. All the companies in this domain were working with no clarity on the safety and permissions.

With the introduction of the Drone Policy 1.0, there is a buzz which has been created and efforts are being made to understand the regulations by all the entities who are set to gain from it. They understand that there will be a new aspect that needs to cater to i.e. the sense of accountability.

For manufacturer’s The NP-NT mandate will be the most immediate requirement, the most common route to implement the mandate will be through changes to existing firmware architecture. The changes themselves are being driven by open source initiatives with various operators, system integrators and manufacturers contributing to the shift to NP-NT for all major drone platforms in the country. The Digital Sky has inadvertently catalysed the first industry-wide initiative to bring together all members of the ecosystem. Other requirements such as ETA bring in much-needed standardisation in the hardware space, this allows benchmarking of products, easier availability of information about the standards to look out for end users.

For operators, a massive increase in the volume of business is expected as they can now focus on getting certified drones into the air, and not so much on getting approvals. The Digital Sky brings in much-needed certainty and predictability into an industry that will be focused on balancing demand and supply of drone-related operations in a market that has a huge need for drones and their data but limited expertise to acquire and process it. This also puts onus an industry to become security and privacy conscious and insurance agencies will play an important role in this regard. It will also immensely help in changing the thought process of the companies providing services and their customers. Customers will start understanding that they also need to have a defined plan, process and execution instead of a haphazard existing process of execution.

How industry/playground will change over the coming years?

With the introduction on the regulations and a platform like Digital sky enabling the ease of doing business for the companies who are serious stakeholders in this domain, there is no limit to what developments will occur in the coming years. It opens up possibilities for utilization of Drone and its related technologies in Agriculture, Medical, Energy and Infrastructure and transportation.

The existing players will become more mature and more focused. They will understand that with regulations in place a more focused approach is the key to scale. They will look at opportunities to compete with the global market also as the solutions that are developed around the Drone Regulations 1.0 and 2.0 will be key factors that contribute to the Indian ecosystem to becoming a global standard to test, adapt and innovate drone applications and management.

What are the opportunities? What does that mean for the current and new players?

UAV/ Drones as a business was a far-fetched thought for many entrepreneurs and has been a struggling industry in the past in India. Going forward it is guaranteed that it will be one of the biggest markets in the world for UAV as a business. What the regulations and Digital Sky platform will enable is a new levelled playground ground for the UAV companies to initiate good scalable business models both existing and the ones entering new to the sector.

The existing companies with the right resources can now plan to scale their operations and also have the added advantage of doing work for the private sector in India. Due to the restrictive method of operations adapted previously the solutions to private agencies was unavailable. Now going forward the companies will shift their focus from being a B2G entity to a B2B entity. Many new businesses for UAV air traffic management, surveillance, AI and ML-based UAV solutions and deliveries will emerge out of India with technology specific to India.

If you want to join our future roundtable sessions on Digital Sky and more, please register your interest here.

The blog is co-authored by Anurag A Joshi from INDrone Aero systems, Abhiroop Bhatnagar from Algopixel Technologies and Gokul Kumaravelu from Skylark Drones

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White Paper On Section 56(2)(viib) And Section 68 And Its Impact on Startups In India

Angel Tax (Section 56(2)(viib)) has become a cause celebre in Indian startup circles due to its broad-reaching ramifications on all startups raising capital.

This paper traces the origin of this section, it’s analysis, impact, how it adversely affects startups. Special mention is also made of the seldom covered Section 68 and it’s used in conjunction with Section 56(2)(viib). The paper also proposes recommendations to ensure that genuine companies are not aggrieved by this while the original intent of the section is preserved.

For any support or query, please write to us at [email protected]