Entrepreneurship took a beating due to demonetisation

Hyderabad:  Since its emergence on the global information technology map in late 1990s, Hyderabad grew as a key economic hub over the last two decades and is currently seen as one of the cities with best entrepreneurship and start-up eco-system in the country.

However, entrepreneurship was impacted by various developments over last few years, especially demonetization in 2016 and introduction of Goods and Services Tax (GST) regime a year later.

Some firms had to shut the shop while others are running on losses. For instance, DataWind, low-cost tablet manufacturer, closed down two manufacturing facilities including one in Hyderabad.

"Many MSME units suffered severe hardships, including shutdowns and employee layoffs, due to demonetisation and introduction of a flawed GST regime, agriculture sector is still feeling the effects of demonetization," Murali Bukkapatnam, past president, The Indus Entrepreneurs (TiE)-Hyderabad, told IANS.

"The manufacturing sector in India has witnessed the highest number of bankruptcies, despite the 'Make-In-India' push by the current government. I don't think there is any country where behavioural economics has taken central stage to their economic policies. Lot of entrepreneurs in unorganized sectors, farm producers, MSME vendors to large MFG companies, weavers etc., got impacted adversely with these policies," he said.

There are other issues as well impacting the businesses. "Manufacturing as a share of GDP has been stagnant through the life of the current government. The relatively high cost of power, land, and transport, along with steep port charges and shipping rates, combining with inefficiencies of the labour market, all of it made worse by an unrealistic exchange rate for the rupee, to limit manufacturing exports," said Murali, also the founder and chairman of Volksy Technologies.

From the point of view of financial reforms, the government must increase competition to public sector banks, bring back the Finance Resolution and Deposit Insurance bills, and take serious steps to improve governance in public sector banks, he said.

According to Murali, other than reducing GST, removing "uncalled for and untimely" registration fee hikes, removing regulatory hurdles (inventing EV without arbitrary deadlines) are the remedies required for the ailing industry.

With the traditional IT and ITES sector reaching a saturation point, the city in recent years started focusing on product development and innovation in emerging technologies.

The formation of Telangana state with Hyderabad as its capital in 2014 ended the uncertainty plaguing the city since 2009, when Telangana movement gathered the steam.

The political stability, pro-industry policies of the Telangana Rashtra Samithi (TRS) government and the enabling environment for start-ups helped the city to regain its brand image.

The IT/ITES exports continued to grow above the national average, clocking Rs 1.09 lakh crore in 2018-19, a growth of 17 per cent over the previous fiscal. The exports have almost doubled since 2013-14.

At the time of formation of Telangana, the government had set a target of Rs 1.20 lakh crore IT exports and eight lakh jobs in the sector. The industry currently employs 5.43 lakh people.

Hyderabad, which is home to global giants like Microsoft, Google, Amazon, Facebook, Apple, Uber and Qualcomm, added 67,725 new jobs in 2018-19.

Jayesh Ranjan, Principal Secretary, IT, Industry and Commerce in the Telangana government, points out that Hyderabad is the only city where five most valued companies in the world have their largest presence outside the US.

IT is the biggest but not the only sector as Hyderabad is also considered as the bulk drug capital of India, accounting for nearly 30 per cent of the production in the country.

Home to a large number of defence research laboratories, the city is also emerging as the aerospace and defence industry hub. The facilities which have come up here in recent times include those manufacturing cabins of the helicopters that fly the US President and F-16 fighter jets.

Kalyani Rafael Advanced Systems (KRAS), a joint venture between Israel's Rafael and Kalyani Strategic Systems, set up India's first missile production facility in private sector.

In 2017, Hyderabad achieved the distinction of becoming the first Indian city to host Global Entrepreneurship Summit (GES), which was attended by 1,500 entrepreneurs, investors and ecosystem supporters from 150 countries.

US President Donald Trump's daughter and the White House advisor Ivanka Trump hogged the limelight at the global event organized by the US.

The launch of T-Hub, the start-up incubator by Telangana government in 2015 marked a major initiative to promote entrepreneurship and innovation. A brainchild of then Information Technology minister K. T. Rama Rao, it has so far supported more than a 1,000 domestic and international startups to scale.

T-Hub, a joint initiative of Telangana government, Indian School of Business (ISB), International Institute of Information Technology (IIT) Hyderabad and Nalsar University of Law, forged partnership with various corporate and international organizational to build a stronger innovation ecosystem.

T-Hub was followed by many other organizations like WE-Hub, India's first state-led women entrepreneurs incubation programme and Research and Innovation circle of Hyderabad (RICH).

Telangana State Innovation Cell (TSIC) was also created and it launched initiatives like 'Startup India Telangana Yatra' with an attempt to promote entrepreneurship in Tier II and Tier III cities of the state.

"Hyderabad has established itself as a thought leader by building a unique innovation ecosystem for India. The city has witnessed not only a steep rise in the number of startups but also in the funding scenario over the span of the last 5 years," Ravi Narayan, CEO of T-Hub told IANS.

"However, Hyderabad ranks 75th as a global startup destination whereas Bangalore ranks 11th, therefore a lot needs to be achieved. And this is where T-Hub with other players like TSIC, RICH, We-Hub in Hyderabad has set out an ambitious path towards transforming the city's startup ecosystem," he said.

"Moreover, I feel, that the launch of T-Hub's phase II which is expected in early next year will redefine the innovation ecosystem in India. It will provide a sneak peek into how Indian entrepreneurs, global corporate innovation teams, government agencies, mentors, investors, academia among others can collaborate to make Hyderabad the number one start-up destination in India," said Ravi Narayan.

Many startups incubated at T-Hub have created a niche for themselves.

K.T. Rama Rao, who is currently working president of TRS, is confident that the day is not far when Hyderabad will have a unicorn of its own.

The entrepreneurship eco-system is set to get further boost with the launch of T-Works, a prototyping and design centre, in next few months. It is expected to be one of the largest makerspaces in the world.

"Hyderabad has always been positioned optimally to seed, nurture, and scale innovation with the presence of academia, industry, and unmatched entrepreneurial spirits of the people. IT Services dominated Hyderabad's offering to global markets until recently, but this is now shifting rapidly. With the support of innovation hubs such as T-Hub and IIIT's CIE, product startups are germinating at a fast pace," said Sanjay Kuberkar,Co-founder and CEO at Schrocken Inc.

"Several Deep Tech startups, comprising IoT, AI & ML, and Blockchain are in early stages of development. Existence of large global product companies serves are the source of inspiration and talent for these early-stage startups. At Schrocken, we have been able to attract talent from top product companies' research and product divisions," said Sanjay Kuberkar.