For A Better Facilitation of Dalit Entrepreneurs Through Start-Up India Plan

On January 6, 2016, the Government of India approved Rs. 8000 crore of funds which will stand guarantee for loans to new ventures, in its bid to create jobs and promote entrepreneurship. It also announced ‘Stand up India’ scheme for credit facilities to SC, ST and women entrepreneurs at lower rates.While the Start-up India Action Plan has garnered widespread acclaim over some of its comprehensive steps to encourage start-ups, a pivotal sphere seems to have been neglected in its policy-making. This is regarding the inclusion of the sections of society which fall at the bottom of the socio-economic pyramid.

While some measures do take these sections into account, they do not guarantee the wholesome integration of these sections into the entrepreneurial mainstream. These include the SC, ST, Dalit entrepreneurs and entrepreneurs in rural areas. The threat of rising inequality prevails and facilitating businesses run by Dalits could be more helpful than other forms of supportive actions because money empowers people.Money can independently fuel a free market. Making it easy for Dalits to start businesses may do more for emancipation of their social status, as money is a great equaliser. Rather than prohibiting the use of money and wealth, attempts should be made to increase society’s tolerance for its use.Schemes like Stand-Up India and SC/ST hub are a well-intended moves by the government. However, only money and no market makes it impossible for Dalits to become entrepreneurs.

The key challenges faced by these entrepreneurs fall into three major categories. Firstly, there are hindrances due to social problems. There is a lack of access to existing business networks since most business houses belong to members of one specific community. This leads to a feeling of alienation from those who already have established businesses. Moreover, discrimination still continues to be a persistent phenomenon in India. Caste stigma is a major hurdle. Secondly, there is a lack of easy availability of credit facilities from formal sources owing to collateral issues. This leads to a severe finance crunch. Another problem faced by majority of them is the lack of managerial, entrepreneurial and technical know how for establishing a sound start-up. Thirdly,the political and administrative issues are ubiquitous. Several difficulties are faced in obtaining clearances, both due to political unwillingness and administrative lacunae.Politics in India is highly influenced by business lobbies which do not prefer emergence of Dalits to compete in business.

The Start-up Action Plan talks of provisions of several grants. However, business owners often turn to grants because they are not required to pay them back. Essentially, one can look at grants as “free money”, but they come with stipulations. Also, understanding and navigating the grant process can be complex. First, there is a need to research and find a grant for which one is eligible. This is followed by the strict application and compliance guidelines one must meet, to be eligible. This in turn is followed by the competition faced with other businesses for the same pool of money. If one is awarded a grant, a detailed report needs to be made on how it was used. Finally, one must devote time and energy to the lengthy application process and subsequently wait for approval. Thus, to cater to the growing demand due to rise in the number of SC/ST entrepreneurs, Stand-Up Connect Centres will be established at the offices of SIDBI and National Bank for Agriculture and Rural Development (NABARD). The SIDBI can join hands with the Dalit Indian Chamber of Commerce and Industry (DICCI), among other institutions, to facilitate the loans. However, for maximum benefit to be achieved by this scheme, a crisp and uncomplicated procedure has to be adopted to avoid subsequent delays.

Keeping in mind the difficulties faced, the Government of India incorporated a few measures as part of the Start-up India Plan, for the benefit of these communities. One of them is the provision of financial aid in the form of security.The Micro Units Development and Refinance Agency Credit Guarantee Fund (MUDRA CGF) assumes security for loans extended to small entrepreneurs. Stand-Up India CGF will also stand guarantee for 10 lakhs to Rs 1 crore loans to be provided to at least 2.5 lakh SC/ST and women entrepreneur by every bank branch, including private sector. Along with this, the Government has allocated Rs. 500 crore for SC, ST and women entrepreneurs in the Budget under the Stand-Up India Scheme.

Additional steps can be taken by the government for placing these communities at par with the entrepreneurial mainstream. Members of these communities should be provided with Skills, Education and Training. Help can be sought from the National Skill Development Corporation(NSDC) in this regard. It is a much-needed attempt by the government to provide them an opportunity to develop the required set of skills. On the economic front, provisions made for cheap credits and collateral free loan could be a major boost for these entrepreneurs. Special Funds for Dalits can be included in the Priority Sector Lending by Banks. As a collateral step, co-operatives should be promoted among Dalits. This would not only help reach out to a wider set of aspiring entrepreneurs, but also connect them with more experienced persons and make the most of the resources available. It would serve as a key to more information and awareness about the market. Political will and administrative empathy towards Dalits can act as a moral support to them.The government can also rope in well-established private firms for Dalit upliftment,who can act as Angel Investors and provide managerial skills. Availability of investment is the primary requirement for any start-up. Venture Capital Funds can be sought after for investing in their entrepreneurial ventures.

The Startup India Action Plan has undoubtedly proved to be the beginning of a whirlwind of change in Indian entrepreneurship. However, its policies need to be all-inclusive and far-reaching for it to turn into a potent eventuality. A gradual approach is necessary, which must be a co-operative effort not only by the government, but also by the capitalist class and the educated youth. This new vision must be realized to break the vicious circle that entangles the weaker sections of society.

This is the last in the series of articles published at the conclusion of a policy review project on PM Modi’s Start-up India Plan undertaken by Praneeth Rao, Vaibhav Goyal, Agrima Singh and Simrat Singh.

IPAN Research Team

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