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What are the measures proposed by India’s Economic Survey to address ‘flipping’ in the start-up ecosystem?

Flipping or “the process of transferring the entire ownership of an Indian company to an overseas entity” is a cause for concern, the survey pointed out

“The flipping phenomenon reflects start-ups venturing out for short-term gains in the dynamic, uncertain geopolitical world. However, the flip can be reversed with collective action by the Government related regulatory bodies and other stakeholders,” as per the Economic Survey released by the Indian government for 2022-23. What is flipping: The survey explained it as the “process of transferring the entire ownership of an Indian company to an overseas entity, accompanied by a transfer of all IP and all data hitherto owned by the Indian company”. The process transforms an Indian company into a 100 per cent subsidiary of a foreign entity, with the founders and investors retaining ownership via the foreign entity, by swapping all shares. Why it matters: The survey pointed out that India ranks among the largest start-up ecosystems in the world responsible for creating nearly nine lakh jobs. But many of the start-ups are not domiciled in India which is a cause for concern. It is ubiquitous to a degree that it's no longer a specialised offering by professionals, according to an article in The Financial Express. The survey is notable as it highlights why the problem needs to be addressed by the state and ways in which it can be done. It is what the authors of the Financial Express article also suggest so as to prevent India from becoming a land of subsidiaries. What are the proposed measures: The survey noted that the "growing maturity of India's capital markets" has slowed down flipping, and incentivised companies…

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I cover several beats such as Crypto, Telecom, and OTT at MediaNama. I can be found loitering at my local theatre when I am off work consuming movies by the dozen.

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