Indian Government's Initiatives Spurring Growth of Indian Startup Economy
Unlike a decade ago, startups are no longer a new trend. In layman's terms, a startup is defined as a young business created by one or more entrepreneurs with the aim of developing and marketing a new product or service. The traditional startup generally has a shoestring operation, with initial funding being provided by the founders or their friends and family.
The startup ecosystem in India has however evolved massively. The country is today home to a plethora of innovative and successful startups that have come up over the past few years. The Indian startup ecosystem has also become the third most successful globally, after U.S. and China. The last two years have also witnessed increased investor and deal activity.
A catalyst for this momentum picked by the Indian startup ecosystem has been the push provided by the Indian government. The government of India defines startup as an entity that is headquartered in India, which was opened less than 10 years ago, and has an annual turnover of less than Rs 100 crores ($14 million).
The role of governments in developing a startup culture is very crucial. The Indian Government has made the startup economies progressive by creating better policies, reducing the tax burden, easing migration of talented workers, and developing infrastructure. The Union budget launched in 2021 also brought to the fore moves such as extension of one year tax holiday for startups, capital gains exemption for startups by one more year, and incentivizing the incorporation of OCPs among other moves.
Other than policy changes, the Indian government has also been encouraged a culture of innovation and research by creating programs and educational institutions to promote talent and tech developments across the country.
Experts also believe that the support of the Government has to be decentralized to be more effective. It is more important to provide support locally than at the central level. Hence, most state governments also play an important role in executing policies and building a local startup ecosystem within the state.
One of the primary schemes to be launched by the Government of India was the Start-up India scheme. Launched on 16th January 2016 by Prime Minister Narendra Modi, it falls under the Department of Industrial Policy and Promotion. The idea has been to give support to entrepreneurs by the ease of compliance and relaxed norms along with a credit guarantee fund launch for startups. The action plan of this initiative focuses on three areas: Simplification and Handholding, Funding Support and Incentives, and Industry-Academia Partnership and Incubation.
Under this initiative, the Government has launched the I-MADE program, to help Indian entrepreneurs build 10 lakh (1 million) mobile app start-ups. The Government has also notified the ‘Startup India Seed Fund Scheme’ (SISFS) under Startup India with the objective of establishing a structure that provides monetary benefits to eligible startups.
The recent union budget extended the eligibility period for startups to March 31, 2022, to avail the tax exemption under Section 80-IAC of the Income Tax Act, 1961.
Another Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship (ASPIRE) is another initiative of the Government of India and promoted by the Ministry of Micro, Small, and Medium Enterprises (MSME). It seeks to promote start-ups for innovation in the agro-industry.
ASPIRE was launched in 2015 to provide knowledge to entrepreneurs for starting up their businesses and becoming job providers. It was introduced to create new jobs and promote start-up enterprises for innovation in rural areas and traditional agro-industries. The budget of 2014-2015 allocated a corpus of Rs200 crore to ASPIRE. The budget of 2019 proposed to set up 80 LBI (Livelihood Business Incubator) and 20 TBI (Technology Business Incubator) in 2019-20 under this scheme.
The Micro Units Development Refinance Agency (MUDRA) Bank is another credit facility launched to support rural start-ups and aims to provide low-interest rate loans to entrepreneurs from low socio-economic backgrounds.
The bank falls under the head of the Pradhan Mantri Mudra Yojana, through which it provides loans of Rs 10 lakh to small ventures without any collateral security. Loans can be granted under three categories: up to Rs 50,000 under the 'Shishu' category; Rs 50,001-Rs 5 lakh under 'Kishore' and between Rs 5,00,001 and Rs 10 lakh under the 'Tarun' category. As per the annual report of the Mudra scheme, total disbursements under the scheme stood at Rs 2.46 lakh crore in 2017-18. Out of this, 40 percent were disbursed to women entrepreneurs and 33 percent to social categories. More than 4.81 crore micro borrowers have benefited through the PMMY scheme during the year FY18.
The Ministry of Skill Development and Entrepreneurship also plays a vital role in supporting the Indian startup economy. Its wise allocation of resources shows India’s dedication to promoting entrepreneurship. A Ministry made to take care of and cater to the startup world, continuously plans skill development sessions, tutorials, events, and seminars while also looking after gap funding. This helps many individuals to find their interests and launch appropriate ventures via creative ideas.
Atal Innovation Scheme is set up by Niti Aayog to create cooperation between state, central, and local innovation schemes and execute entrepreneurship spirit right from schools to corporates. Atal Tinkering Labs, Atal Incubators, and Atal New India Challenges are some of the initiatives under this mission, to boost startups in India and also mentor them. Under this programme, over 7000 ATLs are established across the country so far enabling over 3 Million+ students between Grade VI to Grade XII to acquire a problem-solving, tinkering, and innovative mindset.
Another scheme of significance is the Start-ups Intellectual Property Protection (SIPP) scheme launched by the Government of India. It facilitates start-ups to file applications for patents, designs, and trademarks through registered facilitators' inappropriate IP offices by paying only the statutory fees. The vision of the scheme is to protect the Intellectual Property Rights of Startups and thus encourage innovation and creativity among them. The scheme is inclined to nurture and mentor innovative and emerging technologies among Startups and assist them in protecting and commercialize them by providing access to high-quality IP services and resources.
Support for International Patent Protection in Electronics & Information Technology (SIP – EIT) is one more scheme rolled out by the Department of Electronics and Information Technology (DeiTY) to financially aid MSMEs and technology startup units for filing patents abroad. International patent filing encourages innovation and acknowledges the worth of global Intellectual Property (IP) along with tapping the growth opportunities in the Information Communication Technologies and Electronics (ICTE) sector.
Credit Guarantee Scheme for Startups was launched to provide third-party credit risk mitigation to lenders through the absorption of a portion of the lender's losses on the loans made to SMEs in case of default, typically in return for a fee. The start-up sector, most recently, received a much-needed push from the Government of India with the formulation of the Credit Guarantee Scheme for Startups with a contribution of Rs. 2,000 crore.
The scheme is part of the Startup India action plan and will thus allow startups to avail loans for their businesses without any collateral. The credit guarantee offered will be inclusive of any other assistance (Venture capital, working capital, debentures, optionally convertible debt, term loans, etc.) and will be offered up to the amount of Rs. 5 crores to every eligible startup.
The startup ecosystem in India has however evolved massively. The country is today home to a plethora of innovative and successful startups that have come up over the past few years. The Indian startup ecosystem has also become the third most successful globally, after U.S. and China. The last two years have also witnessed increased investor and deal activity.
A catalyst for this momentum picked by the Indian startup ecosystem has been the push provided by the Indian government. The government of India defines startup as an entity that is headquartered in India, which was opened less than 10 years ago, and has an annual turnover of less than Rs 100 crores ($14 million).
The role of governments in developing a startup culture is very crucial. The Indian Government has made the startup economies progressive by creating better policies, reducing the tax burden, easing migration of talented workers, and developing infrastructure. The Union budget launched in 2021 also brought to the fore moves such as extension of one year tax holiday for startups, capital gains exemption for startups by one more year, and incentivizing the incorporation of OCPs among other moves.
Other than policy changes, the Indian government has also been encouraged a culture of innovation and research by creating programs and educational institutions to promote talent and tech developments across the country.
Experts also believe that the support of the Government has to be decentralized to be more effective. It is more important to provide support locally than at the central level. Hence, most state governments also play an important role in executing policies and building a local startup ecosystem within the state.
One of the primary schemes to be launched by the Government of India was the Start-up India scheme. Launched on 16th January 2016 by Prime Minister Narendra Modi, it falls under the Department of Industrial Policy and Promotion. The idea has been to give support to entrepreneurs by the ease of compliance and relaxed norms along with a credit guarantee fund launch for startups. The action plan of this initiative focuses on three areas: Simplification and Handholding, Funding Support and Incentives, and Industry-Academia Partnership and Incubation.
Under this initiative, the Government has launched the I-MADE program, to help Indian entrepreneurs build 10 lakh (1 million) mobile app start-ups. The Government has also notified the ‘Startup India Seed Fund Scheme’ (SISFS) under Startup India with the objective of establishing a structure that provides monetary benefits to eligible startups.
The recent union budget extended the eligibility period for startups to March 31, 2022, to avail the tax exemption under Section 80-IAC of the Income Tax Act, 1961.
Another Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship (ASPIRE) is another initiative of the Government of India and promoted by the Ministry of Micro, Small, and Medium Enterprises (MSME). It seeks to promote start-ups for innovation in the agro-industry.
ASPIRE was launched in 2015 to provide knowledge to entrepreneurs for starting up their businesses and becoming job providers. It was introduced to create new jobs and promote start-up enterprises for innovation in rural areas and traditional agro-industries. The budget of 2014-2015 allocated a corpus of Rs200 crore to ASPIRE. The budget of 2019 proposed to set up 80 LBI (Livelihood Business Incubator) and 20 TBI (Technology Business Incubator) in 2019-20 under this scheme.
The Micro Units Development Refinance Agency (MUDRA) Bank is another credit facility launched to support rural start-ups and aims to provide low-interest rate loans to entrepreneurs from low socio-economic backgrounds.
The bank falls under the head of the Pradhan Mantri Mudra Yojana, through which it provides loans of Rs 10 lakh to small ventures without any collateral security. Loans can be granted under three categories: up to Rs 50,000 under the 'Shishu' category; Rs 50,001-Rs 5 lakh under 'Kishore' and between Rs 5,00,001 and Rs 10 lakh under the 'Tarun' category. As per the annual report of the Mudra scheme, total disbursements under the scheme stood at Rs 2.46 lakh crore in 2017-18. Out of this, 40 percent were disbursed to women entrepreneurs and 33 percent to social categories. More than 4.81 crore micro borrowers have benefited through the PMMY scheme during the year FY18.
The Ministry of Skill Development and Entrepreneurship also plays a vital role in supporting the Indian startup economy. Its wise allocation of resources shows India’s dedication to promoting entrepreneurship. A Ministry made to take care of and cater to the startup world, continuously plans skill development sessions, tutorials, events, and seminars while also looking after gap funding. This helps many individuals to find their interests and launch appropriate ventures via creative ideas.
Atal Innovation Scheme is set up by Niti Aayog to create cooperation between state, central, and local innovation schemes and execute entrepreneurship spirit right from schools to corporates. Atal Tinkering Labs, Atal Incubators, and Atal New India Challenges are some of the initiatives under this mission, to boost startups in India and also mentor them. Under this programme, over 7000 ATLs are established across the country so far enabling over 3 Million+ students between Grade VI to Grade XII to acquire a problem-solving, tinkering, and innovative mindset.
Another scheme of significance is the Start-ups Intellectual Property Protection (SIPP) scheme launched by the Government of India. It facilitates start-ups to file applications for patents, designs, and trademarks through registered facilitators' inappropriate IP offices by paying only the statutory fees. The vision of the scheme is to protect the Intellectual Property Rights of Startups and thus encourage innovation and creativity among them. The scheme is inclined to nurture and mentor innovative and emerging technologies among Startups and assist them in protecting and commercialize them by providing access to high-quality IP services and resources.
Support for International Patent Protection in Electronics & Information Technology (SIP – EIT) is one more scheme rolled out by the Department of Electronics and Information Technology (DeiTY) to financially aid MSMEs and technology startup units for filing patents abroad. International patent filing encourages innovation and acknowledges the worth of global Intellectual Property (IP) along with tapping the growth opportunities in the Information Communication Technologies and Electronics (ICTE) sector.
Credit Guarantee Scheme for Startups was launched to provide third-party credit risk mitigation to lenders through the absorption of a portion of the lender's losses on the loans made to SMEs in case of default, typically in return for a fee. The start-up sector, most recently, received a much-needed push from the Government of India with the formulation of the Credit Guarantee Scheme for Startups with a contribution of Rs. 2,000 crore.
The scheme is part of the Startup India action plan and will thus allow startups to avail loans for their businesses without any collateral. The credit guarantee offered will be inclusive of any other assistance (Venture capital, working capital, debentures, optionally convertible debt, term loans, etc.) and will be offered up to the amount of Rs. 5 crores to every eligible startup.
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