Powering Economic Transformation: How Startups and Innovation Ecosystems Can Drive Growth in Any Country

Through Startup India, the government aims to create a conducive environment for startups to flourish and become successful businesses.

Under the Startup India initiative, the Government of India is committed to fostering the growth and development of the startup ecosystem across the country. The government has taken various measures and initiatives to support startups and entrepreneurs, such as providing funding and mentorship programs, easing regulatory and compliance requirements, and promoting innovation and entrepreneurship.

Through Startup India, the government aims to create a conducive environment for startups to flourish and become successful businesses. This initiative seeks to promote a culture of innovation and entrepreneurship, attract investments, and create job opportunities. The government’s efforts have already borne fruit, as India has emerged as a leading startup hub globally. According to recent reports, India is home to over 60,000 startups, and the country has witnessed a significant increase in the number of unicorns (startups with a valuation of over $1 billion).

Startups and the entire innovation ecosystem are the engines of growth for any country, the Minister of State in the Ministry of Commerce and Industry, Shri Som Parkash said in reply to a parliamentary question today.. Recognizing this aspect, the Government launched Startup India initiative on 16th January 2016 with an aim to build a stronger ecosystem for nurturing India’s startup culture that would further drive our economic growth, support entrepreneurship, and enable large-scale employment opportunities.

The government’s continuous efforts in this direction have led to a significant increase in the number of recognized startups from 442 in the year 2016 to 92,683 as of 28th February 2023. This remarkable growth demonstrates the positive impact of sustained government support for the startup ecosystem.

Startups, have actively contributed in Government’s flagship programs such as Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, Swachh Bharat Mission, National Heritage City Development and Augmentation Yojana (HRIDAY scheme) to improve urban infrastructure and service provision.

Furthermore, DPIIT has recognised startups which are spread across 56 diversified sectors. More than 15% of these startups are in sectors such as Agriculture, Healthcare & Lifesciences, Automotive, Telecommunication & Networking, Computer Vision, etc. Over 7,000 recognised startups are in sectors like Construction, House-hold Services, Logistics, Real Estate and Transportation and Storage contributing towards urban concerns. Sector-wise number of startups recognised is as follows:

Under the Startup India initiative, the Government constantly undertakes various efforts for the development and growth of startup ecosystem across the country.

The flagship Schemes namely, Fund of Funds for Startups (FFS), Startup India Seed Fund Scheme (SISFS) and Credit Guarantee Scheme for Startups (CGSS) are supporting startups at various stages of their business cycle to enable startups to graduate to a level where they will be able to raise investments from angel investors or venture capitalists or seek loans from commercial banks or financial institutions.

The Government also implements flagship annual exercises and programs including States’ Startup Ranking, National Startup Awards and Innovation Week which play an important role in holistic development of the startup ecosystem. The Government through stakeholder consultations seeks regulatory and policy related recommendations for enhancing ease of doing business and reducing compliance burden for startup ecosystem. The Government also facilitates participation and engagement of Indian startup ecosystem at international platforms. Details of such programs implemented under Startup India initiative by the Government to support startup ecosystem across the country are placed as follows:

Programs Implemented under Startup India initiative

The details of various programs undertaken by the Government to promote startups under Startup India initiative across the country are as under:

Startup India Action Plan

An Action Plan for Startup India was unveiled on 16th January 2016. The Action Plan comprises of 19 action items spanning across areas such as “Simplification and handholding”, “Funding support and incentives” and “Industry-academia partnership and incubation”. The Action Plan laid the foundation of Government support, schemes and incentives envisaged to create a vibrant startup ecosystem in the country.

Fund of Funds for Startups (FFS) Scheme

The Government has established FFS with corpus of Rs. 10,000 crore, to meet the funding needs of startups. DPIIT is the monitoring agency and Small Industries Development Bank of India (SIDBI) is the operating agency for FFS. The total corpus of Rs. 10,000 crore is envisaged to be provided over the 14th and 15th Finance Commission cycles based on progress of the scheme and availability of funds. It has not only made capital available for startups at early stage, seed stage and growth stage but also played a catalytic role in terms of facilitating raising of domestic capital, reducing dependence on foreign capital and encouraging home grown and new venture capital funds.

Credit Guarantee Scheme for Startups (CGSS)

The Government has established the Credit Guarantee Scheme for Startups for providing credit guarantees to loans extended to DPIIT recognized startups by Scheduled Commercial Banks, Non-Banking Financial Companies (NBFCs) and Venture Debt Funds (VDFs) under SEBI registered Alternative Investment Funds. CGSS is aimed at providing credit guarantee up to a specified limit against loans extended by Member Institutions (MIs) to finance eligible borrowers viz. DPIIT recognised startups.

Regulatory Reforms

Over 50 regulatory reforms have been undertaken by the Government since 2016 to enhance ease of doing business, ease of raising capital and reduce compliance burden for the startup ecosystem.

Ease of Procurement

To enable ease of procurement, Central Ministries/ Departments are directed to relax conditions of prior turnover and prior experience in public procurement for all DPIIT recognised startups subject to meeting quality and technical specifications. Further, Government e-Marketplace (GeM) Startup Runway has been developed which is a dedicated corner for startups to sell products and services directly to the Government.

Support for Intellectual Property Protection

Startups are eligible for fast-tracked patent application examination and disposal. The Government launched Start-ups Intellectual Property Protection (SIPP) which facilitates the startups to file applications for patents, designs and trademarks through registered facilitators in appropriate IP offices by paying only the statutory fees. Facilitators under this Scheme are responsible for providing general advisory on diff­erent IPRs, and information on protecting and promoting IPRs in other countries. The Government bears the entire fees of the facilitators for any number of patents, trademark or designs, and startups only bear the cost of the statutory fees payable. Startups are provided with an 80% rebate in filing of patents and 50% rebate in filling of trademark vis-a-vis other companies.

Self-Certification under Labour and Environmental laws

Startups are allowed to self-certify their compliance under 9 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.

Income Tax Exemption for 3 years: Startups incorporated on or after 1st April 2016 can apply for income tax exemption. The recognized startups that are granted an Inter-Ministerial Board Certificate are exempted from income-tax for a period of 3 consecutive years out of 10 years since incorporation.

International Market Access to Indian Startups: One of the key objectives under the Startup India initiative is to help connect Indian startup ecosystem to global startup ecosystems through various engagement models. This has been done though international Government to Government partnerships, participation in international forums and hosting of global events. Startup India has launched bridges with over 15 countries (Brazil, Sweden, Russia, Portugal, UK, Finland, Netherlands, Singapore, Israel, Japan, South Korea, Canada, Croatia, Qatar and UAE) that provides a soft-landing platform for startups from the partner nations and aid in promoting cross collaboration.

Faster Exit for Startups

The Government has notified Startups as ‘fast track firms’ enabling them to wind up operations within 90 days vis-a-vis 180 days for other companies.

Startup India Hub

The Government launched a Startup India Online Hub on 19th June 2017 which is one of its kind online platform for all stakeholders of the entrepreneurial ecosystem in India to discover, connect and engage with each other. The Online Hub hosts Startups, Investors, Funds, Mentors, Academic Institutions, Incubators, Accelerators, Corporates, Government Bodies and more.

Exemption for the Purpose Of Clause (VII)(b) of Sub-section (2) of Section 56 of the Act (2019): A DPIIT recognized startup is eligible for exemption from the provisions of section 56(2)(viib) of the Income Tax Act.

Startup India Showcase

Startup India Showcase is an online discovery platform for the most promising startups of the country chosen through various programs for startups exhibited in a form of virtual profiles. The startups showcased on the platform have distinctly emerged as the best in their fields. These innovations span across various cutting-edge sectors such as Fintech, EntrepriseTech, Social Impact, HealthTech, EdTech, among others. These startups are solving critical problems and have shown exceptional innovation in their respective sectors. Ecosystem stakeholders have nurtured and supported these startups, thereby validating their presence on this platform.

National Startup Advisory Council

The Government in January 2020 notified constitution of the National Startup Advisory Council to advise the Government on measures needed to build a strong ecosystem for nurturing innovation and startups in the country to drive sustainable economic growth and generate large scale employment opportunities. Besides the ex-officio members, the council has a number of non-official members, representing various stakeholders from the startup ecosystem.

Startup India

The Way Ahead: Startup India: The Way Ahead at 5 years celebration of Startup India was unveiled on 16th January 2021 which includes actionable plans for promotion of ease of doing business for startups, greater role of technology in executing various reforms, building capacities of stakeholders and enabling a digital Aatmanirbhar Bharat.

Startup India Seed Fund Scheme (SISFS)

Easy availability of capital is essential for entrepreneurs at the early stages of growth of an enterprise. The capital required at this stage often presents a make-or-break situation for startups with good business ideas. The Scheme aims to provide financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialization. Rs. 945 crore has been sanctioned under the SISFS Scheme for period of 4 years starting from 2021-22.

National Startup Awards (NSA)

National Startup Awards is an initiative to recognize and reward outstanding startups and ecosystem enablers that are building innovative products or solutions and scalable enterprises, with high potential of employment generation or wealth creation, demonstrating measurable social impact. Handholding support is provided to all the finalists across various tracks viz. Investor Connect, Mentorship, Corporate Connect, Govt. Connect, International Market Access, Regulatory Support, Startup Champions on Doordarshan and Startup India Showcase, etc.

States’ Startup Ranking Framework (SRF)

States’ Startup Ranking Framework is a unique initiative to harness strength of competitive federalism and create a flourishing startup ecosystem in the country. The major objectives of the ranking exercise are facilitating states to identify, learn and replace good practices, highlighting the policy intervention by states for promoting startup ecosystem and fostering competitiveness among states.

Startup Champions on Doordarshan

Startup Champions program on Doordarshan is a one-hour weekly program covering stories of award winning/ nationally recognised startups. It is telecasted in both Hindi and English across Doordarshan network channels.

Startup India Innovation Week

The Government organises Startup India Innovation week around the National Startup Day i.e. 16th January, with the primary goal was to bring together the country’s key startups, entrepreneurs, investors, incubators, funding entities, banks, policymakers, and other national/international stakeholders to celebrate entrepreneurship and promote innovation.

(India CSR)