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Startup Ecosystem in India – Where the Numbers Tell an Amazing Story

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India’s famous demographic dividend or youth bulge makes a case for policy planners to formulate policies to best utilise its human resources. In this background, Startup India, a flagship initiative of the Modi government was launched in January, 2016, to build a strong eco-system for nurturing innovation and start-ups in the country.

The gathering momentum on the start-up scene can be seen in:

  1. Measures to boost the sector
  2. Increasing interest towards entrepreneurship among Indian youth
  3. Growing number of start-ups
  4. Rise in overall start-ups funding
Measures to boost the sector
A. Start-up policies

Following the spirit of cooperative federalism, states also are being encouraged to give their own incentives to create a start-up ecosystem.

Before Startup India

Only 4 states/UT’s had startup policies

After Startup India

18 states/UT’s have startup policies

B. Startup India
  • Amended the definition of start-ups – an entity to be considered as a Start-up for up to 7 years (from earlier 5 years) and a Biotechnology Start-up for up to 10 years.
  • STARTUP INDIA HUB – handled more than 88,566 queries from start-ups through telephone, email and Twitter.
  • Funding –
    • A ‘fund of funds’ of INR 10,000 Cr is being managed by SIDBI.
    • 129 start-ups have been funded so far.
  • Entrepreneurship at Institutions –
    • At School Level
      1. 941 tinkering labs approved
      2. 374 of which granted INR 12 L each
    • At College Level
      1. Research park at IIT Kharagpur received INR 74 Cr.
      2. IIT Bombay received INR 34 Cr.
      3. 7 more research parks to be set up
  • Tax Reforms –
    1. Reduction of Income Tax rate for companies with an annual turnover of up to INR 50 crore to 25% from 30%.
    2. Start-up to be able to avail income tax exemption for 3 consecutive assessment years out of a block of 7 years.
  • Faster Exit – start-ups can wind up their business within a period of 90 days.
  • Stockholding reforms –
    1. Start-ups allowed to issue ESOPs (employee stock option plans)
    2. Limit with regards to sweat equity increased from 25% to 50% of paid up capital
C. E-Biz portal

Government to business (G2B) portal which provides single window mechanism for all business transactions with the government. This gives a level playing field for start-ups to get involved in selling to the government too.

D. Scheme for IPR awareness

Over 4,000 IPR awareness workshops are being conducted in academic institutions (schools and colleges) and the industry including Start-ups and MSMEs.

Start-ups and entrepreneurship in India have not been given such serious attention and that too from top policy-making echelons of the country earlier. This has played an important role in accelerating the start-up engine in India.

Increasing interest towards entrepreneurship among Indian youth

In just over two and a half years of the launch of Startup India Scheme, as many as 197,967 individuals registered themselves under 4 weeks free learning and development (L&D) module of Startup India scheme to learn the nitty-gritty of starting their own business.

Apart from imparting learning to individuals, the government has also recognised around 11,841 start-ups as on August 09, 2018. Recognised start-ups meet a certain criterion of government which then helps them to obtain benefits being offered.

Growing number of start ups

Above figure suggest that in 2013, total number of tech-based start-ups in India was 2200 and it more than doubled to 4750 with in only next 3 years.

Even in 2017, India further added 1,000 start-ups according to a NASSCOM study as per a report.  It further said that the country is witnessing a rapid rise in the business to business start-ups focused on verticals like health-tech, fintech, e-commerce and aggregators.

Rise in overall start-ups funding

From the graph, it can be clearly established that start-ups funding growth saw an eye-popping jump from $1.6 Bn in 2013 to a record $13 Bn in 2017.

Way Forward

If the current level of government impetus continues, Indian start-ups ecosystem that is the 3rd largest in the world will only improve further. At this juncture, it is worth recalling that a study titled Indian Start-up Ecosystem Maturing – 2016 had already projected that India will be home to 10,500 start-ups by 2020.

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