STARTUP INDIA

Background: Startup India is a flagship initiative of the Government of India, intended to catalyse startup culture and build a strong and inclusive ecosystem for innovation and entrepreneurship in India. Launched in January, 2016, the Startup India Initiative has rolled out several programs with the objective of supporting entrepreneurs, building a robust startup ecosystem and transforming India into a country of job creators instead of job seekers. These programs are managed by a dedicated Startup India Team, which reports to the Department for Industrial Policy and Promotion (DPIIT).

FEATURES:

    • It is a central sector scheme.
    • Implementing agency: DPIIT
    • Eligibility:
      • Registered as private ltd. Company or a partnership firm or a limited liability partnership (LLP)
      • Turnover: Less than 100 crores in any of previous financial years
      • Age: upto 10 years from date of incorporation
      • Function: Innovation or improvement of existing products, services and processes and have potential to generate employment/create wealth.
      • Exclusion: an entity formed by splitting up or reconstruction of an existing.

 

Key Pillars of Support for Startups under the Startup India Initiative:

1. Simplification and Handholding:

a) Self-certificate to reduce regulatory burden.

b) Easier compliance, easier exit process for failed startups, legal support, fast tracking of patent applications.

c) A website to reduce information asymmetry.

2. Funding & Incentives:

a) Exemptions on Income Tax and Capital Gains Tax for eligible startups.

b) A fund of funds to infuse more capital into the startup ecosystem.

c) A credit guarantee fund through SIDBI.

3. Incubation & Industry-Academia Partnerships:

a) Creation of numerous incubators and innovation labs, events, competitions and grants.

b) Launch of Atal Innovation Mission (AIM)

Steps by government to promote startup India:

S.No Action Points

Objective
1 Compliance Regime based on Self-certification
    • To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.
2 Startup India Hub
    • To create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding
3 Startup India Portal and Mobile App
    • To serve as the single platform for Startups for interacting with Government and Regulatory Institutions for all business needs and information exchange among various stakeholders.
4 Legal Support and Fast-tracking Patent Examination at Lower Costs.
    • To promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs by providing access to high quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in fees.
5 Relaxed Norms of Public Procurement for Startups
    • To provide an equal platform to Startups (in the manufacturing sector) vis-à-vis the experienced entrepreneurs/ companies in public procurement.
    • ‘GeM Startup Runway’ has been launched for startups to sell products and services to Government.
    • Additionally, Startups can now register and participate in all public orders on Central Public Procurement Portal and get exemptions on prior experience, prior turnover and earnest money deposit requirements.
6 Faster Exit for Startups
    • To make it easier for Startups to wind up operations. Ministry of Corporate Affairs has notified Startups as “Fast track firms” enabling them to wind up operations within 90 days I 180 days for other companies
7 Funding Support through Fund of Funds
    • To provide funding support for development and growth of innovation driven enterprises.
    • The Fund of Funds for Startups (FFS) is being operated and managed by Small Industries Development Bank of India (SIDBI). FFS funds the Alternative Investment Funds (AIFs) which in turn invest twice the amount contributed by the FFS, into DPIIT recognized startups.
8 Credit Guarantee Fund for Startups
    • To catalyse entrepreneurship by providing credit to innovators across all sections of society.
    • In order to overcome traditional Indian stigma associated with failure of Startup enterprises in general and to encourage experimentation among Startup entrepreneurs through disruptive business models, credit guarantee comfort would help flow of Venture Debt from the formal Banking System.
9 Tax Exemption on Capital Gains
    • To promote investments into startups by mobilizing the capital gains arising from sale of capital assets.
    • Exemption shall be given to persons who have capital gains during the year, if they have invested such capital gains in the Fund of Funds recognized by the Government. This will augment the funds available to various VCs/AIFs for investment in startups.
10 Tax Exemption to Startups for 3 years
    • To promote the growth of Startups and address working capital requirements.
11 Tax Exemption on Investments above Fair Market Value
    • To encourage seed-capital investment in Startups.
    • Currently, investment by venture capital funds in Startups is exempted from Tax under section 56(2)(viib) of the Income Tax Act, 1961. The same shall be extended to investment made by incubators in the Startups.
12 Organizing Startup Fests for Showcasing Innovation and Providing a Collaboration Platform
    • To galvanize the Startup ecosystem and to provide national and international visibility to the Startup ecosystem in India.
    • These fests would provide a platform to Startups in India to showcase their ideas and work with a larger audience comprising of potential investors, mentors and fellow Startups.
13 Launch of Atal Innovation Mission (AIM) with Self- Employment and Talent Utilization (SETU) Program
    • To serve as a platform for promotion of world-class Innovation Hubs, Grand Challenges, Startup businesses and other self-employment activities, particularly in technology driven areas.
    • The Atal Innovation Mission (AIM) shall have two core functions:
      • Entrepreneurship promotion through Self-Employment and Talent Utilization (SETU), wherein innovators would be supported and mentored to become successful entrepreneurs.
      • Innovation promotion to provide a platform where innovative ideas are generated.
    • This initiative is coordinated by NITI Aayog.
14 Harnessing Private Sector Expertise for Incubator Setup
    • To ensure professional management of Government sponsored / funded incubators, Government will create a policy and framework for setting-up of incubators across the country in public private partnership.
    • Atal Innovation Mission (AIM), under the Atal Incubation Centres (AICs) scheme is establishing new incubation centres, that nurture innovative start-up businesses in their pursuit to become scalable and sustainable enterprises. These incubators provide state-of-the-art infrastructure, mentoring support, business planning support, access to seed capital, training sessions etc.
15 Building Innovation Centres at National Institutes
    • To propel successful innovation through augmentation of incubation and R&D efforts.
    • This initiative is coordinated by Department of Science and Technology and Ministry of Human Resource Development.
16 Setting up of 7 New Research Parks
    • To propel successful innovation through incubation and joint R&D efforts between academia and industry.
    • The Government shall set up 7 new Research Parks in institutes such as IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT Kharagpur, IISc Bangalore, IIT Gandhinagar and IIT Delhi with an initial investment of Rs. 100 crore each. The Research Parks shall be modelled based on the Research Park setup at IIT Madras.
    • This initiative is coordinated by Department of Science and Technology and Ministry of Human Resource Development.
17 Promoting Startups in the Biotechnology Sector
    • To foster and facilitate bio-entrepreneurship.
18 Innovation Focused Programs for Students
    • To foster a culture of innovation in the field of Science and Technology amongst students.
    • Innovation Core: To target school kids with an outreach to 10 lakh innovations from 5 lakh schools.
    • NIDHI: A Grand Challenge program (“National Initiative for Developing and Harnessing Innovations) to support and award Rs. 10 lakhs to 20 student innovations from Innovation and Entrepreneurship Development Centres (IEDCs).
    • Uchchatar Avishkar Yojana: A joint MHRD-DST scheme which has earmarked Rs. 250 crore per annum towards fostering “very high quality” research amongst IIT students.
    • 50% from Ministry of Human Resource Development,
    • 25% from Department of Science and Technology and
    • 25% from industry.
19 Annual Incubator Grand Challenge
    • To support creation of successful world class incubators in India.

 

INITIATIVES TO PROMOTE STARTUP:

    • Make in India initiative – To encourage companies to develop, manufacture and assemble products in India.
    • Atal Innovation Mission (AIM) – It is a flagship initiative to create and promote a culture of innovation and entrepreneurship across the length and breadth of country.
    • Startup India Seed Fund Scheme
    • National Startup Awards – It was aims to recognize, reward, promote and offer exclusive handholding support to a diverse set of startups.
    • SCO Startup Forum – It aims to create multilateral cooperation and engagement for startups among the SCO Member States, empowering the local startup ecosystem.
    • Prarambh – The Startup International ecosystem
    • National Initiative for Developing and Harnessing Innovations (NIDHI) – It will help startups with initial funding especially student startups.
    • PMMY (Pradhan Mantri Mudra Yojana) – To create inclusive, sustainable and value based entrepreneurial culture by providing low interest rate loans.
    • National Mentorship Portal (MAARG) – It provides one stop mentorship platform to facilitate mentorship for startups across by connecting with acadmecians and industry experts.
    • ASCEND (Accelerating Startup Caliber & Entrepreneurial Drive) – Under this sensitization workshops on startups and entrepreneurship were conducted for all eight North Eastern States with the objective to capacitate and augment knowledge on key aspects of entrepreneurship and continue efforts towards creating a robust startup ecosystem in these States.
    • Startup20 Engagement Group – It has been institutionalized under India’s G20 Presidency. It acts as the voice of the global startup ecosystem bringing together varied stakeholders on a common platform.

BENEFITS:

    • Robust startup ecosystem to establish India as a start-up hubacross the world.
    • Promoting the culture of self-employment by encouraging entrepreneurship.
    • Increase in Patent registration by Indian entrepreneurs as reduction in registration fees.
    • Encouraging culture of innovation promoting creation and invention of new goods and services.
    • Employment generation
    • Contribute to overall economic growth of the country.

CHALLENGES FACED BY INDIAN STARTUPS:

    • Funding Challenges include:
      • Limited access to capital
      • Difficulty in obtaining venture capital.
      • lack of investor confidence
    • Absence of a robust infrastructure ecosystem as:
      • Limited access to technological resources
      • Inadequate physical infrastructure
      • Dearth of incubation centers and mentorship programs
    • regulatory hurdles and complex tax structures due to cumbersome compliance process and bureaucratic red tape.

ACHIEVEMENTS:

    • India has emerged as the 3rd largest ecosystem for startups globally.
    • India ranks 2nd in innovation quality with top positions in the quality of scientific publications and the quality of its universities among middle-income economies.
    • One lakh plus startups recognized (average of 80 per day)
      • 50% from tier II and tier III cities.
      • 48% have at least one women director.
    • 42 lakh plus employment generated (avg. 11 per startup).

FACTS:

    • Highest recognized startups in Delhi followed by UP, Gujrat, Maharashtra, Karnataka.
    • The industry which has seen the maximum number of startups is IT Services followed by healthcare & life sciences and education.
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