In the global landscape of innovation and entrepreneurship, India has emerged as a compelling force, standing tall with its rapidly growing startup ecosystem. The transformation of India’s business landscape, from a maze of bureaucratic hurdles to a hospitable arena for startups and entrepreneurs, marks a shift in the country’s economic discourse.This transformation is the result of a large number of strategic government policies, consistent regulatory reforms, and the undying entrepreneurial spirit thriving across the nation.
The Government’s Nurturing Hand
Under the leadership of Prime Minister Narendra Modi, the government launched the Startup India initiative in 2016. This campaign was aimed at promoting and fostering entrepreneurship and innovation, marking a strategic move towards making India a nation of job creators instead of job seekers. Since the initiative’s launch, over 50 regulatory reforms have been implemented, thereby enhancing the ease of doing business, simplifying the process of raising capital, and also reducing the compliance burden on startups.
Government initiatives under the Startup India banner that are managed by the Department for Promotion of Industry and Internal Trade (DPIIT) are aimed to provide recognized startups with various benefits. These include access to tax benefits, eased compliance, and fast-tracking of Intellectual Property Rights (IPR). The DPIIT recognized startups, for instance, are eligible for exemption from provisions of the Income Tax Act. The number of startups increased from 300 in 2016 to over 1.17 lakh startups in 2023 that have been recognized by DPIIT.
An important metric that reveals the impact of these measures is the job creation by startups. The Economic Survey 2022-23 reports that DPIIT recognized startups have created over 9 lakh jobs, with 48% of them coming from Tier II and Tier III cities.
India’s Rise as a Global Innovation Hub
Over the past few years, India has experienced a remarkable transformation in its innovation capabilities. This transformation has not gone unnoticed, as evidenced by the significant jump in India’s ranking in the Global Innovation Index (GII). From holding the 81st position in 2015, the nation climbed up to the 40th spot in 2022. Such an impressive leap not only reflects the effectiveness of the government’s policies but also marks India’s promising journey towards becoming a global innovation leader.
The Global Innovation Index, an annual ranking produced by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), considers a wide array of parameters to assess a country’s innovation performance. These include factors like a country’s human capital and research, knowledge and technology outputs, and business sophistication, among others. India’s improved ranking signifies an enhanced innovation environment, better research capacity, more sophisticated businesses, and increased knowledge and technology outputs. It also reflects the country’s ongoing transition towards a knowledge-based economy, where wealth creation is driven primarily by intellectual capital.
Central to this transition has been the protection and commercialization of intellectual property, which lies at the heart of any innovation-led growth. In recognition of this, the Indian government has taken concrete steps to fortify the country’s Intellectual Property Rights (IPR) regime. These steps include measures to streamline the process of filing patents, trademarks, and copyrights, significantly reducing the time and effort required by startups and businesses.
Moreover, the government has made efforts to expedite the IPR process, allowing businesses to protect their innovations faster and more efficiently. Such measures have not only made it easier for companies to protect their inventions but have also created an environment conducive to innovation and creativity.
This stronger focus on IPR has yielded impressive results. From 2016 to 2021, the domestic filing of patents grew by a substantial 46%, indicating an increase in novel and innovative ideas worthy of patent protection. This surge in patent filings is a testament to the country’s burgeoning creativity and innovativeness, and it underscores the success of government measures to foster an innovation-friendly environment.
Encouraging Ease of Business
The Indian government has introduced multiple initiatives to ease the operational environment for startups. These include:
- A user-friendly platform for business registration: The Start-up India portal and mobile application have significantly reduced the time and effort required to establish a startup.
- Financial concessions: Startups receive an 80% rebate in patent filing and a 50% rebate in trademark filing vis-a-vis other companies.
- Self-certification: Startups can self-certify their compliance under 9 Labour and 3 Environment laws for a period of 3 to 5 years from the date of incorporation.
- Tax exemptions: Recognized startups granted an Inter-Ministerial Board Certificate are exempted from income tax for a period of 3 consecutive years out of 10 years since incorporation. Fast track winding up: Startups have been notified as ‘fast track firms,’ enabling them to wind up operations within 90 days compared to 180 days for other companies
Fostering Access to Funding
Access to capital, often termed as the lifeblood of any business, is indeed a key driver of startup success. It not only enables startups to develop their ideas and bring them to market but also helps them navigate the challenges of scaling, market expansion, and talent acquisition. Recognizing this, the government, in conjunction with numerous financial institutions, has instituted several innovative funds and programs designed to provide much-needed capital to the nation’s startups.
One such initiative is the SIDBI (Small Industries Development Bank of India) Fund of Funds, which seeks to provide high-risk capital to startups across various sectors. The Fund operates by investing in various venture capital funds, which are professional investment organizations that, in turn, invest in promising startups. By working through these venture capital funds, the SIDBI Fund of Funds effectively amplifies its impact, reaching a broader array of startups and providing a significant boost to the Indian startup ecosystem.
The Atal Innovation Mission (AIM) is another powerful initiative, launched by NITI Aayog, the government’s policy think-tank. AIM aims to promote a culture of innovation and entrepreneurship in India. It takes a comprehensive approach to fostering startups by establishing Atal Incubation Centres (AICs) and providing them with financial aid. AICs, in turn, provide startups with necessary guidance, tech resources, infrastructure, and access to capital.
To further ease the financial burden on startups, the government also introduced the Credit Guarantee Fund Scheme for Startups. The scheme offers collateral-free loans to startups, thereby reducing the financial barriers that many young companies face. The initiative guarantees loans up to INR 500 lakh per case inclusive of the term loan, working capital or any other instrument of assistance extended by a lending institution to finance an eligible borrower i.e., a startup recognized by the Department of Industrial Policy and Promotion (DIPP). The absence of a requirement for collateral security is a significant relief for startups that often do not have sufficient assets to pledge.
Incubation and Acceleration
The presence of a strong network of incubation centers and accelerators has been a key element of India’s burgeoning startup ecosystem. Providing more than just physical spaces, these centers serve as hubs of entrepreneurial activity, offering a rich array of resources and support mechanisms that can help startups thrive.
Among the many initiatives that support this vibrant network in India are Atal Incubation Centres, T-Hub, and NASSCOM 10,000 Startups. The Atal Incubation Centres (AICs), established under the Atal Innovation Mission (AIM), provides a comprehensive set of services for startups, including mentoring support, infrastructure, and access to investors. These AICs are strategically located in various academic, corporate, and other organizations, thus integrating the startup ecosystem with existing landscapes of innovation.
T-Hub, based in Hyderabad, represents one of India’s largest incubators for startups. Its model of “COLLAB – Co-Create, Co-Innovate, Co-Operate”, provides a collaborative environment for startups, corporates, academia, research institutions, and government bodies. It aims to facilitate the growth of startups by providing them with world-class workspaces, mentorship, and opportunities for networking and collaboration.
NASSCOM 10,000 Startups, an initiative of the National Association of Software and Service Companies (NASSCOM), has been instrumental in fostering the startup culture in India. It aims to scale up the startup ecosystem in India by tenfold and provides a variety of services, including incubation, acceleration, mentorship, and networking opportunities, with a specific focus on technology startups.
Thanks to these substantial efforts and initiatives, India has become the third-largest startup ecosystem in the world, home to more than 100 unicorns. The nation’s continuous commitment to bolstering entrepreneurship and startup culture is positioning it as an attractive destination for both domestic and global investors. As the ecosystem continues to mature and evolve, it promises to drive further technological advancements, job creation, and global competitiveness, shaping the trajectory of India’s economy for the coming years.
The Indian startup ecosystem serves as a shining testament to the power of Modi-led government initiatives, entrepreneurial spirit, and innovation in fostering economic development. As India continues to nurture this ecosystem, the country is poised to lead the entrepreneurial revolution, shaping a future marked by innovation, economic growth, and prosperity.
