Startup India: Know About Government Initiative That Supports & Funds India's Startup Ecosystem

To provide financial aide and support to the budding startup culture in India, the central government launched the Startup India initiative in January 2016 across the country. Under this initiative, qualifying businesses gain recognition as startups by the Department for Promotion of Industry and Internal Trade (DPIIT). This helps them receive a variety of benefits including tax incentives, simpler compliance, IPR fast-tracking, and others.

One such story is of Sunny Garg, who received ₹65 Lakhs for his startup at the age of 19. Sunny entered the startup ecosystem with his venture 'Yourshell', a full stack co-living operator. After three years, he sold the successful venture following a multi-million dollar evaluation. Based in Bangalore, Sunny has since spoken at more than hundred events about the scope of startup ecosystem in India, and is currently working as the co-founder of another venture, 'Crib', a marketplace aimed at digitalising transactions and communications at rental housing.

Aim To Empower 'Made-In-India' Startups

As of September 7, 2022, 107 unicorns (startups valued at $1 billion or more) had a total valuation of $340.79 billion, making India the third-largest startup ecosystem in the world. The Indian startup ecosystem has welcomed 23 new members into the unicorns club as of 2022 alone, according to Financial Express. With such rigorous expansion in the startup ecosystem, Startup India aims to empower 'made-in-India' startups and create funds for budding entrepreneurs.

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The initiative consists of a plan of action involving 19 steps that cover a variety of topics, including simplification and assistance, financial support and incentives, partnerships between business and academia, and incubation. As of November 30, almost 84,000 companies from across the nation had received startup recognition. Karnataka had the most incubated startups (126), closely followed by Maharashtra (104), Tamil Nadu (51), Gujarat (49), and Telangana (46)

The Funds For Startups (FFS) programme, Credit Guarantee Scheme for Startups (CGSS), and Startup India Seed Fund Scheme (SISFS) are implemented as part of the endeavour to offer funding at different phases of a startup's business cycle. As of last month, 93 AIFs (alternative investment funds) under FFS have commitments totaling ₹7,528 crores. 773 startups have received investments from these AIFs. Similarly, 656 startups were incubated over the course of the previous two years by SISFS.

For a startup to qualify under the scheme, they need the following: Listing as a private limited company not more than ten years old and a scalable business model with a turnover of less than ₹100 crores. Once registered, a startup can avail multiple benefits, including self-certification, tax exemptions, and access to SIDBI 'Fund Of Funds', a ₹10,000 crores worth fund set aside by the Indian government and currently administered by SIDBI as a fund to support startups in the country.

Needs Strategic Focus On Government Policies

While the initiative aims to provide a much-needed boost to the startup ecosystem in the country, the government policies also need to align with the vision. Drastic policy changes in the fields of e-commerce, IT, crypto, and Edtech have impacted the startups of those industries.

For example, when RBI issued a notification prohibiting the extension of any credit line through prepaid payment instruments (PPIs) such as cards and digital wallets, many fintech startups were forced to stop issuing their flagship products. Similarly, when the government introduced a 30 per cent tax on all crypto-transactions, several crypto startups suffered from reduced transaction volumes.

New and innovative fields also need to come under the purview of the scheme, such as space tech and EV. The idea should be to expand this initiative into a dynamic process involving well-directed policies and financial assistance and exponentially grow the Indian startup ecosystem.

Also Read: Aspiring For Startup, Here Are Four Important Advice From India's Leading Investor