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What Are Startups?

➤ A startup is a company or project undertaken by an entrepreneur to seek, develop and validate a scalable economic model

➤ An entity shall be considered as a Startup if it fulfills conditions mentioned below:

  • Not older than ten years from the date of incorporation/ registration.

  • It is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.

  • Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded 100 crore rupees.

  • Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

➤ While entrepreneurship refers to all new businesses including self employment and businesses that never intend to become registered startup prefers to new businesses that intend to grow large beyond the solo founder

➤ Some startups with the time become successful and become unicorns (valuation of more than $ 1 billion).

Significance of Startups

  • For employment generation in the economy

  • For creation of wealth since entrepreneurs are attracting investors by investing their own resources

  • Better standard of living

  • It is possible to generate more revenue via startups

  • It is a source of foreign direct investment

  • It promotes the culture of entrepreneurship

Status of Startup ecosystem in India

  • India is the 3rd largest start-up ecosystem in the world.

  • As on June 3, 2021, 50,000 startups across have been recognized as startups by DPIIT.

  • Leading sectors that pervade the Indian start-up landscape are: fintech, e-commerce, logistics enterprises, health-tech

  • Start-up are spread across 590 districts – the startup movement has reached 80% of our districts.

  • All States and UT in India have at least 1 startup

  • 45% of recognized startups have at least one women director

  • Startup recognized across 54 sectors and 224 sub sectors

  • 4.6 lakh jobs reported by recognized startups

  • An average of 12 jobs created by each recognized startups

Steps taken by the government

  • Startup India campaign was launched in 2016 it is aimed at promoting bank financing for startup ventures to boost entrepreneurship and encourage job creation and restrict the role of states in the policy domain. Rural India’s version of startup India has been named Deen Dayal Upadhyaya Swaniyojan Yojana.

  • Make in India was launched in 2014. it is aimed at transforming India into a global manufacturing hub and contains a raft of proposals designed to attract investments from both local and foreign companies in 25 key areas.

  • Stand-up India is aimed at promoting entrepreneurship and job creation at the grassroots level especially keeping in mind the scheduled caste scheduled Tribes and women.

  • Atal Innovation Mission launched by NITI Aayog to provide an innovation promotion platform involving academicians and drawing upon national and international experiences to foster a culture of innovation research and development.

  • National Skill Development Mission was launched in 2015. The mission aims to build synergies across sectors and states in skilled industries and initiatives.

  • Ease of Doing Business reforms due to which India has improved its ranking by 79 positions in five years (2014-19) in the World Bank’s Ease of Doing Business Report.

Startup India

➤ Launched in January 2016 as a Clarion call to the innovators, entrepreneurs  and thinkers of the nation to lead from front in driving India’s sustainable economic growth and create large scale employment opportunities.

➤ It laid the foundation for building a self reliant India.

➤ Key objectives of startup India action plan are as follows

  1. Simplification and handholding

  2. Funding support and incentives

  3. Industry academy partnership and incubation

➤ An additional area relating to this initiative is to discard restrictive States government policies within this domain , such as license Raj ,land  permission for investment proposals and environmental clearances

Inherent challenges to Start-ups in India

  1. Financial scarcity: Availability of finance is critical for the startups and is always a problem to get sufficient amounts.

  2. Lack of Infrastructure: There is a lack of support mechanisms that play a significant role in the lifecycle of startups which include incubators, science and technology parks, business development centers etc.

  3. Regulatory bottlenecks: Starting and exiting a business requires a number of permissions from government agencies.

  4. Compliance hurdles: For example earlier Angel tax, which stands removed no, falls under corruption and bureaucratic inefficiencies as it takes the focus of entrepreneurs away from building a product or service to responding to tax notices and filing appeals.

  5. Low success rate: Several startups fail due to poor revenue generation as the business grows.

  6. Lack of an Innovative Business Model: To be successful a startup must be innovative. Unfortunately, Indian startups are less innovative than startups elsewhere.

  7. Non-competitive Indian Markets: Too many startups serving too few consumers are saturating the Indian market. Most startups serve the fraction of Indians who live in urban India.

Way Forward

  • Foster a Culture of innovation amongst citizens and students in particular

  • Promote innovation in all sectors of economy across the country including semi urban and rural areas

  • Support creative and innovative ideas through incubation and research and development to transfer them into valuable products processes or solutions to improve productivity and efficiency

  • Create an environment of absorption of innovation in industry

  • Facilitate public organisation to assimilate innovation with a view to improving public service delivery

  • Promote creation,  Protection and commercialization of intellectual property rights

  • Make it easier to start, operate, grow and exit businesses by reducing regulatory compliances and cost

  • Promote Ease of access to capital for startups

  • Incentivise domestic capital for investment into startups

  • Mobilize global capital for investment in Indian startups

  • Keep control of startups with original promoters

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