Demand-led innovation is at an all-time high, spurred on by the pandemic’s tailwinds, and increasing digitisation across all sectors.
With such accelerated pace of growth, it is essential that the government and its agencies extend the right support for the continued growth of the startup ecosystem.
Conducive policies are a confidence-booster for entrepreneurs, who not only feel emboldened to take risks, but also assured that they have all the right support.
However, it is imperative to understand that government policies are not just about providing funding to startups, but also about non-financial aspects like setting up of incubators, encouraging other institutions to be enablers, upgrade existing infrastructure, and reforming redundant policies to keep up with changing times.
In that sense, a defining moment for the startups in the country was the introduction of the Startup India mission in 2016, an initiative aimed at spurring entrepreneurship. This move by the central government had a catalytic effect on the state governments as well.
Prior to the Startup India mission, only a few states had brought out schemes dedicated to the sector. Rajasthan, way back in 2015, had a policy for the setting up of incubators, and creating a structure so that new businesses could have access to funds and other infrastructural facilities.
Post 2016 though, saw a wave of favourable planning policies being introduced, especially in Karnataka, Kerala, Andhra Pradesh and Rajasthan.
And, their early involvement has proven beneficial in the long run, as we now notice a new crop of Tier II startup hubs emerging from these states.
Many other states also started catching up, especially those from the North-Eastern region. Manipur, Nagaland, Tripura, and Assam began by introducing specific policies suitable for the region.
Take for instance Nagaland, a state which has a special focus on women entrepreneurship. Besides increasing awareness among women entrepreneurs on various state and centrally sponsored schemes, the state has also allocated 25 percent funds to promote new businesses by them.
Assam-based startup Brahmaputra Fables founded in 2017 by Dhruba Jyoti Deka, is an ecommerce marketplace for handicrafts. The startup is part of an incubator created by the state government and IIM Calcutta Innovation Park called “Assam Startup- The Nest”.
According to the Startup India website, 30 of the 36 States and Union Territories have a dedicated startup policy, and 25 of them actually launched their policies after the Startup India mission. It further states that there is at least one Department for Promotion of Industry and Internal Trade (DPIIT) recognised startup in each of the states and union territory.
When it comes to supportive measures, startups not only require enabling policies from the government, but also the removal of existing hurdles. According to Startup India, over 37 regulatory reforms have been undertaken by states and union territories between 2016 and 2020.
The self-certification initiative has greatly benefitted startups, and many states have adopted this process. The financial grants provided by the state governments is also a key enabler, especially for the early stage startups.
Arminder Thind, Founder and CEO of sports technology startup StanceBeam, says his company participated in the Karnataka government’s startup focused initiative Elevate 100, and earned some much need funds to continue with their R&D activity.
The startup initiative by the government also underlines the importance of cutting red-tapism for startups. An area that entrepreneurs across sectors are wary about is the statutory aspect of running a business, as failure to meet legal requirements can land a startup in trouble. Both established as well startups that are just emerging have to not only focus on managing their growth, but also spend a considerable amount of time keeping pace with rapidly changing regulatory laws in India.
To this extent, Startup India has laid down several measures to ease compliance and ensure that the associated risks are prevented or mitigated. Under the initiative, startups are now allowed to self-certify under various labour and environmental compliances for fixed durations.
In the recent past, coordinated efforts between the centre and the states have seen the most impactful results. Between 2016 and 2020, 12 states and Union Territories – Maharashtra, Karnataka, Delhi, Uttar Pradesh, Haryana, Gujarat, Telangana, Tamil Nadu, Kerala, Rajasthan, West Bengal and Madhya Pradesh – saw the emergence of close to 1,000 recognised startups each, according to information available with Startup India.
And going by the encouraging results, today, various state governments have gone beyond just startup policies. The focus now is on looking at separate sector-wise incentives for certain segments. For instance, Andhra Pradesh and Maharashtra are keen to promote the fintech segment while Karnataka has rolled out special incentives to encourage AI-based startups and nanotechnology.
Schemes coming out of Kerala balance both fiscal and non-fiscal incentives, such as establishing at least 10 incubators or accelerators, developing one million sqft of incubation space, venture capital funding of minimum Rs 2000 crore, etc.
Image credit: Startup India report
Telangana is known for its T-Hub – a public private partnership between the Government of Telangana, three academic institutions (IIIT Hyderabad, ISB and NALSAR), and key private sector leaders. According to Startup India, it is the largest and the fastest-growing technology incubator in India.
In the east, Odisha provides a one-time grant of 50 percent of capital cost up to a maximum of Rs 1 crore, and performance grant of Rs 5 lakh for each successful startup created or supported in the state.
In the North East, the startup policy of Nagaland aims to facilitate growth of at least 500 startups with a focus on “Made in Nagaland” products and services.
Nothing better than a good dose of healthy competition in order to see states doing their best, and towards this, the Startup India initiative has introduced a ranking system as an index to see how best these policy measures are being implemented.
The ranking exercise is aligned with a key objective of the Startup India initiative – a startup in each block and each zilla in the country.
Leading the list for 2019 were the states of Gujarat, Karnataka and Kerala. Gujarat was ranked as the best performer, while Karnataka and Kerala came under the top performers category.
While the central government’s role in advocating entrepreneurship and fostering the startup ecosystem cannot be ignored, it is specific state government policies that play a critical role in one factor – the expansion of this ecosystem from the main hubs or metros to other parts of the country.
In the years ahead, it will be interesting to see startup hubs hosting innovation and development from places far and beyond – from Kohima to Ladakh, or Kashmir to Kanyakumari.
With the digital wave penetrating every corner, ideas and innovations as diverse as our country are just waiting to be tapped.
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