India’s startup ecosystem is bustling with innovation, ambition, and a strong entrepreneurial fervour. Emerging as the world’s third-largest startup ecosystem, India is where bold ideas flourish and dreams take flight.

Expanding digital infrastructure, business-friendly reforms, government funding, and the entrepreneurial spirit are key enablers of a thriving startup sector in India. As of March 14, 2024, there were 1,23,900 DPIIT-recognised startups, with at least one recognised startup in every state.

As of December 31, 2023, the recognised startups have generated direct employment for over 12 Lakh individuals. Such staggering numbers put India firmly on the path to becoming a frontrunner in cutting-edge technology and innovation.

Startups have been at the forefront of innovation — introducing new technology, products and services that could potentially change the world while generating jobs, establishing valuable enterprises & nurturing innovation.

The Government of India has been leading the transformation of the startup ecosystem with strategic initiatives that facilitate innovation and enable entrepreneurs to generate growth.

Paving The Path

One of the foundational elements of government initiatives for startups has been simplifying and digitising processes of setting up an enterprise.

The Tax Deduction & Collection Account Number (TAN), the Permanent Account Number (PAN), and the Director Identification Number (DIN) have been combined into a SPICe. With this facility, now startups can easily incorporate their business on a single web form, SPICe+.There is no incorporation fee for startups with capital up to INR 15 Lakh.

Project Insight promises to enhance cooperation among different tax authorities – direct, indirect, and corporate affairs – to promote transparency and digitisation.

Similarly, the Income Tax Transaction Analysis Centre (INTRAC) seeks to use data analytics in tax administration to enhance its reporting capabilities. The Compliance Management Centralised Processing Centre (CMCPC) is to harness these reporting capabilities to reduce the compliance burden on startups.

Regulatory Reforms

Since 2016, 53 regulatory reforms have been enacted to boost the startup ecosystem in India. The latest recognises any entity or business as a startup for 10 years since its incorporation, with a turnover of less than INR 100 Cr. Moreover, startups can avail of tax rebates on profits for 3 consecutive years of the 10 years if incorporated before March 31, 2024, provided that their annual turnover does not exceed INR 100 Cr.

To alleviate the burden of compliance, young startups - for 3 to 5 years from incorporation - can now self-certify their compliance under 9 Labour and 3 Environment laws. Startups in India can also avail of an 80% rebate on patent filing and a 50% rebate on trademark filing compared to other businesses. 

Furthermore, an amendment of patent rules on September 21, 2021, extends the 80% refund benefits on patent filing to educational institutions.

Winding up a business should also be as easy as starting one. Hence, the government notifies startups as ‘fast track firms’, allowing them to wind up operations within 90 days versus 180 days for other companies.

These reforms aim to foster an innovation ecosystem, enhance the ease of business, and build successful businesses.

Funding Innovation

16 Ministries have schemes for the promotion of startups. The Ministry of Commerce & Industry and the Department of Science & Technology have implemented several schemes and initiatives to support startups and encourage innovation. These schemes provide financial, technical, infrastructural, and regulatory support.

The Startup India Initiative offers multiple schemes to assist startups with financial and infrastructural support. The Startup India Seed Fund Scheme provides financial assistance to startups for proof of concept, prototype development, product trials, market entry and commercialisation through eligible incubators. As of December 31, 2023, 217 incubators have been selected under the Scheme with approved funding of ~INR 841.8 Cr.

The National Initiative for Developing and Harnessing Innovations (NIDHI) initiated by The National Science and Technology Entrepreneurship Development Board (NSTEDB) has developed more than 170 Technology Business Incubators (TBIs) since its inception in 2016. Each TBI allocated a grant of INR 220 Lakh to fund 10 innovators every year.

Startups working on cutting-edge technologies like the Internet of Things, Artificial Intelligence (AI), Blockchain, Robotics, and more can find financial and technological support under the enhanced TIDE 2.0 launched by the Ministry of Electronics & Information Technology. The scheme aims to fund 2000 technology startups developed in 51 incubators across India.

Along with ensuring the availability of funds for startups, the Government of India has also made strides to nurture the startup ecosystem by initiating schemes and reforms that foster foreign partnerships and global exposure.

Capital Support

Multiple initiatives and reforms have been enacted to promote global trade and foreign investments to enhance the nation’s startup ecosystem.

Recently, the Government of India has relaxed the FDI policy to allow a 100% Foreign Direct Investment in the procurement and manufacture of satellite systems. Furthermore, in an amendment to the tax exemption under Section 56 of the Income Tax Act, DPIIT-recognised startups will not attract angel tax.

To promote global exposure and exports for startups, the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme remits taxes and duties on exports. In the current financial year, the RoDTEP Scheme has been allocated INR 15,070 Cr with an additional increase of 10% for 2024-25.

SIDBI Fund of Funds, which operates under Startup India, has helped emerging startups by providing venture capital funds worth approximately INR 10,284 Crore to 131 AIFs. The Credit Guarantee Scheme for Startups, also under Startup India, offers credit guarantees up to INR 10 Cr for loans extended by member institutions to finance eligible startups.

The Startup India Investor Connect is an AI-based matchmaking platform connecting startups with investors to facilitate investment opportunities. Since its inception, the platform has registered 120 investors and 5,969 startups.

Startup India & AIM

The Startup India Initiative and the Atal Innovation Mission are pioneering initiatives that are driving India’s success in the global startup ecosystem.

The Atal Innovation Mission (AIM) was launched in 2016 to support innovation and entrepreneurship. So far, AIM has helped over 3,500 startups through incubation in 72 AICs (Atal Incubation Centres). AIM supports startups in various domains such as health tech, fintech, edtech, and more.

Launched in 2016, the Startup India Initiative has implemented several programs to support entrepreneurs, build a robust startup ecosystem and transform India into a country of job creators instead of job seekers. With over 6 Lakh users, the Startup India portal is a one-stop destination for all things startups in India. Users can access resources and eligibility criteria for the various schemes, certifications, and more in one place.

The Government also executes annual exercises and programs, including States’ Startup Ranking, National Startup Awards and Innovation Week for holistic development of the startup ecosystem.

Conclusion

India’s startup ecosystem boasts a record 114 unicorns as of March 2024, with a combined valuation of $350 Bn. Of the total unicorns, 45 were born in 2021 and 22 in 2022. 19 startups of these 114 unicorns are not Publicly Listed or have been acquired by a Publicly Listed company.

India is leaving no stone unturned to pay the way forward. Ceaser may have wept that there were no more worlds to conquer, but for Indian startups, the world is their oyster. The only way forward is up.