Why is it in the news?

• The Department of Industrial Policy & Promotion recently released the Startup Ranking of States for 2022, assessing the performance of 33 states and Union territories in building robust startup ecosystems.

Startup Ecosystem in India

• The startup ecosystem is described as a network of interconnected entities, organizations, and resources supporting the growth, development, and success of startups within a specific geographical location.
• Over the past seven years (2015-2022), there has been significant growth in the startup ecosystem, reflecting a dynamic and evolving landscape.

Regulatory reforms are needed to enhance ease of doing business, ease of raising capital and reduce compliance burden for the startup ecosystem. These include:

• Startups can be registered as a private limited company, partnership firm, or a limited liability partnership.
• The startup should not be more than 10 years old.
• Turnover should be less than 100 crores in any of the previous financial years.
• A certificate of an eligible business from the Inter-Ministerial Board of Certification of DPIIT is a prerequisite for availing tax benefits.
• The Ministry of Labour & Employment has allowed startups to self-certify compliance under various Labour Laws.

Significance of Startups

• Startups are contributing economically, creating wealth, and generating employment.
• Majority of startups have been growing at a rate of more than 35% for the last two years.
• About 50% of Department for Promotion of Industry and Internal Trade (DPIIT) recognized startups are from Tier II & Tier III cities, highlighting the decentralized growth of the startup ecosystem.
• Startups are creating a manifold impact in society by introducing innovative solutions, creating large-scale employment, contributing to economic growth, and garnering huge demand from the private and government sectors.
• Over the past five years, the number of startups in India driven by women has increased by 4%.
• About 49% of all DPIIT recognized firms have at least one-woman director.

Challenges associated with Startups in India

• There are thousands of startups competing for funding, talent, and customers across various sectors.
• High taxes, stringent labour laws, and bureaucratic delays in obtaining licenses and permits pose significant challenges for startups.
• Inadequate healthcare and educational facilities, insufficient power supply, inadequate water and sanitation, and poor transportation networks are hindering factors.
• Despite achieving recognition as Best and Top Performers, Indian states still face challenges in incubation and mentorship support, fostering innovation and entrepreneurship, and planning for a sustainable future.

Related Initiatives

1) DPIIT Schemes inlcude:

• Fund of Funds for Startups (FFS)
• Startup India Seed Fund Scheme (SISFS)
• Credit Guarantee Scheme for Startups (CGSS)

2) Other Initiatives:

• Innovations for Defence Excellence (iDEX)
• Innovation and Agri-Entrepreneurship Development Program
• Atal Innovation Mission (AIM)
• Promoting Innovations in Individuals, Start-ups and MSMEs (PRISM)

3) Make in India

Way Forward

• The government is actively promoting initiatives such as ‘Make in India,’ ‘Startup India,’ and MUDRA to boost grassroots GDP growth.
• There is a need to continually refine and streamline regulatory processes to make it easier for startups to register and operate.
• Introducing policies that provide tax incentives, subsidies, and other financial support for startups is crucial for their sustenance and growth.
• Promoting entrepreneurship education and skill development programs is essential to equip aspiring entrepreneurs with the necessary knowledge and skills.