India has always been the dream marketplace of global entrepreneurs, whether during medieval times or the modern world. Companies like Microsoft, P&G, Nestle, PepsiCo, IBM, Sony, etc. have built a huge market for themselves in India and many more – small and big companies have invested in India. Businesses create a supply for the products and services which is futile without a demand. Meanwhile, the world’s second-largest population living in a developing economy would certainly have needs which it cannot fulfil by itself. This makes India a perfect consumer market where supply meets demand and the interdependence helps both to flourish. However, there has always been one big complaint about India – the Government registrations and licenses. India has the market, however, obtaining business licenses has always been an ardent task, especially if you don’t belong to this land (others grew up getting used to it). However, this is going away! Of course, not in one day, however, step by step. From 142 to 77th place on ‘Ease of Doing Business’rankings in merely 4 years, India has travelled a long road and is prepared to travel further. One of the flagship initiatives of Government of India, forming part of this journey, is the ‘Startup India Initiative’, launched in 2016.
What is the Startup India initiative?
On January 16, 2016, the Government of India launched the ‘Startup India’ initiative and rolled out several programs with a sole objective of supporting entrepreneurs with business set up in India. The Government’s vision is to become a country of job-creators than job seekers by building an ecosystem which allows news businesses to thrive. To achieve the same, the Startup India programs shall help eligible startups with a hassle-free setup of business in India and save them from clutches of red tapes, heavy cross-border taxation, and compliance burden. The program is managed by a dedicated ‘Startup India Team’ under the Department for Promotion of Industry and Internal Trade (DPIIT).
What actions were taken under the Startup India Action Plan 2016?
The Action Plan 2016 consists of a series of actions that the Government had promised to undertake while launching the program and implemented the same over the years. These included:
- Startups to get registration under 9 labour and environmental laws by self-certification
- Startup India hub to collaborate with Government, venture capitalists, angel investors, incubators, legal partners, universities and R&D institutes, to assist startups and to organise mentorship programmes.
- Rolling out mobile app and portal for registration under the Startup India schemes, filing for compliances and collaboration with startup ecosystem partners
- Legal support and fast-track patent examination at lower costs
- Relaxed norms for Startups in public procurement tenders floated by Government entity
- Faster exits for startups within 90 days under the insolvency and bankruptcy law
- Providing funding support through a fund of funds with a corpus of INR 10,000 crore
- Credit guarantee fund for startups to encourage bankers and other lenders to provide venture debts
- Tax exemption on Capital Gains by any person, if the proceeds are invested in Government’s fund of funds
- Tax exemption to Startups for 3 years under Income Tax Laws
- Tax exemption to investors for acquiring equity of a startup at a price above the Fair Market Valuation
- Organising Startup Fests for Showcasing Innovation and providing a collaboration platform
- Launch of Atal Innovation Mission (AIM) with Self-employment and Talent Utilisation (SETU) Program
- Connecting Private Sector expertise for incubator setup in India
- Building innovation centres at National institutes by scaling up 31 existing centres and 13 new centres with Government support
- Setting up 7 new research parks at the Indian Institute of Technology (IIT)
- Promoting Startups in the biotechnology sector with bio-clusters, bio-incubators and bio-connect offices
- Launching of innovation-focused programs for students to promote research and innovation at a young age
- Annual incubator grand challenge to create world-class incubators in India
What is DPIIT Recognition under Startup India initiative?
Under the Startup India Action Plan, the Government aimed to provide a host of benefits to entrepreneurs, with business set up in India. However, the same is available only if the startup is eligible as per the eligibility criteria. The applications for eligibility are evaluated by the Department for Promotion of Industry and Internal Trade (DPIIT) and if approval is received, the Startup becomes a ‘DPIIT recognised startup’. This recognition certificate allows the entrepreneur to avail the benefits under Startup India initiative and speedy business set up in India.
Eligibility criteria under Startup India initiative
To obtain DPIIT recognition, the eligibility criteria is as follows:
- Must be a Private Company, LLP or Partnership Firm – A Startup to be eligible under this scheme must be incorporated as a Private Limited Company under Indian Companies Act, 2013 or a Limited Liability Partnership under Indian Limited Liability Partnership Act, 2008. The Startup can also be in the form of a Partnership firm. However, the firm must be registered under the Indian Partnership Act, 1932.
- Must not be formed by Restructuring – A startup to be eligible should not be formed by splitting or reconstructing an existing business. The business set up in India must be new; merely forming new entity from an existing business would not make the startup eligible for Startup India initiative.
- Not more than 10 years have elapsed –The Startup India policy seeks to encourage not only new startups but also existing startups. All enterprises which are in the first ten years of their business since incorporation or registration are eligible to receive DPIIT recognition.
- Annual Turnover has never exceeded INR 1billion – Annual turnover of an eligible startup must not exceed INR 100 crore (i.e. 1 billion) in any of the past financial years since its incorporation or registration.
- Entirely new Product or Service – This is a crucial per-condition of this entire initiative. These rules provide that only startups developing an entirely new product or service or process shall be eligible under this scheme. Thus, the startup must be working towards innovation, development or improvement of products, processes or services. However, the rules also allow a startup if it has a scalable business and high potential for employment generation or wealth creation.
- Approval from Inter-ministerial board – Startup has to obtain approval from Inter-Ministerial Board set up by the Department for Promotion of Industrial Policy and Internal Trade (DPIIT).To obtain the DPIIT approval, a startup should be eligible as per the norms specified above and innovative as per the board.
How large is the Startup India network?
In its early phase, the Startup India initiative did not gather much traction owing to its stringent norms concerning innovation, the low threshold of turnover and other rules. However, the same was amended and the norms were made less stringent to include more entities under the program. Today, there are about 90,750 entities registered on the Startup India portal of which about 34,222 entities have received DPIIT recognition and are enjoying the benefits under the scheme. Besides, there are about 570 incubators, 128 accelerators, 594 mentors, 47 Government bodies and 85 investors connected through the Startup India hub.
You can view the existing list of ’DPIIT Recognised’ startups on the Startup India portal. [ii]
What are the Startup India Programs?
The Startup India portal hosts various challenges, workshops and also events hosted by Corporates and Government Departments in which a Startup can participate. These come with a chance to win cash prizes, incubation and funding. Various events have been hosted by corporates entailing cash prizes or funding such as B K Birla Global Innovation Challenge, WhatsApp Grand Challenge, Capgemini Innovation Challenge, Aspiring Entrepreneurs Meet, SBI Startup Challenge, etc. to encourage for entrepreneurs who are setting up a business in India.
You can know more about the ongoing Startup India challenges, programmes, workshops on the Startup India portal.