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Empower Innovation with the Startup India Scheme

Introduction:

The Startup India Scheme was launched by the Central Government of India in 2016, with the aim of boosting innovation, entrepreneurship, and economic growth in India. The scheme provides tax exemptions, regulatory benefits, the Fund for Startups (FFS) program, financing support, and promotion of research and development. The initiative enables networking, mentorship, and business scaling. However, challenges such as ensuring greater accessibility and further support for commercialization remain. The scheme has played a significant role in positioning India as a global hub for entrepreneurship, job creation, and economic development.

Table of contents:

• What is the Startup India Initiative?
• Aim of Startup India Initiative
• What are the three pillars of the Startup India Scheme?
• Programs under Startup India Initiative
• Benefits of Startup India Scheme
• Criteria for registration under Startup India Initiative
• Challenges of Startup India Scheme

 

• What is the Startup India Initiative?

Startup India is an initiative launched by the Government of India on 16 January 2016 to encourage innovation and startups in the country. The initiative plays a vital role in creating a strong ecosystem to boost India's economic growth and create employment opportunities on a large scale. The initiative aims to empower startups through innovation and improved design. The Standup India scheme was launched on 5 April 2016 to facilitate bank loans. Under this scheme, at least one Scheduled Caste (SC) or Scheduled Tribe (ST) person is given Rs. 10 lakh, and one woman per bank branch is given Rs. 1 crores to set up a Greenfield enterprise in the field of trade, services, or manufacturing. The scheme is designed to benefit at least 2.5 lakh borrowers.

• Aim of Startup India Initiative:

The main objectives of the Startup India initiative are:

• It supports entrepreneurship through programs such as improved infrastructure, easy IPR facilities, and a better regulatory environment.
• This initiative encourages entrepreneurs to experiment with new ideas by making it easier for them to shut down operations and reallocate resources.
• It helps to empower startups through innovation and improved design.
• The initiative aims to create new jobs by making India a nation of job creators.

 

• What are the three pillars of the Startup India Scheme?

There are three pillars of the Startup India scheme:

• Streamlining and Handholding: Simplifying compliance, regulatory and patent support, and market access.
• Funding and Incentives: This initiative includes exemption from income tax and capital gains tax, seed funding, and a credit guarantee scheme.
• Incubation and Industry-Academia Partnerships: The Startup India initiative also includes incubators, innovation labs, mentorship connections, events, and competitions, and grants.

 

• Programs under Startup India Initiative:

The Startup India initiative program includes:

• Startup India Action Plan: It provides financial support to startups for product trials, prototype development, market entry, and commercialization.
• Startup India Seed Fund Scheme (SISFS): It provides capital to entrepreneurs in the early stages of their businesses.
• Fund of Funds for Startups (FFS): It issues funds for new startups.
• Credit Guarantee Scheme for Startups (CGSS): It provides credit guarantees for loans extended to startups.
• Atal Innovation Mission (AIM): It gives support to startups through incubation at Atal Incubation Centres (AICs).
• Startup India Portal: It is a one-stop destination for resources and eligibility criteria for various schemes and certifications.
• Annual Exercises and Programs: It includes Startup Rankings of States, National Startup Awards, and Innovation Week.

 

• Benefits of Startup India Scheme:

The Startup India initiative benefits the startups in many ways. These include:

• Tax Exemptions: Startups become eligible for income tax exemption for the first three years after registration. They can also apply for angel tax exemption under Section 56 of the Income Tax Act.
• Simplified Compliance: It offers self-certifying compliance with nine labor and three environmental laws through the Startup India web portal or mobile app.
• Relaxed Public Procurement Rules: Startups are exempt from the "prior experience/turnover" criteria for government tenders.
• Funding: Startups achieve funding through seed funds, funds of funds, investor connectivity portals, and credit guarantee schemes.
• Industry-education support: Startups can access infrastructure such as innovation centers, startup hubs, technology business incubators, research parks, and Atal Tinkering Labs.
• Legal Assistance: Startups can get legal assistance for low-cost patent filing and fast-tracked patent examination.
• Quick Exit: Startups can close their businesses within 90 days of filing a petition for bankruptcy.
• Startup India Hub: Startups can get hand holding at various stages of their development.

 

• Criteria for registration under Startup India Initiative:

1. The company must be a private limited company or a limited liability partnership firm.
2. The firms should have obtained approval from the Department of Industrial Policy and Promotion.
3. A recommendation letter by an incubator is a must.
4. The firm must provide innovative schemes or products.
5. The farm should not be older than five years.
6. The total turnover of the company should not exceed 25 crores.
7.  It should not be a result of splitting up or reconstructing a business already in existence.

 

• Challenges faced by Startups in India:

Startups in India face many challenges, including:

• Funding: New firms often struggle to get funding due to lack of access to capital. Venture capital firms target established startups, making it difficult for early-stage businesses to get funding. 
• Infrastructure: Startups in India often face inadequate infrastructure, including unreliable internet connectivity, power shortages, and lack of access to modern equipment.
• Regulatory compliance: Startups must navigate a complex landscape of regulatory requirements. Ensuring compliance with legal frameworks can be intricate for startups operating in diverse sectors.
• Competition: Rapid growth in India's startup ecosystem makes it difficult for new startups to differentiate themselves.
• Uncertain startup environment: The pandemic of 2020 has set some regulatory and transformative policies for the new deployment ecosystem, including changes to foreign direct investment (FDI) rules that restrict investment from neighboring countries. This has brought some uncertainty to startups in India.
• Lack of market knowledge: Lack of market knowledge also affects the success rate of new startups in India. 

Conclusion:

The Startup India Scheme has made a significant contribution to boosting innovation, entrepreneurship, and economic growth in India. The initiatives, including tax exemptions, regulatory simplification, the Fund of Funds for Startups (FFS), etc., create a thriving ecosystem for startups by providing funding through research and development. It also helps entrepreneurs scale their businesses through easier networking and mentorship. Despite various challenges, including ensuring greater accessibility and more support for commercialization, the scheme is playing a key role in positioning India as a global hub for entrepreneurship, job creation, and economic development.

 

FAQs:

• Who can apply for the Startup India scheme?

• Any Indian citizen with a new or less than 10-year-old business and less than INR 100 crore annual turnover can apply for the Startup India scheme.
• What are the resources available to Startups?
• Every new startup needs a variety of resources for establishing their business. Which include:

• Funding: Startups seek funding from investors, financial institutions, venture capitalists, or through crowd funding or business loans.
• Business plan: A well-developed business plan can set new maps, goals, and track progress for startups.
• Market research: They need to vary the demands of the market before choosing their products.
• Registration: For new farms, getting registered with the state government and obtaining additional permission from the local government is a must.
• Lawyer: In the case of contract reviewing, hiring navigation, and dealing with other issues, every startup needs a lawyer.
• Incubator: It provides funding opportunities and other facilities to new businesses.

 

• What is the success rate of Indian startups?

• According to the studies, among all new startups in India, around 10-15% become successful.

 

• What is the primary objective of the Startup India initiative?

• The primary objectives of the Startup India initiative include:

• Empowering startups.
• Creating job opportunities.
• Making easier shut downs.
• Encouraging experimentation.