India’s Startup Boom

                                                India’s Startup Boom

 

Why in News?

Recently, the government presented data in the Parliament, which shows that over the last 7 years, the number of registered startups in India have grown from 452 in 2016 to 84,012 in December 2022.

 

So, What are Startups & Unicorns?

1. Startup:
   1. The term ‘startup’ refers to a company which is in the initial stage of operations. Startups are mostly founded by one or more entrepreneurs who want to develop a product or service for which they believe that there is a demand for it in the market.
   2. Legally, a startup is defined as a company which is established in India not less than 10 years ago and has an annual turnover of less than ₹100 crore, and registered under Company Act or Partnership Firm or Limited Liability Act.
   3. These companies generally start with high costs and limited revenues, which is why they look for capital from a variety of sources.

2.Unicorn:

a) A unicorn is any privately owned firm with a market capitalization of more than USD 1 billion.

b) It includes new entities which are dedicated to offering creative solutions and new business models, among other things.

c) There are several categories like fintech, Edtechs, B2B (Business-to-Business) companies, etc.

 

Status of Startups in India:

1. India has become the 3^rd largest start-up ecosystem in the world after the US and China.
2. India is home to as many as 84,000 Startups.
3. 49% of start-ups are from tier-2 and tier-3 cities.
4. There are currently 107 unicorns in India, out of which 44 were born in 2021 and 21 in 2022.
5. Startups are also emerging in the fields like IT, agriculture, aviation, education, energy, health and space sectors.
6. India has been ranked in its global ranking of Global Innovation Index (GII) from 81^st in the year 2015 to 46^th in 2021 among 130 economies of the world.
7. India ranks 2^nd among 34 lower middle-income economies and 1^st among 10 Central and Southern Asian economies in terms of GII.

  

Major Challenges Related to Start-ups in India are:

1. 1. Lack of Forward Thrust to Innovation: India’s education system lacks vocational training and industry exposure that keeps students deprived of pursuing innovation. As a result, this makes the Indian higher education system behind in terms of research and development.
   2. Lack of Recognition: Since, almost 70% of the Indian population lives in rural areas that are still deprived from reliable internet access. Consequently, many village-based start-ups go unrecognised and are deprived of government funding initiatives.
   3. Bootstrapped Nature: For running a start-up, a significant amount of working capital is required. Many start-ups in India, especially at early stages, are bootstrapped, i.e., self-funded through the founders’ own savings.
   4. Scalability Concern: Small start-ups in India have limited understanding of customers and are confined to only certain regions, where they know the local language and local people.
   5. Limited Presence in Space Sector: Indian startups in fintech and e-commerce are doing exceptionally well, but space startups remain very less. Globally, the space economy is valued at USD 440 billion, with India holding less than 2% of the market.

 

Some Major Government Initiatives for Startups are:

1.  Credit Guarantee Scheme for Startups (CGSS)
   1. 1. 1. The scheme has been approved for the purpose of providing credit guarantees to the loans extended by Member Institutions (MIs) to finance eligible startups.
         2. Here, Member Institutions (MIs) include financial intermediaries like banks and other financial institutions like Non-Banking Financial Companies (NBFCs) which are engaged in lending and are conforming to the eligibility criteria approved under the Scheme.
         3. This scheme will help in providing the much-needed collateral-free debt   to the start-ups.
         4. Aim of the scheme is to support startups that are hit hard by the Covid-19       pandemic and are now going to be impacted further by the rising interest rates.
2. Startup India Seed Fund Scheme (SISFS): It aims to provide financial assistance to startups for proof of concept, product trials, market entry and commercialization.
3. National Startup Awards: It seeks to recognize and reward outstanding startups and ecosystems that are contributing to innovation and injecting competition.
4. SCO Startup Forum: The first-ever Shanghai Cooperation Organisation (SCO) Startup Forum was launched in October 2020 to develop and improve startup ecosystems collectively.
5. Prarambh: The ‘Prarambh’ Summit aims to provide a platform to startups and young minds from around the world to come up with new ideas, innovation and invention.

 

Way Forward

1. The development of proper start-up ecosystem needs significant funding and therefore the role of investors is very important.
2. Apart from policy-level decisions that promote entrepreneurship, the onus is also on India’s corporate sector to promote entrepreneurialism, and create chain to build impactful technology solutions and sustainable and resource-efficient growth.
3. With the recent events creating capital distrust in China, the world’s attention is sharpening on the lucrative tech opportunities in India and the value that could be created. For this, India requires good policy measures in addition to the ‘Digital India’ Initiative.

 

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