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Government Launches 'Startup India' Campaign
Jan 18, 2016

On January 16, Prime Minister Narendra Modi announced a new campaign ‘Start-up India’ to promote bank financing for start-ups and offer incentives to boost entrepreneurship and job creation.

Key Features

Rs. 10,000 crore fund for startups: The government will set up a fund with an initial corpus of Rs. 2,500 crore and a total corpus of Rs. 10,000 crore over a period of four years, which will be be managed by a board with private professionals drawn from industry bodies, academia, and successful startups. The fund will participate in the capital of SEBI registered venture funds, and invest in sectors such as manufacturing, agriculture, health, and education.

Single point of registration for startups: The government will launch a mobile app and a portal on April 1, which will enable startups to register their company in a day. The portal will also serve as a single point of contact for clearances, approvals and registrations, and for companies to apply for schemes under the Startup India Action Plan.

Simplified regulatory regime based on Self-Certification
: To reduce the regulatory burden for startups, the government will allow startups to self-certify compliance on nine labour and environment laws through the startup mobile app. No inspections will be conducted in case of the labour laws for a period of three years.

Fast-track mechanism filing Patent applications: Launched on a pilot basis for a year, the Central Government shall bear the cost of patents, trademarks and designs for a startup, with an 80 percent rebate to encourage the creation and protection of its intellectual property.

Credit Guarantee Fund for startups: A credit guarantee mechanism willl help startups raise debt funding through the formal banking system through National Credit Guarantee Trust Company (NCGTC)/SIDBI, which has an annual corpus of Rs. 500 crore for the next four years.

Tax exemption for three years, and capital gains: Aimed at facilitating growth and help retain capital, startups will be exempted from income-tax for a period of three years. However, the exemption shall be available subject to non-distribution of dividend by the startup. To augment the funds available to various VCs and alternative investment funds, capital gains invested in SEBI registered venture funds will be exempt from tax as well.

A Startup India Hub for collaboration: The Startup India Hub will serve as a single point of contact for startup ecosystem players, and will function in a hub and spoke model with central and state governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions. The hub will assist startups in obtaining financing, and organise mentorship programs to encourage knowledge exchange.

Relaxed norms of public-procurement: The Central Government, State Government and PSUs will exempt startups in the manufacturing sector from the criteria of ‘prior experience/turnover’ as long as they have their own manufacturing facility in India, and have the requisite capabilities and are able to fulfil the project requirements.

Faster Exits for startups: Startups may be wound up within a period of 90 days from making of an application for winding up on a fast track basis, as per the recently tabled Insolvency and Bankruptcy Bill 2015, which has provisions for voluntary closure of businesses. This process will respect the concept of limited liability.

Atal Innovation Mission to encourage entrepreneurship and innovation: The Atal Innovation Mission will establish sector specific incubators and 500 'Tinkering Labs' to promote entrepreneurship, provide pre-incubation training and a seed fund for high-growth startups. Three innovation awards will be given per state and union territory, along with three national awards, as well as a Grand Innovation Challenge Award for finding ultra-low cost solutions for India.

Innovation focused programmes for students: An innovation core programme targeted at school kids aims to source 10 lakh innovations from five lakh schools, out of which the the best 100 would be shortlisted and showcased at an Annual Festival of Innovations, to be held in Rashtrapati Bhavan. A Grand Challenge programme called NIDHI (National Initiative for Developing and Harnessing Innovations) shall be instituted through Innovation and Entrepreneurship Development Centres (IEDCs) to support and award Rs. 10 lakhs to 20 student innovations. Uchhattar Avishkar Yojana, a joint MHRD-DST scheme has earmarked Rs. 250 crore annually to foster very high quality’ research amongst IIT students.

Annual incubator grand challenge: The government will identify and select ten incubators, evaluated on pre-defined Key Performance Indicators (KPIs) as having the the potential to become world class, and give them Rs.10 crore each as financial assistance to ramp up their infrastructure.
At present…

  • With 4,200 startups, India ranks 3rd globally. 

  • Of $18 billion pumped into Indian startups between 2010-15, $9 billion came in 2015 alone. 

  • 9 Indian startups have been valued at more than a billion dollars. 

  • Increase in number of incubators: 80 in 2014, 110 in 2015; 50% outside Delhi, Bengaluru, Mumbai. 

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