A Leg up to Really Start Thing Up

Context: An account of start-up ecosystem in India 

Significance of Indian Start-up Ecosystem:

• Huge Size: Indian start-up ecosystem is the third-largest in the world.

• Magnet for capital and talent: Start-ups are attracting large amounts of Foreign Direct Investment (FDI) capital, $14.5 billion in 2019.

• Engaged in nearly all sectors: Apart from generating employment in highly skilled and semi-skilled jobs, they are also creating unskilled labour-intensive jobs such as delivery professionals.
• Innovations fostering economic growth: By reducing the cost of doing business, bringing transparency and scalability, start-ups are solving problems faced by the government through e-Gov and government-to-company (G2C) services. 

Role of the Government: 

• Recognition of start-ups: The Department for Promotion of Industry and Internal Trade (DPIIT) has recognized over 36,000 start-ups providing employment to 4.2 lakh people. (300% growth since 2016). 

• Pushing for a startup-friendly regime: As evident from India scaling up ranks in the World Bank's Ease of Doing Business Ranking (from 77th in 2019 to 63 in 2020).

• Government as the first buyer: help them acquire scale on their growth curve. For, E.g. The central and state governments, along with Smart City Special purpose vehicles (SPVs) are large buyers of services. 

Issues faced by start-ups:

• Presence of restrictions: during the tendering process such as minimum net worth requirements, size of the company by the number of employees and high cut-off experience in the sector.

• These artificial restrictions create an insurmountable entry barrier, denying level playing field, and favour entrenched players only.

• Selective exemptions: given to the start-ups registered in a state is discriminatory since start-ups cant incorporate in all states and goes against the spirit of 'One Nation, One Market' policy.

Way Ahead:

• Developing a policy framework to support start-ups in sectors in which the government is a buyer of services.

• A recognized DPIIT start-up on the Government e-Marketplace (GeM) portal: should be exempted from restrictive clauses for eligibility during the tendering process.

• Circulate a uniform policy for all states: to avoid discriminating between domiciles of DPIIT registered start-ups. 

• A mix of advisory and sweeteners: in which an index can be created for the state's engagement with start-ups, and appropriate incentives for the winner. 

Conclusion: To create a fast-growing ecosystem, both supply and demand sides have to be addressed, hopefully resulting in an upsurge in investor confidence, investments and technology transfer.