Start-up Ecosystem In India

Start-up Ecosystem In India

[pib] National Startup Advisory CouncilPIB


From UPSC perspective, the following things are important :

Prelims level : National Startup Advisory Council

Mains level : Mechanisms to promote startup in India

The Union Government has notified the structure of the National Startup Advisory Council to advice on measures needed to build a strong ecosystem for nurturing innovation and startups in the country.

National Startup Advisory Council

  • The Council will be chaired by Minster for Commerce & Industry.
  • It will consist of the non-official members, to be nominated by Central Government, from various categories like founders of successful startups, veterans and persons capable of representing interests of incubators and accelerators etc.
  • The term of the non-official members of the Startup Advisory Council will be for a period of two years.
  • The nominees of the concerned Ministries/Departments/Organisations, not below the rank of Joint Secretary to the Government of India, will be ex-officio members of the Council.
  • Joint Secretary, Department for Promotion of Industry and Internal Trade will be the Convener of the Council.

Various functions

  • The Council will suggest measures to foster a culture of innovation amongst citizens and students in particular, promote innovation in all sectors of economy across the country
  • It will also suggest measures to facilitate public organizations to assimilate innovation with a view to improving public service delivery, promote creation, protection and commercialization of intellectual property rights.
  • It would suggest making it easier to start, operate, grow and exit businesses by reducing regulatory compliances and costs, promote ease of access to capital for startups, and incentivize domestic capital for investments into startups.
  • It would also mobilize global capital for investments in Indian startups, keep control of startups with original promoters and provide access to global markets for Indian startups.
Start-up Ecosystem In India

Start-Up India SchemeGovt. Schemes


From UPSC perspective, the following things are important :

Prelims level : Start-up India scheme

Mains level : Startup ecosystem in India

  • Maharashtra, Karnataka, and Delhi have seen the highest number of start-ups recognised under the government’s flagship Start-Up India Scheme in the period from 2016 to 2019.
  • These three states also attracted the highest investments from Alternative Investment Funds (AIFs) in start-ups.

About Start-Up India Scheme

  • Startup India Scheme is an initiative of the Indian government, the primary objective of which is the promotion of startups, generation of employment, and wealth creation.
  • It was launched on the 16th of January, 2016.
  • A startup defined as an entity that is headquartered in India, which was opened less than 10 years ago, and has an annual turnover less than ₹100 crore (US$14 million).
  • The action plan of this initiative is based on the following three pillars:
  1. Simplification and Handholding
  2. Funding Support and Incentives
  3. Industry-Academia Partnership and Incubation
  • An additional area of focus is to discard restrictive States Government policies within this domain, such as License Raj, Land Permissions, Foreign Investment Proposals, and Environmental Clearances.
  • It was organized by The Department for promotion of industry and internal trade (DPI&IT).


Alternative Investment Funds (AIFs)

  • An alternative investment is a financial asset that does not fall into one of the conventional investment categories. Conventional categories include stocks, bonds, and cash.
  • Most alternative investment assets are held by institutional investors or accredited, high-net-worth individuals because of their complex nature, lack of regulation, and degree of risk.
  • Alternative investments include private equity or venture capital, hedge funds, managed futures, art and antiques, commodities, and derivatives contracts.
  • Real estate is also often classified as an alternative investment.
Start-up Ecosystem In India

[op-ed snap] Half-measures: new angel tax rules for start-upsop-ed snap


Mains Paper 3: Economy | Mobilization of resources

From the UPSC perspective, the following things are important:

Prelims level: Angel Tax

Mains level:  Change in Angel Tax rules on startup and it’s effects



After the uproar among start-up investors in the last few weeks, the Centre  decided to ease the conditions under which investments in start-ups will be taxed by the government.

New Rules

  • Investments up to ₹25 crore in companies that are less than 10 years old and with a total turnover of less than ₹100 crore will be exempted from the new angel tax.
  • Investments made by listed companies with a net worth of at least ₹100 crore or a total turnover of at least ₹250 crore will be fully exempt from the tax; so will investments made by non-resident Indians.

Problems with old rules

  • In 2012, the angel tax was justified as an emergency measure to prevent the laundering of illegal wealth by means of investments in the shares of unlisted private companies at extraordinary valuations.
  • But the adverse effect that it has had on investor confidence has forced the government to ease the stringent rules.

Positive effects of New Rules

  • The easing of the outdated angel tax rules will definitely make life easier for start-ups, which are in desperate need for capital to fund their growth and other business requirements. 
  • Further, since the new rules are set to be applied retrospectively, many young companies that have received notices from the Income Tax Department in the last few years will be relieved by the latest tweak in the rules.

Negative Effects

  • Companies wishing to make use of the latest exemption, for instance, will first need to be registered with the government as start-ups.
  • To be classified as one, a company needs to attest to conditions such as that it has not invested in any land unrelated to the business, vehicles worth over ₹10 lakh, or jewellery.
  • These requirements, while probably aimed to prevent money- laundering, can lead to considerable bureaucratic delays and rent-seeking.
  • . Also, the new rules for the angel tax can cause the same old problem of arbitrary tax demands for companies that do not fall under the defined category of start-ups.
  • The taxes to be paid are still supposed to be calculated by the authorities based on how much the sale price of a company’s unlisted share exceeds its fair market value.
  • It is impossible to know the market value, let alone the fair market value, of shares that are not openly traded in the marketplace.
  • So tax authorities with ulterior motives will still possess enough leeway to harass start-ups with unreasonable tax demands.

Way Forward

The government should address the arbitrary nature of the angel tax, Otherwise, the damage to investor confidence may remain.

Start-up Ecosystem In India

[pib] Second edition of States’ Ranking on Startup InitiativesPIB


Mains Paper 3: Economy | Development and Employment

From UPSC perspective, the following things are important:

Prelims level: States’ Start-up Ranking 2019

Mains level: Boosting the startup ecosystem in India


  • The Department for Promotion of Industry and Internal Trade (DPIIT) has released second edition of Startup Ranking for 2019.

States’ Start-up Ranking

  1. The DPIIT launched this exercise to rank states and UTs on the basis of measures being taken by them to promote startups, and added that it was consulting states for their ranking framework.
  2. Erstwhile DIPP began this exercise from January, 2016.
  3. The State Startup Ranking Framework is aimed at bringing to fore progress made by States/UTs for promoting startup ecosystem.
  4. The report intends to foster competitiveness and propel the states/UTs to work proactively while facilitating states/UTs to identify learn and replicate good practices.

About 2019 Framework

  1. The Ranking Framework 2019 comprises of 7 pillars and 30 action points.
  2. DPIIT has prepared the framework after several rounds of consultation with State and UT Governments.
  3. DPIIT also proposes to recognise States and UTs for their exemplary performance in seven pillars of the ranking framework:
  • Institutional support
  • Simplifying regulations
  • Easing public procurement
  • Incubation support
  • Seed funding support
  • Venture funding support
  • Awareness and outreach related activities
Start-up Ecosystem In India

Explained: Angel Tax ControversyPriority 1


Mains Paper 3: Economy | Investment Models

From the UPSC perspective, the following things are important:

Prelims level: Angel Tax

Mains level: Interventions required by the government to diversify India’s startup’s financing



  1. Over past few weeks, several startups have reportedly been receiving notices from the I-T department asking them to clear taxes on the angel funding they raise.
  2. In some cases they were levied a penalty for not paying Angel Tax.
  3. However, this is not the first time that this issue has come up. Startups have been raising the issue of Angel Tax for years, requesting the government to do away with it.

Who is an Angel Investor?

  1. An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
  2. It is also known as a business angel, informal investor, angel funder, private investor, or seed investor.

What is Angel Tax?

  1. Angel Tax is a 30% tax that is levied on the funding received by startups from an external investor.
  2. However, this 30% tax is levied when startups receive angel funding at a valuation higher than its ‘fair market value’.
  3. It is counted as income to the company and is taxed.
  4. Angel tax was introduced in 2012, with the purpose of keeping money laundering in check.
  5. The notices demanding what is known as ‘angel tax’ were served under Section 56(2) (viib) of the IT Act, which was introduced by the previous UPA government in 2012 to fight money laundering.

Why is Angel tax problematic?

  1. There is no definitive or objective way to measure the ‘fair market value’ of a startup.
  2. Investors pay a premium for the idea and the business potential at the angel funding stage.
  3. However, tax officials seem to be assessing the value of the startups based on their net asset value at one point.
  4. Several startups say that they find it difficult to justify the higher valuation to tax officials.
  5. In a notification in May, 2018, the CBDT had exempted angel investors from the Angel Tax clause subject to fulfillment of certain terms and conditions, as specified by the DIPP.
  6. However, despite the exemption notification, there are a host of challenges that startups are still faced with, in order to get this exemption.

Income Tax notices

  1. One of the reasons put forward by the IT Department to send such notices is to get information for distinguishing the genuine startups from the bogus ones.
  2. The notices essentially fall under two brackets: Notices under section 56(2) (viib) of the Income Tax Act, which is called income from other sources.
  3. This section states that any excess consideration received by a company will be treated as its income if it issues shares to a resident at a price which exceeds the fair market value of the shares.
  4. The section is invalid if consideration is received from venture capital companies, venture capital funds or a class of persons notified by the government.

Government’s stand

  1. It is a fact that less than 10% of our VC investments in startups come from domestic investors.
  2. We should liberalise the angel tax provisions to unlock the domestic capital and trigger off a new wave of startup value and job creation.
  3. The controversial sections discriminate between resident Indian investors (angel investors) and venture capital (VC) funds registered with the market regulator.
  4. The provision does not apply to investments raised via VC firms irrespective of any valuation, but the startup has to justify the valuation for the capital raised from other resident investors.

Way Forward

  1. Earlier in the year, the Department of Revenue had issued a notification directing assessing officers not to take coercive steps on recovery of angel tax against registered start-ups.
  2. But unregistered startups that have already raised angel investment may still be under the scanner of the income tax authorities.
  3. CBDT recognizes that startups are going to bring a lot of innovation to the country and, therefore, have to be supported in every possible manner.
Start-up Ecosystem In India

[pib] States’ Startup Ranking 2018PIBStates in News


Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: States’ Start-up Ranking 2018

Mains level: Boosting the startup ecosystem in India


  • The Department of Industrial Policy and Promotion (DIPP) announced results of the first ever States’ Start-up Ranking 2018.

States’ Start-up Ranking

  1. The DIPP launched an exercise to rank states and union territories on the basis of measures being taken by them to promote startups, and added that it was consulting states for their ranking framework.
  2. DIPP began this exercise from January, 2016.
  3. The State Startup Ranking Framework is aimed at bringing to fore progress made by States/UTs for promoting startup ecosystem.
  4. The report intends to foster competitiveness and propel the states/UTs to work proactively while facilitating states/UTs to identify, learn and replicate good practices.

Performance of the States

  • Best Performer: Gujarat
  • Top Performers :Karnataka, Kerala, Odisha, and Rajasthan
  • Leaders: Andhra Pradesh, Bihar, Chhattisgarh, Madhya Pradesh, and Telangana
  • Aspiring Leaders : Haryana, Himachal Pradesh, Jharkhand, Uttar Pradesh, and West Bengal
  • Emerging States: Assam, Delhi, Goa, Jammu & Kashmir, Maharashtra, Punjab, Tamil Nadu, and Uttarakhand
  • Beginners: Chandigarh, Manipur, Mizoram, Nagaland, Puducherry, Sikkim, and Tripura
Start-up Ecosystem In India

[pib] 2nd Startup India Investment Seminar in BeijingPIB


Mains Paper 3: Economy | Development and Employment

From UPSC perspective, the following things are important:

Prelims level: Particulars of the seminar, Difference between VCs and Angel Investors

Mains level: Boosting the startup ecosystem in India


2nd Startup India Investment Seminar

  1. Embassy of India in China in partnership with Startup India Association (SIA) and Venture Gurukool organized 2nd Startup India Investment Seminar in Beijing for fostering innovation and entrepreneurship among Indian youth.
  2. The event was planned to expose Chinese VCs and investors to the promising Indian startups and also help Indian startups to reach out to the large Chinese investors for receiving investment for their companies.
  3. Forty-two Indian entrepreneurs representing 20 Indian startups participated in the event and pitched before Chinese investors to make investments in their ventures.
  4. More than 350 Chinese Venture Capital (VC) funds, angel investors participated in a day long pitching session and seminar.
  5. A panel discussion was also organised to discuss effective strategy for Chinese VCs to enter the Indian startup market and share their experiences about the Indian startup ecosystem.


Venture Capitalists

  1. A venture capitalist is an investor who either provides capital to startup ventures or supports small companies that wish to expand but does not have access to equities markets.
  2. Venture capitalists are willing to invest in such companies because they can earn a massive return on their investments if these companies are a success.

Angel Investors

  1. An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
  2. A small but increasing number of angel investors invest online through equity crowdfunding or organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.
Start-up Ecosystem In India

[pib] Startup India’s Academia Alliance ProgrammePIB


Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: Particulars of the programme

Mains level: Boosting the startup ecosystem in India

Startup Academia Alliance Programme

1. To fulfil the Government of India’s mission to promote the spirit of entrepreneurship in the country, Startup India launched the Startup Academia Alliance programme
2. It is a unique mentorship opportunity between academic scholars and startups working in similar domains.
3. It aims to reduce the gap between scientific research and its industrial applications in order to increase the efficacy of these technologies and to widen their impact.
4. By creating a bridge between academia and industry, the Alliance aims to create lasting connections between the stakeholders of the startup ecosystem and implement the third pillar on which the Startup India Action Plan is based – Industry Academia Partnerships and Incubation.

Functioning of the programme

1. The first phase of Startup Academia Alliance was kickstarted through partnering with Regional Centre for Biotechnology, The Energy and Resources Institute (TERI), Council on Energy, Environment and Water, and TERI School of Advanced Studies.
2. Renowned scholars from these institutes, in fields such as renewable energy, biotechnology, healthcare and life sciences were taken on board to provide mentorship and guidance to startups working in relevant arenas.
3. The applications for Startup Academia Alliance were hosted on the Startup India Hub, a one-stop destination for startups to apply for opportunities such as incubator and accelerator programmes.

Start-up Ecosystem In India

Defence Ministry throws 11 challenges at startupsPrelims Only


Mains Paper 3: Science & Technology | Indigenization of technology & developing new technology

From UPSC perspective, the following things are important:

Prelims level: Defence India Startup Challenge

Mains level: Boosting innovation for defence manufacturing in India


Defence India Startup Challenge

  1. Defence Minister unveiled the Defence India Startup Challenge, an initiative to tap startups for finding safe and futuristic Indian solutions to critical needs of the three Armed Forces.
  2. Ministry released a list of 11 technologies that the Army, the Navy, and the Air Force need, to begin with.
  3. They included remote air vehicles, laser weapons, secure and safe communication systems and bandwidth, precision targeting systems, sensors, and protected and informed movement of soldiers in battle tanks.
  4. Those that come up with prototypes of usable products would be supported with ₹1.5 crore each and friendly procurement procedures from the Ministry under SPARK or Support for Prototype & Research Kickstart in Defence.

Assistance for Startups

  1. Startups participating under the Make-II or indigenous production procedure of the Defence Procurement Policy 2016 projects would be entitled to get a prototype development cost of up to ₹3 crore.
  2. The schemes are part of Innovations for Defence Excellence initiative launched at the DefExpo held in Kanchipuram in April.
  3. They would be supported by a ₹100-crore Defence Innovation Fund kick-started by defence PSUs Hindustan Aeronautics Ltd. and Bharat Electronics Ltd.
  4. Bengaluru-based Tonbo Imaging received a first of its kind certificate of accord of approval in principle for its proposal, Night Fire Control System for AGS-30.

Top Tech Institutions to mentor

  1. The Defence Innovation Organization signed MoUs with four of five selected incubators to mentor entrepreneurs and small and medium industries to create technologies for the military.
  2. The four are the Centre for Innovation Incubation and Entrepreneurship, IIM Ahmadabad; Society for Innovation and Entrepreneurship, IIT Bombay; T-Hub, Hyderabad; and FORGE under the Coimbatore Innovation & Business Incubator. IIT-Madras is the fifth partner.
Start-up Ecosystem In India

[op-ed snap] Can the state spur start-ups?op-ed snap

Image Source


Mains Paper 3: Economy | Development and employment

From UPSC perspective, the following things are important:

Prelims level: Particular schemes given in the article

Mains level: Issue of employment is specially mentioned in the Mains Syllabus.



  1. The article talks about India’s Start-up ecosystem in a very brief manner

India’s start-up atmosphere

  1. Recently held, the Global Entrepreneurship Summit has turned the spotlight once again on India’s booming start-up economy
  2. Over the past three years, India has become the third largest start-up ecosystem
  3. According to data compiled by Inc42, over $9.4 billion in funding has flowed into Indian start-ups in 2017, up 1.3 times over last year(as of September)
  4. There are more than a hundred funds registered with markets regulator Securities and Exchange Board of India alone

Efforts done by the Central Government for funding of start-ups

  1. The Centre alone has announced a corpus of Rs. 10,000 crore to fund start-ups, of which 75 have actually received some money so far
  2. India’s policy on foreign direct investment was specifically amended to include start-ups,
  3. Start-ups are now allowed to accept up to 100% of their funding requirement from foreign venture capital investors

Various schemes by the central government

  1. There are many schemes run by various arms of the government, all of which provide tax breaks, incentives, grant money and other forms of assistance to wannabe technopreneurs
  2. At last count, there were more than 44 such schemes
  3. Technical Assistance: The Department of Electronics and Information Technology offers technical assistance for filing patents
  4. And up to Rs. 15 lakh per invention, or up to 50% of the costs incurred in filing a patent
  5. The department has multiplier grants scheme which provide up to Rs. 2 crore for start-ups in the IT services, analytics, artificial intelligence, and Internet of things space
  6. Funds for Borrowings: The Credit Guarantee Fund Trust for Micro and Small enterprises underwrites borrowings of up to Rs. 1 crore per unit
  7. Encouraging initiative: The Centre’s Atal Innovation Mission funds up to Rs. 10 crore for each Atal Incubation Centre set up under the scheme
  8. The Atal Mission also provides funding to schools to set up ‘Atal Tinkering Laboratories’ to spur the spirit of innovation and enterprise amongst the young

Efforts done by the State Governments

  1. As many as 16 State start-up policies are listed on the Startup India hub
  2. States like Tamil Nadu and Kerala had rolled out schemes of their own

Important question: Can start-up ecosystem actually be created through state intervention and policy?

  1. There is mixed evidence from around the world
  2. Israel is the most celebrated success story of state intervention and policy creating and shaping an innovations powerhouse
  3. It set up a technology incubator programme way back in 1991, under the office of its Chief Scientist
  4. Since then, it has gone on to become a major world power in IT innovation, as well as innovation in the pharma sector
  5. Many countries have tried to follow the Israel model, but with far less success
  6. This is probably because Israel’s policy was clearly focussed in a few areas of technology where
    (1) it enjoyed a human capital advantage,
    (2) the ecosystem was small and manageable, and
    (3) the policy was administered by science and technology experts rather than administrative generalists
  7. On the other hand, the U.S., with the largest start-up ecosystem has no clear start-up policy, though almost every state and several major cities have specific policies

Future of Start-ups in India

  1. It is too early to tell in India’s case
  2. But given the proliferating schemes, the ever-growing involvement of the government
  3. And the lack of a targeted focus, we may end up repeating the mistakes of others
Start-up Ecosystem In India

Start-up funding crawls: 20 months, Rs 70 crore


Mains Paper 2: Governance | Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

The following things are important from UPSC perspective:

Prelims Level: Particulars of the FFS

Mains level: The article shows the inability of implementing the FFS scheme, by the government. Government needs to counter the issue.


Fund-of-Funds for start-ups (FFS) is showing slow progress

  1. FFS was launched in line with the Start-up India Action Plan of the Government
  2. It is a Rs 10,000-crore Fund
  3. The fund under the plan has made slow progress with only about Rs 70 crore having been disbursed to start-ups until the beginning of this month

Aim of launching the fund

  1. The Fund was launched with aim to invest in local venture capital funds
  2. It has made commitments to 62 start-ups
  3. All these 62 start-ups were backed by Alternative Investment Funds (AIFs) where state-owned SIDBI (Small Industries Development Bank of India) acted as a limited partner
  4. What is an AIF: An AIF is any fund established or incorporated in India that is a privately pooled investment vehicle, which collects funds from investors(Indian or foreign) for investing it in accordance with a defined investment policy for the benefit of its investors
Start-up Ecosystem In India

Odisha Start-up Policy 2016

  1. Aim: To develop an ecosystem to facilitate at least 1,000 young ventures in the next five years
  2. To emerge amongst the top three start-up hubs in India by 2020 through strategic partnerships and policy interventions
  3. Policy: Will provide incentives and support to young companies at all stages of development
  4. Fund: A start-up capital infrastructure fund up to Rs. 25 crore would also be used to support the development of start-up ecosystem in the state
  5. Credit: The Govt would also encourage banks and other financial institutions to extend and enhance lending facilities and set up dedicated desks for young ventures for easy funding
Start-up Ecosystem In India

India is world’s third biggest tech start-up hub: Study

  1. Study: By Assocham in association with Thought Arbitrage Research Institute
  2. Top 3: US, UK, India
  3. Top Indian cities: Bengaluru, Delhi NCR, Mumbai, Hyderabad and Chennai
  4. Overall start-ups: (Both tech and non-tech) India figures among the five largest hosts in the world, along with China
  5. Synergising ‘Startup India’ with ‘Make in India’ and ‘Digital India’ initiatives has the potential to expand the domestic ecosystem for new entrepreneurs
  6. R&D: Tax exemption to encourage fresh ideas without fear of failure
Start-up Ecosystem In India

ONGC unveils start-up fund

  1. News: Oil and Natural Gas Corporation (ONGC) unveiled a Rs.100 crore start-up fund to foster, nurture and incubate new ideas related to the oil and gas sector
  2. The initiative, christened as ONGC Start-up’, is in line with the Government of India’s initiative ‘Start-up India’
  3. ONGC will provide the entire support chain for start-ups including seed capital, hand-holding, mentoring, market linkage and follow-ups
  4. Aim: To increase the contribution of implementable ideas in the oil and gas sector
  5. ONGC is setting up a dedicated website to take this initiative forward
  6. Impact: Would promote entrepreneurship among the younger Indians by creating an ecosystem that is conducive for growth of start-ups in the oil and gas sector, which has a huge potential for technology-enabled ideas

    Analysis: Start Up India mission by GOI is to encourage entrepreneurial spirit among youngsters. It has been provided on the motto – “Earlier youngsters used to look for employment but now youngsters will be giving employment. “

Start-up Ecosystem In India

Incubator hubs soon to spur Start-up India

  1. News: With its Start-up Policy having drawn only lukewarm response so far, the government is planning a twin-pronged approach to spur the initiative
  2. In places with no leading centres such as the IITs, the IIMs, or other renowned institutes, colleges would be clubbed to form an incubator hub
  3. It will also be ensured that incubators do not reject applications from entrepreneurs, and instead provided them all the hand-holding they needed
  4. Incubators affected by shortage of staff would be asked to rope in experts from outside so that no applicant will be denied the expertise required
Start-up Ecosystem In India

Nod for Rs.10,000 cr start-up fund

  1. The Cabinet approved the setting up of a Rs.10,000 crore ‘Fund of Funds for Startups’ at the Small Industries Development Bank of India (SIDBI)
  2. It will contribute to various Alternative Investment Funds registered with the Securities and Exchange Board of India (SEBI)
  3. The Rs.10,000 crore-corpus will be built up over the 14th and 15th Finance Commission cycles subject to progress of the scheme and availability of funds
  4. Already, Rs.500 crore has been provided
  5. The fund is expected to generate employment for 18 lakh persons & will support start-ups in becoming full-fledged business entities
  6. This is in line with the Start-up India Action Plan of the government unveiled this year
Start-up Ecosystem In India

Startups to get tax exemptions

  1. News: Central Board of Direct Taxes (CBDT) has notified the much awaited tax exemption on investments above fair market rate for startups
  2. Impact: Startups can now issue shares to investors at higher than fair value without worrying about tax consequences
  3. Fair value: Since startups have unique business models and might not necessarily have a publicly traded comparable, fair value is a value determined by an independent third party, for example, auditors
  4. Background: Under the Indian tax law, if an Indian company receives investment from an Indian resident that exceeds the fair value of shares, then the excess amount is taxed as income of the Indian company
Start-up Ecosystem In India

A single platform for smart tech-aided urban solutions

  1. Context: Bengaluru based startup Mapunity gives a single platform for technology aided urban solution called Technagara
  2. It integrates urban solutions on a geospatial platform
  3. Use: Can create an app for city, Community, municipal ward etc
  4. The city-neutral platform is designed to host data over nine major domains
  5. Domains: Transport, health, education, heritage, environment, tourism, safety, business, public utilities
Start-up Ecosystem In India

Deen Dayal Upadhyay Swaniyojan Yojana

  1. What? Rural avatar of Startup India campaign aimed at boosting entrepreneurship
  2. It is being designed by the rural development ministry
  3. It will be backed by MUDRA Bank loans, innovative credit linkages and self-help groups
  4. Skill sets to be provided would be related to driving, plumbing, agriculture, dairy farming, grafting and horticulture among others
  5. Govt will also hold discussions with private entities and individuals working in the startup space to map entrepreneurship opportunities
Start-up Ecosystem In India

State-run oil companies to set up start-up fund

  1. Context: Statement issued at Natural Gas Vision 2025 conference organized by the Indian Oil Corp. Ltd
  2. What? State-owned oil companies will set up a fund that will finance start-ups based on innovative ideas in the energy sector
  3. The move is in line with the government’s idea of promoting entrepreneurship, innovation and self-employment
  4. Any start-up needing hand-holding can seek support from the fund
  5. Public sector companies will independently evaluate the commercial viability of the project and take a decision on their equity participation
Start-up Ecosystem In India

Kashmiri start-up aims to fight pashmina fakes

  1. News: Srinagar-based start-up aims to sell pashmina shawls, woven from rare wool extracted from chiru in upper reaches of the state
  2. Protection with GI tag: Help to protect new buyers from being cheated into purchasing fakes
  3. What’s the Problem? J&K is battling a high level of unemployment with about 7 lakh educated youth left looking for jobs
  4. State ranks at number 29 on Ease of Doing Business indicator according to a World Bank survey, reflecting the lack of government support for new start-ups
  5. What’s Requirement? Start-ups require an incubation centre where youngsters can toy with their ideas with minimum risk factor
  6. Need of a mechanism to allow free-flow of investment in Kashmir without any fear and hurdles
Start-up Ecosystem In India

Start-ups’ focus shifts to conserving cash

  1. What? Start-ups across the board are focusing on cash conservation and making their core businesses fitter
  2. Why ? Funding has slowed
  3. Earlier: Investors poured more than $5 billion into Indian Internet companies, which expanded into new cities and businesses
  4. This was without caring much about the financial viability of many of their experiments
  5. Now: Market sentiment has flipped because of a mix of macroeconomic and international factors and local ones such as deep losses incurred by start-ups
  6. Even relatively well-funded start-ups are shutting the initiatives which aren’t yielding immediate returns or entailing high costs
Start-up Ecosystem In India

‘Start-Up India’ and ‘Make In India’ Should Impel CSIR-Tech pvt ltd

  1. Dr Harsh Vardhan recently met with leaders and team members of CSIR-Tech Pvt Ltd at CSIR-NCL’s campus in the city of Pune.
  2. Dr Harsh Vardhan keenly asked questions about the successful work of technology commercialization that CSIR-Tech was involved with for the last 3 years.
  3. CSIR-Tech was doing which directly aligns with the government of India’s programs like ‘Start-up India’ and ‘Make in India’
  4. How technology and intellectual property being developed at CSIR, BARC, IITs, DST labs, DRDO, etc. is finding its way to touch common lives
  5. CSIR-Tech invests in science based start ups and spin off businesses through its ‘India Science Venture Fund’, a SEBI registered fund which includes SIDBI as a lead partner
Start-up Ecosystem In India

Government and Qualcomm announce contest for start-ups

  1. The DIPP and Qualcomm Ventures announced India’s largest start-up contest  “QPrize Make in India”
  2. It will award $3.5 lakh in equity investment as prize money for the winning company
  3. The contest is to catalyse Indian entrepreneurs and start-up community to drive the entire value chain from innovation to manufacturing in India
Start-up Ecosystem In India

Relaxations to start-ups to create more Indian unicorns

  1. RBI will ease regulations to allow startups to raise foreign venture capital through innovative instruments.
  2. The step comes as it seeks to lighten norms to support growth of entrepreneurship in India.
  3. RBI will also simplify the process for outward remittances and allow innovative instruments like convertible notes.
  4. RBI’s measures are in line with the government’s Start-up India initiative which envisages making the ecosystem conducive for growth of startups.
Start-up Ecosystem In India

RBI relaxes FDI norms to boost start-ups

  1. RBI relaxed several rules including FDI norms to boost start-up activity in the country.
  2. Start-ups are allowed to receive foreign venture capital investment irrespective of the sector in which they operate.
  3. The new norms will enable transfer of shares from foreign venture capital investors to other residents or non-residents.
  4. Proposals like permitting start up to access ECB, issuance of innovative FDI instruments etc. are under consideration.
  5. If these proposal goes through, it will improve investor participation and also help start-ups to raise capital at low cost.
Start-up Ecosystem In India

Start and goop-ed snap

‘Start-up India’ is overdue. But creation of enabling policy environment must not be restricted to start-ups.

  1. It promises swift approvals for starting enterprises, easier exits, tax and fiscal incentives, faster registration of patents and protection of intellectual property rights.
  2. Signals a possible end to the inspector raj.
  3. Tax breaks do help but what is more critical is an enabling regulatory and business environment that will foster innovation and have a cascading impact on entrepreneurship.
  4. Funding now on offer could perhaps be directed more towards segments tough to raise capital in such as food processing, rather than mobile-based applications or e-commerce firms.
  5. Easing of rules and creation of a conducive policy environment should not be restricted just to start-ups. It should be extended to all businesses.
Start-up Ecosystem In India

Case for special enabling environment for start ups

Small entrepreneurs find it difficult to navigate the complex bureaucratic and regulatory maze.

  1. Start-ups hold the potential of creating more jobs at a time when the manufacturing sector is facing a slump.
  2. That may last longer given global economic prospects and the slowdown in China, which has been one of the engines of global growth.
  3. With growing automation, the manufacturing sector may no longer be in a position to create jobs.
  4. The fact is that there is a fundamental problem of demand and the real challenge for the Indian economy now is to fund several large projects — be it roads, highways or railways.
  5. Start-ups are job creators like the large number of self-employed who form a significant part of the country’s labour force.
Start-up Ecosystem In India

SBI starts advisory services for startups

  1. SBI has unveiled a dedicated advisory services branch for startups.
  2. The branch, named branch InCube, was recently inaugurated in Bengaluru.
  3. InCube’s relationship managers will provide personalised advice to startup founders on investments, taxation and forex transactions, and solutions to optimise the cash conversion cycle.
  4. It will be a one-stop advisory services facility for entrepreneurs. However, it will not offer loans to startups for now.
Start-up Ecosystem In India

SpaceX success launches space startups to new heights

Investor confidence has been buoyed by the historic landing of SpaceX’s Falcon 9, upright and intact, on December 21.

It was the first ever successful recovery of a reusable rocket.
It was the first ever successful recovery of a reusable rocket.

  1. SpaceX’s successful landing of a reusable rocket booster in December, 2015.
  2. Opens a new frontier for commercial space startups by offering tremendous cost savings and attracting venture capitalists who once shied away from spatial ventures.
  3. Space startups include nano-satellite makers, earth-imaging and weather-tracking technology developers.
  4. SpaceX, founded by high-tech entrepreneur Elon Musk, had one successful rocket landing after multiple failures, and more work to do.
Start-up Ecosystem In India

‘Start up India’ to be unveiled today

To make it easier for setting up new ventures and closing unviable ones, besides clearing regulatory issues that hamper access to finance.

Around 40 Silicon Valley heavyweights are expected to take part in the inaugural ceremony of Start Up India launch. Photo: @DIPPGOI/Twitter
Around 40 Silicon Valley heavyweights are expected to take part in the inaugural ceremony of Start Up India launch. Photo: @DIPPGOI/Twitter

  1. The Start Up India mission envisages technology business incubators and research parks.
  2. HRD Ministry and Department of S&T have agreed to partner in an initiative to set up over 75 such startup support hubs in the NITs, IIITs, the IISERs and NIPERs.
  3. Programme include a Startups and Entrepreneurship Law.
  4. Google will be offering $15,000 of equity funding for early stage startups at a session called ‘Launchpad Accelerator’ where startups can make live presentations about their business ideas.
Start-up Ecosystem In India

Startups for tax breaks, single window system

With 4,200 enterprises, India already ranks third in the world for the number of start ups after the U.S. and the U.K.


  1. Simplified tax structure, easy compliance process and single window system are some of the issues that startups expect to be addressed through the much-awaited ‘Startup India’ policy.
  2. Ease of doing business is important for any enterprise but critical for startups.
  3. All entrepreneurs look for single window clearances, ease of doing business, incentives to develop regions and clarity on taxation structures.
  4. The problem in most cases is not the regulation but the red tape that makes compliance difficult despite best intentions.
  5. Many startups begin their journey here in India but quickly move abroad as they are intimidated by the complexity of regulation in India.
Start-up Ecosystem In India

Startup mission looks beyond IITs, IIMs

HRD Ministry, DST to join hands to set up over 75 startup support hubs.

  1. The Start-Up India mission to be unveiled by Prime Minister includes an ambitious plan.
  2. To create a network of startup centres, technology business incubators and research parks, to take the startup culture beyond the top-tier education institutions such as IITs and IIMs.
  3. From about 70 incubators set up by the government between 2001 and 2014, we have now crossed 100 incubators.
  4. As per the plan, the HRD Ministry and the Science and Technology Ministry would share the costs for setting up startup centres in these institutions.
  5. The Science and Technology Ministry would bear 100 per cent cost to set up business incubators in institutes like NITs.
Start-up Ecosystem In India

Start Up India schemes to finally take off

The SETU scheme’s resources would be devoted to strengthening incubators and setting up ‘tinkering labs’ where ideas can be shaped into prototypes before they are ripe for funding.

  1. The government can finally start deploying funds from the Self-Employment and Talent Utilisation (SETU) scheme and the Atal Innovation Mission (AIM).
  2. To promote startups and scientific research, after over 10 months of spadework.
  3. AIM would focus on inviting aspiring entrepreneurs to solve India’s contemporary socio-economic problems via ‘grand challenges’.
  4. That offer substantial awards to incubate and scale up winning ideas.
  5. An overarching supervisory body with about 10 members is being formed to oversee the allocation of funds under the schemes to line ministries.
Start-up Ecosystem In India

Corruption, delays hamper startups in India: survey

According to a new survey, corruption and delays are preventing the growth of entrepreneurship in India.

  1. Nearly 60% of the citizens felt these bottlenecks were some of the biggest hurdles to growth of entrepreneurship in the country.
  2. While only 14% felt funding to be the main impediment.
  3. The Start Up India mission should go beyond digital/technology startups and enable entrepreneurship at the grassroot level.
Start-up Ecosystem In India

India to roll out red carpet for Silicon Valley chiefs

  1. Govt. has invited CEOs of big MNCs for unveiling the Start Up India initiative on Jan 16.
  2. The Start Up India launch would be similar to the start of the Make In India campaign last year.
  3. Indian startups have received $9 billion in funding in 2015, which is half the total amount they could raise in the 5 years preceding 2015.
  4. PM could announce include a new law that makes it easier to start and exit a venture and additional support for innovative startups.
Start-up Ecosystem In India

Govt sets up mechanism to support start-ups

A mechanism known as SETU to support all aspects of start-up businesses and other self- employment activities has been set up by the government.

  1. National Policy for Skill Development and Entrepreneurs envisaged fostering entrepreneurship and grassroots innovation.
  2. By providing support in terms of fiscal incentives, creation of grass root technology innovation hubs, legal support and market linkages.
  3. India Aspiration Fund (IAF) under the Small Industries Development Bank of India(SIDBI) to give a boost to start-up ecosystem.
  4. Department of Electronics and Information Technology is implementing a scheme entitled ‘Technology Incubation and Development of Entrepreneurs’ (TIDE).
  5. Under which 147 start-ups have been supported at 25 TIDE centres established in premier institutes like IITs, NITs, IIMs etc.
Start-up Ecosystem In India

Startup policy in New Year

The Start-up India policy would be a set of significant measures to encourage entrepreneurship in the economy.

  1. It would be a game-changer in making the ecosystem conducive for new ventures.
  2. Nearly 90% of the venture capital in Indian startups is coming from overseas, and govt. is trying to create a domestic VC industry.
  3. Country need innovations that solve Indian consumers’ problems, with a grassroots-level movement.
  4. Foreign venture capital firms tend to have a bias towards replicating business models proven in developed countries
Start-up Ecosystem In India

Change laws for startups to mushroom: Nasscom

  1. The Centre is currently engaged in framing its startups policy.
  2. Nasscom is seeking the enactment of bankruptcy laws, the absence of which has become a major bottleneck for establishment of companies.
  3. India needs laws for shutting down unviable startups quickly, ease taxation policies to nurture young entrepreneurs.
  4. There is also a need for introduction of e-filing facility so as to bring down paper work.
Start-up Ecosystem In India

Start-ups may get MAT exemptions, IPR earning waivers

PM Modi in his Independence Day speech had given a call for “Start-up India, Stand up India” to encourage innovation and increase employment for the youth.

  1. Exempting start-ups from the levy of minimum alternate tax (MAT), exemptions on earnings from intellectual property rights.
  2. A relief from the anti-abuse provisions with regards to capital gains tax.
  3. In cases where the start-ups have started earning from the commercialisation of IPRs, in those cases royalty income should not be taxed.
  4. Currently, the Income-Tax Act, 1961 provides weighted deduction of up to 200 per cent in certain cases for research and development.
  5. An aim to encourage IPR generation and increase innovation.
Start-up Ecosystem In India

Can india create the next google-open

Current status of Startups in India:

  • India is the largest incubator in Asia , 3rd biggest in the world.
  • Indian start-ups have received more than $ 3.5 billion in the venture funding during Jan-Jun 2015.

US has cited regulatory hurdles. What are the solutions ?

  • Clear and simple rules
  • Tax treaty with US, because most investments are routed through Mauritius or Singapore.
  • The favourable capital tax gains exemption is available through these countries, in case investor want to exit.
  • A zero capital gains regime will increase the flows substantially.
  • Introduce bankruptcy code/law.
  • Simplify company creation.
  • Streamline issues exits & liquidity.

What is so special about start-ups?

  • In US, they are responsible for 2/3rd of jobs.
  • Indian start-ups will employ majority of the 10 lakh youth that join the work force every month.
Start-up Ecosystem In India

India bags third slot in global startup space

India has emerged as the youngest startup nation in the world with over 72% of founders are less than 35 years old.

  1. The country has presence of more than 4,200 startups, making it the 3rd largest startup base worldwide.
  2. The sector grew at the rate of 40% over the last year, overtaking Israel.
  3. Around 1,200 tech startups were born in the year 2015, out of which more than 50% focus on e-commerce, consumer services and aggregators business.
  4. Bengaluru remains the hot destination for entrepreneurs to launch their business and was ranked 15 globally.

Reasons for growth of Startups in India :

  • Investment by business tycoons like Ratan Tata and Azim Premji in startups.
  • Rapid increase in the availability of risk capital.
  • Large Indian enterprises have also formed dedicated corpus to invest in startups.

Impacts of Startups on India :

  • It is contributing to the Indian economy in many ways.
  • It is positively impacting the lifestyles of citizens.
  • They are creating innovative technology solutions that are addressing the key social problems that India is facing.
Start-up Ecosystem In India

Nasscom bats for policy changes for the Startups

  1. Nasscom wants India to bring more policy reforms for the growth of the start-up sector.
  2. Nasscom has sought easing of rules and regulation for funding.
  3. It wants simplification in compliance procedures by minimising licences, permits, approvals, tax for startups.
Start-up Ecosystem In India

SEBI notifies start-up listing norms

  1. SEBI notified a new set of listing norms for start-ups, including e-commerce ventures, on a separate platform of domestic stock exchanges – the institutional trading platform.
  2. The new norms provide significant relaxations in the disclosure requirements.
  3. SEBI has also relaxed its delisting, takeover and Alternative Investment Fund regulations for entities engaged in IT, data analytics, intellectual property etc.
  4. However, the new platform would be open to only institutional investors and HNIs in order to protect small retail investors from the risks involved with the star-ups.

START-UP India Launch by Prime Minister Modi on 16th January, 2016, aimed at celebrating the entrepreneurship spirit of country’s youth and has been attended by CEOs and founders of top startups (over 1500) from across the country. Let’s see this in brief!

<In Part I, we have taken a glance on Simplification and Handholding of Start up Plan, rest part will be covered in Part II of this series>

What is Start up India programme and its mandates?

  • Startup India is a flagship initiative, intended to build a strong ecosystem for nurturing innovation and Startups in the country that will drive sustainable economic growth and generate large scale employment opportunities.
  • In order to meet the objectives of the initiative, Government of India is announcing this Action Plan that addresses all aspects of the Startup ecosystem.

How can this Action Plan help accelerate the Startup movement?

  • It is spread across movement from digital/ technology sector to a wide array of sectors including agriculture, manufacturing, social sector, healthcare, education, etc.
  • From existing tier 1 cities to tier 2 and tier 3 cities including semi-urban and rural areas.

The Action Plan is divided across the following areas:

  • Simplification and Handholding
  • Funding Support and Incentives
  • Industry-Academia Partnership and Incubation

What is the exact definition of a Startup ?

  • Startup means an entity, incorporated or registered in India not prior to 5 years, with annual turnover not exceeding INR 25 crore in any preceding financial year.
  • Provided that such entity is not formed by splitting up, or reconstruction, of a business already in existence.

What will be the Action plan for Simplification and Handholding task?

#Compliance Regime based on Self-Certification

  • To reduce the regulatory burden on Startups thereby allowing them to focus on their core business and keep compliance cost low.
  • Startups shall be allowed to self-certify compliance (through the Startup mobile app) with 9 labour and environment laws (refer below).
  • In case of the labour laws, no inspections will be conducted for a period of 3 years.
  • In case of environment laws, Startups which fall under the ‘white category’ (as defined by the Central Pollution Control Board (CPCB)) would be able to self-certify compliance and only random checks would be carried out in such cases. [Can you think of question on white category in Prelims?]

#Startup India Hub

To create a single point of contact for the entire Startup ecosystem and enable knowledge exchange and access to funding.

How will “Startup India Hub” be a key stakeholder in this vibrant ecosystem?

  • Work in a hub and spoke model and collaborate with Central & State governments, Indian and foreign VCs, angel networks, banks, incubators, legal partners, consultants, universities and R&D institutions.
  • To all young Indians who have the courage to enter an environment of risk, the Startup India Hub will be their friend, mentor and guide to hold their hand and walk with them through this journey.

#Legal Support and Fast-tracking Patent Examination at Lower Costs

  • To promote awareness and adoption of IPRs by Startups and facilitate them in protecting and commercializing the IPRs.
  • By providing access to high quality Intellectual Property services and resources, including fast-track examination of patent applications and rebate in fees.
  • The scheme for Startup Intellectual Property Protection (SIPP) shall facilitate filing of Patents, Trademarks and Designs by innovative Startups.

Various measures being taken in this regard include:

#1. Fast-tracking of Startup patent applications:

Patent application of Startups shall be fast-tracked for examination and disposal, so that they can realize the value of their IPRs at the earliest possible.

#2. Panel of facilitators to assist in filing of IP applications:

Facilitators will be responsible for providing general advisory on different IPRs as also information on protecting and promoting IPRs in other countries.

#3. Rebate on filing of application:

Startups shall be provided an 80% rebate in filing of patents vis-a-vis other companies. This will help them pare costs in the crucial formative years.

#Relaxed Norms of Public Procurement for Startups

  • At present, effective April 1, 2015 Central Government, State Government and PSUs have to mandatorily procure at least 20% from the Micro Small and Medium Enterprise (MSME).
  • In order to promote Startups, Government shall exempt Startups (in the manufacturing sector) from the criteria of “prior experience/ turnover” without any relaxation in quality standards or technical parameters.

#Faster Exit for Startups

  • To make it easier for Startups to wind up operations.
  • The Insolvency and Bankruptcy Bill 2015 (“IBB”), tabled in the Lok Sabha in December 2015 has provisions for the fast track and / or voluntary closure of businesses.
  • In terms of the IBB, Startups with simple debt structures or those meeting such criteria as may be specified may be wound up within a period of 90 days from making of an application for winding up on a fast track basis.

Let us know what do you think on this question?

#Q. How will start ups create an ecosystem that can flourish with ‘Digital India’ initiative? Discuss with examples.


Published with inputs from Arun

Leave a Reply

Please Login to comment
0 Comment threads
0 Thread replies
Most reacted comment
Hottest comment thread
0 Comment authors
Recent comment authors
newest oldest most voted
Notify of