Startup India initiative: States laid the groundwork, time for Centre to give final push

The proposed Start up India, Stand up India scheme can play a big role in extending the startup culture across the country.

New Delhi | Updated: January 16, 2016 4:30 pm
start up India stand up India, startup india, startup modi New Delhi: Prime Minister Narendra Modi with WeWork founder and Start Up India participant Adam Neumann (R), in New Delhi on Friday. (Source: PTI)

According to the World Bank’s report, India is ranked 130 out of 189 countries in the overall “ease of doing business” ranking. Opening a business in India is much harder than any other of the counterpart BRIC countries. Basic issues like getting credit, electricity, paying taxes and resolving insolvency continue to be sluggish and difficult in India.

In order to provide an impetus to the Indian entrepreneurial landscape, the Government is readied to launch the Startup India, Standup India campaign on 16th January, 2016. The initiative aims to set up a network of start-ups and provide a new dimension to entrepreneurship in the country. While the government plans to launch this initiative at a national level, Swaniti Initiative, a non-profit organization working on data insights, took a closer look at state level performance to see how various states had adopted a start-up friendly policy.

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Researchers delved in to looking at variables that are important for businesses and sought to find states that were performing well in these metrics. The findings were as follows:

1) Maharashtra
2) Delhi
3) West Bengal
4) Karnataka
5) Tamil Nadu

Maharashtra accounts for the largest share of new companies registered, followed closely by Delhi. Along with West Bengal, Karnataka and Tamil Nadu, 65.9% of all registered companies have been opened in these 5 states. At the same time, the North eastern states of Arunachal, Manipur, Nagaland and Mizoram together house less than 1% of total registered companies.

By improving the regulatory framework, the top performing states have been able to provide a relatively conducive environment for entrepreneurial activities. While Delhi and Maharashtra have benefited due to their status as the political, financial and commercial hubs of the nation, Karnataka became the first state to establish a startup policy with a timeframe of 5 years from 2015-2020. The policy entails setting up incubators in postgraduate colleges, collaboration between R & D institutions and industry and technical business incubators in higher learning institutions. Similarly, Tamil Nadu has set up a State level warehouse at Tidel Park in its mission to set aside dedicated areas for start-ups to function.

Being able to create a macroeconomic environment that is inviting for business is considered one of the most important factors for startups according to the World Bank.

States aspiring to promote new businesses have been able to designate a centralized state body which acts a single point of contact for all business startup licensing. This body is empowered through an explicit mandate to carry out the functions. Andhra Pradesh, Madhya Pradesh, Maharashtra, Punjab, Telangana and Uttar Pradesh have also gone one step ahead and placed the business registration process online to simplify the process of applying for and obtaining registration certificates for entrepreneurs. An assessment study conducted by Department of Industrial Policy and Promotion (DIPP) ranks the top 5 states on multiple parameters on ease of setting up a business.

Top 5 states – Setting up a business

The ease of opening businesses consistently marks as one of the most important variables across all Connecting talent with the required infrastructure helps improve the overall knowledge economy and creates new jobs. As internet connectivity and penetration improves, it plays a major role in boosting job generation and enabling newcomers to start successful business ventures. The top five service areas in terms of internet subscriptions (wired + wireless) per 100 population are Delhi, Punjab, Himachal Pradesh, Kerala and Tamil Nadu. Maharashtra and Karnataka follow closely with a greater internet subscriber base than the other states.

Internet Subscribers per 100 population

Access to Human Capital

Investing in human capital is an essential activity undertaken by a successful enterprise. Southern states of Maharashtra, Karnataka, Andhra Pradesh and Kerala have a greater number of colleges per lakh population that cater to their youth. Several of these institutions also host incubation centres under the Technology Incubation and Development of Entrepreneurs (TIDE) scheme implemented by Department of Electronics and Information Technology (DeitY). Out of 27 TIDE centres, nearly 50% have been set up in these states. The ready availability of skilled workforce establishes a strong correlation with the successful launch of startup missions.

Colleges per lakh population

The Union Cabinet recently approved the setting up of two credit guarantee funds to facilitate loans to micro and small entrepreneurs through MUDRA (Micro Units Development Refinance Agency) and the Stand Up India scheme. The corpus of credit guarantee fund for MUDRA will be Rs 3,000 crore and for Stand Up India Rs 5,000 crore with loans repayable up to 7 years. Banks will also be required to focus on SC/ST and women entrepreneurs in a bid to make the ecosystem more inclusive.

As of January 15th, 2016, banks have disbursed Rs. 81,004 crore under the Pradhan Mantri Mudra Yojana benefiting more than 2 crore micro and small entrepreneurs. Karnataka, Maharashtra, Tamil Nadu, Bihar and West Bengal account for 43% of loans made available through the scheme.

Disbursement of funds under PMMY

As is evident, Southern states of Karnataka, Tamil Nadu, Maharashtra, Andhra Pradesh and Kerala have been able to create an entrepreneur-friendly system. States, such as West Bengal and Rajasthan have also set up structures to nurture start-ups by launching incubation centres and funding support.

The proposed Start up India, Stand up India scheme can play a big role in extending the startup culture across the country by promoting the required blend of suitable policies, access to finance, incubation and inclusive ecosystem.

Swaniti-Final-Logo The Indian Express has partnered Swaniti Initiative for a regular DATA series called India In Numbers.

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  1. M
    Jan 16, 2016 at 8:49 am
    Once the states start competing with each other Commies and Congis will die of suffocation! Simply an oxygen less air grave.
  2. S
    Mar 17, 2016 at 8:49 am
  3. H
    Hemen Parekh
    Jan 17, 2016 at 5:41 am
    TEN MILLION START- UPS IN ONE YEAR ? Thank you , Narendrabhai , for the Start Up Action Plan announced last evening I am glad that some of my suggestions ( sent to Ministers / Secretaries ) over the past 2 years , have been incorporated in the ACTION PLAN , in respect of : * Self Certification * Simplified Registration thru Mobile App * Tax Exemption for Capital Gains * Entrepreneurship Program for 10 lakh students * No Corporate Income Tax for 3 years You will find my detailed suggestions covering these points in following blogs at , : * A New Economic Order - Start Up Act 2015 / 12 Sept 2015 * From Job Seekers to Job Creators / 15 Sept 2015 * Back Up Factory of the World / 09 Sept 2015 * Blue Print for a Start Up Nation / 27 Dec 2015 * Creating Jobs Vs Creating Self Emplo ? / 10 Dec 2015 * Get Out of the Way / 01 Dec 2015 * Ten Million Entrepreneurs ? / 19 Oct 2015 * Start Up Eco System / USA vs India / 01 Oct 2015 * Treading the Beaten Path / 25 Sept 2015 * Second Industrial Revolution / 21 Sept 2015 * From Single Window to a Single Day ? / 19 Sept 2015 * Myth of Job Creation / 12 Sept 2015 * Killing Many Birds with One Stone / 07 Sept 2015 * If Mohamed cannot go to Mountain / 26 July 2015 * Ditch Historical Baggage / 24 Dec 2015 * Create Self Employment / 21 Feb 2015 Very likely , your initiative may see the birth of ten thousand new start-ups in 2016-17, which , together , might generate one lakh jobs In itself, this will bring a new dynamism to India's Economy But that will still fall far short of 12 Million ( 120 lakh ) youth joining the work-force each year Can all of these youth become Start Ups ? It is entirely possible All you need to do is to implement my following suggestion, described in , " A New Economic Order / Start Up Act - 2015 " / 12 Sept 2015 " : SUGGESTION * Although all Start Ups will need to file annual Income Tax returns ( with full disclosure of income / expenses / profits / sources of funds etc ) , it will not be required to pay any Corporate Income Tax for the first 10 years of its existence * A Start Up will be free to raise funds from any source ( Individuals / Companies / PE funds / VCs / Angel Investors / Religious Trusts etc ) * 100 % FDI will be permitted in Start Ups * A Start Up can receive loans or equity and be able to accept fixed deposits . It can also give loans to individuals or other Start Ups or invest in other Start Ups by way of equity * There will be no restrictions on what interest ( on loans / FDs ) that a Start Up may pay nor any restrictions on dividends it may declare The dividends declared by Start Ups will not attract any Income Tax * As far as the persons / companies etc providing funds to Start Ups ( by way of loans or equity ) is concerned , no questions will be asked re their source of funds WHAT WILL HAPPEN , IF IMPLEMENTED ? * Billions of rupees worth Black Money will flow into these Start Ups - money which is currently lying unutilized or locked up in unproductive ets * Within 3 months , thousands of Venture Capital Funds will be born , exclusively for funding of Start Ups ( You know who will set up these VCs ! ) * With NO Income Tax to be paid , Start Ups will conduct all transactions through cheques ( receipts / payments ) * GST collections will go up * Domestic Savings Rate will go up * Since millions of ( Black Money holding ) individuals / businesses will come forward to fund these Start Ups , lending pressure on banks will go down * Who knows , Start Ups may get into the business of ets Reconstruction and relieve banks of NPAs ! * With locally / domestically stashed Black Money flowing into the economy , our dependence on FDI will go down * Corruption will decline drastically Dear Shri Narendrabhai : It is still not late to incorporate my suggestion in forthcoming Union Budget on 29 Feb 2016 This is your opportunity to * Dream BIG * Enable millions to dream big * Unleash the Entrepreneurial Genome of India's Youth * Make 21st Century , an Indian Century * notwithstanding the opposition in Rajya Sabha ------------------------------------------------------------------------------------------------------- hemen parekh 17 Jan 2016
  4. K
    Kayaka Sharana
    Jan 16, 2016 at 8:01 am
    The thing that startups need most is no interference from government in their functioning, no government regulation other than in case of pollution. You provide good public transport and clean 24/7 electricity and simple tax rules and laws that don't change for at least next 5 years, we ask you nothing more.