Bolstering Growth

The Government of India is not only promoting schemes to help the present group of startups but also motivating budding entrepreneurs, startups, and students from all domains who intend to be independent and lead the vision of ‘Atmanirbhar Bharat’ forward. Below are some such initiatives that have been introduced for the development of the Indian startup ecosystem.

The startup ecosystem in India is growing at an expeditious rate. Not even halfway through the year, 13 Indian startups have already entered the Unicorn Club. Annual surveys are conducted every year to track the progress and suggest the future moves of the startup ecosystem in India.The pandemic situation has put the startup ecosystem in jeopardy. They are compelled to watch the venture capital dry out. To orchestrate the situation, the Government has launched favorable schemes and policies that are proving to be of great assistance in the direction of growth. 

Micro, Small, and Medium Enterprises (MSMEs) contribute a staggering 30 percent to the country’s GDP, around 45 percent of the manufacturing output, and approximately 48 percent of the country’s exports. The MSME sector has employed more than 11 crore people, establishing itself as the ‘Backbone of the country’.

Government support is crucial

The Indian MSME sector has reticently been supporting the national economy since its inception. Around 45 lakh MSMEs throughout the country contribute about 6.11 percent of GDP from manufacturing and 24.63 percent of GDP from services. They are crucial to the production and manufacturing of a variety of products for both domestic as well as international markets. It is quite imperative now, more than ever, that schemes like ‘Atmanirbhar Bharat’ are focused on building a startup ecosystem in India to not only build but also strengthen the capability and capacity to develop appropriate local technology and provide fierce competition in domestic and international markets.

Startups require both monetary and technical support to overcome the initial roadblocks. Initiatives by the Indian Government, such as ‘Make in India’ and other startup programs, are providing propulsion to manufacturing startups in India.  

The Government of Karnataka has provided incentives that promote startups in the Electronics System Design & Manufacturing sector (ESDM) to develop Karnataka into a global ESDM hub through the Karnataka Electronics System Design & Manufacturing (KESDM 2017-22) policy. The policy aims at stimulating the growth of 2,000 ESDM startups by the end of 2022, thereby creating 20 lakh new job opportunities, reaching US$40 billion in ESDM revenues by 2025.

Following are the incentives by the Government of Karnataka that are adding value to the state’s startup ecosystem:

• Research & Development Grant: provides up to `2 crore per year, twice during the policy period. 
• Reimbursement of Quality Certification Costs: covers up to 50 percent of testing and certification costs, equivalent to approximately `10 lakh per year.
• Reimbursement of Prototyping Costs: covers around 50 percent of total costs, equivalent to approximately `10 lakh per year.
• Patent Registration Incentive: covers a maximum amount of `2 lakh for domestic registration and `10 lakh for international registration.
• International Marketing Incentive: Covers up to `5 lakh annual amount for two members.

Technology is another vital element

Another pivotal element in the growth of the manufacturing sector is Technology. Consistent investment in avant-garde technology is vital in maintaining the quality to surpass the competitors. The Government is providing the tools and technologies to Indian startups and MSMEs to compete with global peers. 

The Government has launched Credit Linked Capital Subsidy Scheme (CLCSS) to promote Technology Upgradation. The scheme provides financial assistance to MSMEs to upgrade their technology and implement avant-garde technological platforms in their business. Under CLCSS, the Government provides a 15 percent subsidy for an investment of up to `1 crore to upgrade technology for startups and MSMEs in India.

The businesses that have invested in technology using term loans borrowed from Public Lending Institutions can avail the following benefits of CLCSS:

• With a 15 percent subsidy on the purchase of advanced technology, the MSMEs’ loan burden decreases.
• At the same time, their efficiency increases, and the cost of production decreases, resulting in maximized profit and higher growth.
• With the growth in rural industries, employment opportunities increase, and living conditions for the entire local population improve.
• Thanks to this unique scheme, even micro, small, and medium-sized industries can now manufacture high-quality products and compete globally.
• Credit linked capital subsidy scheme is helping small-scale industries to adapt, scale, and boost their production.

Design-centric approach is a must

The key to consistent novelty and creativity are design and innovation for any sector. Every startup and MSME must have a design-centric approach to solve the problems of their niche. To encourage and inspire small businesses to experiment and try out new designs for their products, the Ministry of Micro, Small, and Medium Enterprises has created a Design Clinic to induce design-related expertise for startups and MSMEs. Under this scheme, the Government will provide up to `60,000 aid for attending design seminars and up to `3.75 lakh or 75 percent of the cost of a seminar, wherein the entrepreneur and their team can learn and implement design theories for their startups.

Schemes to further benefit startups

Other Government certifications and eligibility-specific schemes to benefit from are as follows:

• ZED Certification: This is a step toward the quality assessment of the products to ensure better quality so that the exported goods are never returned. This Zero Defect and Zero Effect certification offer financial, technological, and tools support to existing and new manufacturing units, enabling them to embrace world-class manufacturing processes and technology in their startups to manufacture the best-in-class products.
• Startup Recognition and Tax Exemption: Startups incorporated on or after April 01, 2016, can apply for income tax exemption. The recognized startups that are granted an Inter-Ministerial Board Certificate are exempted from income tax for three consecutive years out of 10 years since incorporation.
• Government Public Procurement Eligibility: The Government of India has authorized its ministries, departments, and public sector undertakings to relax norms in all public procurements. Startups can avail of an exemption on prior turnover, prior experience, and an earnest money deposit. DPI recognized startups can now get listed as sellers on the Government of India’s largest e-procurement portal Government e-Marketplace (GeM).
• Self-Certification under Labor and Environmental Laws: Startups are allowed to self-certify their compliance under six Labor and three Environment laws for a period of three to five years from the date of incorporation.
• Fast-tracking and Rebate on Applications for Intellectual Property: Startups are eligible for an 80 percent rebate in patent filing fees and 50 percent on trademark filing fees. Additionally, startups are also provided the facility of expedited examination of patent applications to reduce the time taken in granting patents. Also, ‘Support for International Patent Protection in E&IT (SIP-EIT)’, launched by the Department of Electronics and Information Technology (DeitY), provides financial support for international patents.
• Access to `10,000 Crore Fund of Funds: To provide equity funding support for the development and growth of innovation-driven enterprises, the Government has set aside a corpus fund of `10,000 crore managed by SIDBI. This Fund of Funds implies that the Government participates in the capital of SEBI registered Venture Funds, which invest twice the amount in startups.

The Government is not only promoting these schemes to help the present group of startups benefit from them but also motivating budding entrepreneurs, startups, and students from all domains who intend to be independent and lead the vision of ‘Atmanirbhar Bharat’ forward. These initiatives have been introduced for the development of the Indian startup ecosystem. The country now seems to be heading towards the golden era of entrepreneurship, where if things go as planned, India may host as many successful startups as the USA or any other leading nation by 2030.

Bhooma Krishnan
Chief Operating Officer, Devic Earth Pvt Ltd

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