Government Policies Lead Indian Startups to Thrive

The government of India’s various initiatives and policies facilitate the growth of startups in India. Experts believe that government policies have made accessing capital easier.

India is now a booming economy for startups to prosper. Much of the credit goes to the Government of India for taking suitable initiatives to make the country a safe home for Indian startups to thrive. The recently concluded G20 summit has promised to facilitate global collaboration and raise a whopping $1 trillion by 2030, hence, Indian startups can see the Sun shining bright for long enough to give them the space and time to “frost themselves”'.

It doesn't matter which sector your business is catering to, whether it's fintech, SaaS, or prop-tech; government initiatives serve businesses as a whole. This provides them with the opportunity to grow and meet the needs of not only people in the metros but also those in Tier 2, Tier 3 cities, and smaller towns.

Kanika Bali, Partner, Optimyze Finance LLP, stated that India’s startup ecosystem has been on an unprecedented growth trajectory, establishing itself as the third-largest startup hub globally. With over 99,000 DPIIT-recognized startups spread across 670 districts as of May 2023, India’s prowess in innovation and entrepreneurship is undeniable. This remarkable achievement is not confined to a single sector, with startups emerging in 56 diverse industrial sectors, showcasing the nation’s versatility and dynamism.

Ms. Bali also added that one of the standout achievements of government policies is the exponential growth in funding, reflecting investor confidence in India’s startups. Over the period from 2015 to 2022, there has been a staggering 15-fold increase in total startup funding. This infusion of capital has catalyzed innovation, enabling startups to scale and address critical challenges across various sectors.

Jitender Ahlawat, Founder and Managing Partner, of HJA & Associates, said, “The legal environment for businesses has been greatly simplified thanks in part to the ‘Startup India’ program, which was introduced in 2016. It provides tax breaks for three consecutive financial years out of its first ten years since inception in order to lessen the financial strain on new startups and increase their appeal to investors. The program also makes it simpler for businesses to get cash by facilitating access to funds through programs like the Fund of Funds for Businesses (FoF) and credit guarantee schemes.”

StartupTalky interacted with entrepreneurs and experts from a range of industries and the government has been praised for its various startup-friendly initiatives and policies.

Prop-tech
Hardware-tech
Fashion
Lending-tech
SaaS
Fintech
Recommendations to the Government

Prop-tech

Mr. Saurabh Vohara, Founder and CEO, of ALYF, praised the government initiatives like Startup India and Digital India as these initiatives have given investors the trust and confidence to invest in startups.

He said, “The government's supportive policies have been instrumental in ALYF's journey to democratize holiday home ownership in India. Initiatives like Startup India and Digital India have given investors trust and confidence to back startups like us who are trying to solve real estate challenges through technology and AI. We believe that further enhancements to government policies including tax incentives, streamlined approvals for new project launches, and joint research initiatives will definitely continue to foster innovation and drive economic growth in the real estate startup sector.”

Dr. Nikhil Sikri, CEO and Co-founder, Zolostays, said, “The government's decision to implement 12% GST on PG and student housing for rates less than Rs 1,000 per night and 18% for others is a progressive move that promises to bring greater clarity and efficiency. We strongly believe that this step has enhanced compliance, reduced the prevalence of unscrupulous practices, and ultimately resulted in a more sustainable co-living and student housing ecosystem.”

Moreover, he also mentioned that the government initiatives in research and startup incubation serve as the cornerstone of informed decision-making in the real estate sector. Through rigorous analysis and data-driven insights, the government has steered the course of housing policies, urban planning, and market regulations, ensuring affordability, sustainability, and economic stability. These initiatives have fostered equitable housing solutions.“We are committed to offer our patrons with high-quality, affordable co-living accommodations, and we are positive about the government regulations that will aid to further enhance an organized ecosystem," Dr. Sikri added.

Hardware-tech

Pramod Kathuria, Founder and CEO, of Easiloan, mentioned that there needs to be a balance between support and oversight. He said, “To boost startup growth in India, government policies should focus on enhancing funding accessibility through grants and tax incentives, simplifying regulations, and promoting education and research. Favorable international trade agreements and entrepreneur-friendly visas should also be prioritized for global expansion. Striking a balance between support and oversight is key.”

Fashion

Ms.Varija Bajaj, Founder of Office & You, Lela, and Varija Design Studios, shares that the support provided by organizations like Startup India and Invest India has been truly remarkable. They have gone above and beyond in their efforts. The incentives for startups, the invaluable mentorship, and guidance on investments have been nothing short of brilliant.

“I believe these initiatives have led to the establishment of numerous incubation centers and have transformed the mindset of individuals who previously might not have considered investing in startups,” she added.

Lending-tech

Mr. Bhavik Vasa, Founder and CEO, of GetVantage, while talking about the credit deficit in the Indian SME sector mentioned that the recent government allocation announced in the Budget 2023 would foster the growth of small businesses.

He said, “In recent budget sessions, the government has allocated substantial capital for priority sector lending and introduced corporate guarantee schemes to fuel the growth of small businesses. There is a strong awareness of the need to support these sectors to achieve the goal of becoming a $5 trillion economy. This involves identifying the importance of these sectors at the government and Finance Ministry levels, along with the active participation of industry players. The government's efforts are aligning well with the growing importance of small businesses and startups in India, and there is a significant amount of capital earmarked for these sectors.”

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SaaS

Mr. Rajarshi Bhattacharyya, Chairman and Managing Director of ProcessIT Global, said. “If your startup is performing well for three years, you become eligible for tax exemptions. It can hardly get better than this. The ecosystem is designed to support your growth. The government, in collaboration with organizations like NASSCOM, organizes various mentorship programs under the Startup India initiative, providing people with invaluable guidance and support.”

He also mentioned that among the top 15 cities globally for startups, three of them are in India - Bangalore, Mumbai, and Delhi NCR. This is a testament to the encouragement the government provides for individuals to become entrepreneurs, break free from mundane jobs, and pursue innovative ideas. Access to funding is available, and Indians are known for their brilliant minds. Mr Bhattacharyya also added that the policies have been established to enable startup companies to participate in large government tenders without needing to provide Earnest Money Deposits (EMDs). Membership in the Startup India scheme takes care of your credentials, eliminating the need for Pre-Qualification (PQ) criteria.

Fintech

However, in order to further boost startup growth in India, Ajit Thomas, Co-founder and CMO, of Cavli Wireless, said that the government should streamline regulatory processes, making it easier for startups to register and operate.

“Reducing bureaucratic red tape can expedite business launches. Additionally, tax incentives for early-stage startups can alleviate financial pressures. Enhancing digital infrastructure, especially in Tier-2 and Tier-3 cities, will democratize entrepreneurial opportunities. Lastly, fostering stronger academia-industry linkages can spur innovation, while dedicated startup hubs can facilitate mentorship and networking. These changes can create a more conducive environment for startups to thrive and innovate,” he added.

Ms. Bali said, “One of the standout achievements is the exponential growth in funding, reflecting investor confidence in India’s startups. Over the period from 2015 to 2022, there has been a staggering 15-fold increase in total startup funding. This infusion of capital has catalyzed innovation, enabling startups to scale and address critical challenges across various sectors.”

“The startup landscape in India has become synonymous with innovation, disruption, and boundless potential. The Indian government has paved the way for startups to thrive. These schemes provide financial support, access to resources, and opportunities for growth,” she added.

Recommendations to the Government

However, Mr. Ahlawat highlighted some specific changes to the government policies to boost the growth of startups. These include simplifying business registration processes, expanding tax incentives, improving access to finance, enhancing intellectual property protection, expanding research and development grants, investing in education and training, expanding startup incubators and accelerators, facilitating government procurement, extending support programs for SMEs, forming international collaboration partnerships, ensuring regulatory clarity, developing comprehensive data privacy regulations, introducing incentives for startups focusing on sustainability and green technologies, facilitating exit strategies, and expanding e-governance initiatives.

Garima Mitra, Co-Founder, of Treelife, also reminded that it is essential that India continues to streamline regulatory processes, improve access to capital, and enhance its education system to fully harness its innovation potential and sustain long-term economic growth.

As we look ahead, it is imperative for the government to continue its proactive approach, streamlining regulations, enhancing infrastructure, and strengthening academia-industry collaborations to ensure that the Indian startup landscape continues to shine brightly on the global stage. The future indeed holds boundless possibilities for innovation, growth, and economic prosperity in India's startup ecosystem.