[email protected] - Daily Current Affair Article

CONTEXT:

In the light of the 75th anniversary of our Independence, analysis of India's economic development is necessary, that too, of the start-up culture in India which is the future of economy.

BASICS

  • 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.

IMPORTANCE OF START-UPS FOR INDIAN ECONOMY

  • The proliferation of this startup economy has brought with it new business opportunities, innovation, tech-centric approaches and job creation across sectors.
  • A mature startup ecosystem, with seasoned entrepreneurs and technology-led solutions, paves the way for innovation and expanding its global footprint.
  • The startups are the support system for a robust and continuously growing economy, wherein, it is the need of the hour amidst the slowdown due to Covid pandemic.

OPPORTUNITY FOR ENTREPRENEURSHIP IN NEW INDIA

  • India now has 38,756 officially-recognised start-ups – with 27 unicorns, eight of which achieved this status in 2020 – and is the third-largest tech start-up hub globally. Apart from it, India’s economy, demography and government’s active support provides a wide scope for establishing a thriving startup environment.
  • The favorable conditions provided by India for entrepreneurship:

Favourable Demography:

  • Half of the country’s population are below the age of 25 years.
  • With 62 per cent of the population in the working age group and 54 per cent below the age of 25, we have the advantage of leveraging the skill and ability of our youth to drive the nation forward through productive output and innovation.
  • Huge section of population has the ability to absorb the innovative goods and services provided by startups.

Indian Economy:

  • Just before sudden disruption by Covid-19 pandemic, the Indian economy continued to grow and purchasing power was increasing steadily.
  • As economic recovery is expected in the short-term, the rising consumption will be driven by the growth of upper-middle income and high-income segments of the population.
  • Thus, the size of Indian market provides ample opportunity for startups to grow.

Active Government Support:

  • On 16th January 2016, Prime Minister Narendra Modi launched the Start Up India Action Plan, with an aim to build a strong eco-system for nurturing innovation and Startups in the country.
  • Prarambh: Startup India International Summit is being organized by the Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry.
  • Further, the overhaul of the digital payments ecosystem is being led by State innovation (NPCI), with Aadhaar, Jan Dhan, UPI, and India Stack.

High Scope in Rural Areas:

  • As the majority of India’s population still resides in rural areas, many startups have focused towards providing ease of living in rural areas. For example:

FIA Global - with a network of 26,000 banking agents - is using Artificial Intelligence (AI) to deliver financial products and services such as remittance services and access to credit in rural areas, and has reached over 34 million customers.

MFine provides an AI-powered health care platform for people to consult over 3,500 doctors.

PharmEasy connects local pharmacy stores and diagnostic centres to verify prescriptions and deliver over 100,000 medicines.

RECENT ACHIEVEMENTS IN STARTUP DOMAIN

  • While India has historically and culturally been an entrepreneurially-driven nation, the last decade-and-a-half has witnessed a significant change in the landscape — from the founding of new startups, to global investor interest, to the advances made in infrastructure and policies. In 2021 alone, Indian startups have so far raised upward of $20 billion in funding, achieved unicorn statuses, and more.
  • From 2011, when India’s first private company achieved unicorn status, to being on track to have a 50-plus strong “Unicorn club” in 2021 according to Nasscom, the country now finds itself at the epicentre of entrepreneurship.
  • Even amid the Covid-19 pandemic, Indian startups have rapidly innovated to provide indigenous, tech-enabled solutions to combat challenges from testing kits and ventilators to remote monitoring, and preventive technologies, as well as innovations in supply chain management, logistics, and education
  • Solutions built by Indian startups for online education in this pandemic saw widespread adoption not just domestically but also on a global scale, firmly establishing the country as a cornerstone of tech and innovation in the world.

REASONS FOR SLOW CHANGES IN STARTUP ECOSYSTEM

  • Digital Divide: As nearly 70% of the Indian population lives in rural areas, the customers of the mass market tend to come from low-income backgrounds in villages. This creates inequalities in usage of digital media and devices. This often discourages many startups to come up with a pan-India approach.
  • Regional Imbalance: The startups’ understanding of India's diversity is often limited to certain regions.
  • Funding: Many startups, especially at early stages, are bootstrapped, i.e. self-funded through the founders’ own savings, or using capital from friends and family. Then, eventually, these savings reaches an end and further lack of investment becomes the biggest hurdle.
  • Hiring Challenge: For many job-seekers, joining a startup as an employee is not an attractive career option, due to the inherent risk that the startup might fail. In addition to this, many job applicants are not sufficiently skilled. Startups see a gap between the knowledge taught to students in colleges and the knowledge needed for the jobs, especially in sectors in which technologies change at a fast pace.
  • Complex Regulatory Environment: The government of India has introduced policies that aim to ease the business environment for startups. However, the present regulatory framework in which startups operate is widely seen as difficult, inefficient and unpredictable. For example, the government has imposed “Angel Tax”.

START-UP SCHEMES IN INDIA

  • The ASPIRE ( A Scheme for Promoting Innovation and Rural Entrepreneurship) scheme aims at increasing employment, reducing poverty, and encouraging innovation in rural India. However, the main idea is to promote the agro-business industry. The Ministry of Medium and Small Enterprises has tried to boost economic development at the grassroots level. The total budget of the scheme was INR 62.5 crores for the period of 2014-2016.
  • Micro Units Development Refinance Agency (MUDRA) banks has been created to enhance credit facility and boost the growth of small business in rural areas. The government has introduced this scheme to support small businesses in India. In 2015, the government allocated INR 10,000 crores to promote startup culture in the country. The MUDRA banks provides startup loans of up to INR 10 lakhs to small enterprises, business which are non-corporate, and non-farm small/micro enterprises. MUDRA comes under Pradhan Mantri Mudra Yojana (PMMY) which was launched on 8 April 2015. The loans have been categorized as Tarun, Kishore, and Shishu. The assets are created through the bank’s finance and there is no collateral security.
  • The Ministry of Skill Development and Entrepreneurship: In 2014, the Prime Minister decided to dedicate an entire ministry to build this sector as he felt that skill development required greater push from the government's side.
  • Atal Innovation Mission was established to create a promotional platform involving academicians and draw upon national and international experiences to foster a culture of innovation, research, and development. The government allocated AIM about INR 150 crores in the year 2015.
  • eBiz Portal : This is the first electronic government-to-business(G2B) portal. The main purpose of the portal is to transform and develop a conducive business environment in the country. eBiz Portal was developed by Infosys in a public-private partnership model. It is a communication center for investors and business communities in India. The portal has launched 29 services in 5 states of India, viz., Andhra Pradesh, Delhi, Haryana, Maharashtra, and Tamil Nadu. The government will add more services to the scheme with time
  • The Department of Electronics and Information Technology (DeiTY) has launched a scheme entitled “Support for International Patent Protection in E&IT (SIP-EIT)”. This scheme provides financial support to MSMEs and Technology Startups for international patent filing.
  • Small Farmer’s Agri-Business Consortium (SFAC) has launched the Venture Capital Assistance (VCA) scheme for the welfare of farmer-entrepreneurs and to develop their agri-business. The scheme is approved by the banks and financial institutions regulated by the RBI. It intends to provide assistance in the form of term loans to farmers so that the latter can meet the capital requirements for their project's implementation. VCA promotes the training and nurturing of agri-entrepreneurs.

MEASURES TO PROMOTE

  • However, in order to transition beyond the current capabilities and achieve the demographic dividend, education, and reskilling, and upskilling of our workforce is crucial.
  • We need to realise,recognise and acknowledge the changing global environment and technological advances, and prepare the Indian economy accordingly.
  • India’s corporate sector needs to foster entrepreneurialism, and create synergies to build impactful technology solutions, sustainable and resource-efficient growth
  • Speed, inclusion, and sustainability are key elements in this mission, as is the youth of the country.

With Indians set to make up one-fifth of the world’s working-age population in the next five years and likely to have an estimated 850 million internet users by 2030, the country stands at the cusp of unprecedented economic growth, and the opportunity to be a global game-changer. [email protected] is ready to transform into [email protected] and be the leader of the Global economy.

Sources

  • The Hindu
  • The Indian Express
  • PIB
  • PRS
  • Startup India government website
General Studies Paper 3
  • Economy