Youth and DPIIT: Epicenters of Startup Ecosystem

Minister of Finance, Nirmal Sitharaman, via her X account has called for an attention on continued surge of India’s dynamic startup ecosystem. Fuelled by the pivotal role played by the  youth, India has become the world's third-largest startup ecosystem in the world.  According to government data, with 177,095 Department for Promotion of Industry and Internal Trade (DPIIT)  recognised startups and 118 unicorns, India stands at the cusp of a new economic era which will be driven by innovation, ambitions and resilience of its youth.

Role of DPIIT in Startup Ecosystem

The nodal government body under the Ministry of Commerce and Industry, DPIIT is responsible  for steering the startup policy framework. DPIIT in following ways plays a fundamental role in startup ecosystem:

• Grants recognition to Startups.

• Recognized Startups get access to tax exemptions, easier compliance, intellectual property support and access to government tenders.

• Implements Fund of Funds (FFS) and Seed Fund Scheme (SISFS) to support startups in the early period. 

• Helps in policy formulation and coordination among various stakeholders.

• Maintains and publishes startup registrations, funding, and job creation.

Key Challenges

Despite the optimism, challenges remain. Though the numbers initially appear impressive, several caveats apply to data. They don't exactly reveal about the quality, scale, or innovation of these startups, overlooking meaningless ventures with little or no economic contribution. Firms motivated by benefits can also dilute the government's objective of supporting startups.

DPIIT only defines startups-

• With company age not exceeding ten years since its incorporation.
• Company registered either as a Private Limited Company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008).
• Turnover not exceeding 100 crore for any financial year since the company's incorporation.
• Entity working towards  innovation or any scalable business model with a high potential of employment generation.

Note: Splitting up or reconstruction of an existing business is not considered a startup.

Way Forward

There is no additional segregation into active and dormant startups. Absence of database for status of startups makes it elusive to know the actual operational standing. An official mechanism to periodically update with a public performance dashboard to display operational position is the need of the hour. Recognition of shell firms to mitigate pressure on the government’s money should also be considered. DPIIT should also look for collaborations with academic institutions or NITI Ayog for a research unit for effective analysis of work done and implementation of policies facilitating startups. By doing this we can get our desired results and reap  the rewards of initiatives like  Startup India.