The Startup India – Peppystores initiative

Anish Tiwari, Colm O’Gorman and Teresa Hogan, ‘ The Good, the Bad and the Ugly of Startup India — a review of Indian entrepreneurship policy’ Economic & Political Weekly (EPW), Volume (50), 2021.

A research paper from Dublin City University in Ireland reviewing the Indian enterprise policy Startup India confirms its positive impact in reducing regional entrepreneurial disparities. However, shortcomings in addressing the under-representation of women and marginalized caste groups in the national startup ecosystem have been cited. The paper was published in Economic and political weekly in December 2021. Startup India was launched in 2016 as “a wake-up call to the nation’s innovators, entrepreneurs and thinkers to be at the forefront of driving India’s sustainable growth and creating expansive job opportunities”.

Trade and Industry Minister Piyush Goyal recently informed Lok Sabha that the entrepreneur portal has registered more than 65,000 startups. Of these, 40 have achieved “unicorn” status in the past 12 months, bringing the total to 90 to date. He stated that India ranks third among global startup ecosystems.

Addressing regional entrepreneurial disparities

The evidence compiled by the authors of the research paper suggests that the networking, training and mentoring facilities provided by Startup India, along with entrepreneurship awareness campaigns in Tier 2 and Tier 3 cities, have helped create regional addressing business differences in India. The aim of the program was to find entrepreneurs from these cities and integrate them into the portal. It would then enable a network between venture capital funds, angel networks, banks, incubators, accelerators, universities, legal partners, consultants and research and development institutions.

The paper said the initiative helped steer many states’ policy making in favor of startups. Quoting from the Startup India (2018) report, the researchers mention that only four states had specific startup policies before launch. After its inception and by December 2019, 23 states and 2 union territories had formulated a specific startup guideline.

High concentration in megacities

Despite the initiative, the researchers pointed out that entrepreneurship remains “highly concentrated” in three megacities, namely Mumbai, Bengaluru and Delhi NCR. The three cities accounted for 93% of all funds raised between 2014 and 2019. The paper pointed out that India’s venture capital industry is also concentrated in and around these three cities.

The same notion was put forward by the Reserve Bank of India (RBI) in their pilot survey on the Indian startup sector (2019). The study of 1,246 participants found that nearly three quarters of the participants were from Karnataka, Maharashtra, Telangana, Delhi and Tamil Nadu.

Citing recent studies, the researchers found that such concentration can lead to greater economic inequality and hinder the emergence of entrepreneurs from industries other than clusters. The rise of industries (in this case start-ups) creates job opportunities, which drives demand for leisure and essential amenities among the population. This in turn promotes employment, economic activity and efficiency. However, this comes at the expense of another area that has not previously enabled a suitable supporting ecosystem.

According to the results calculated by the researchers in the paper, 30% of all states and union territories in India have an equal or higher proportional share in the start-up pool recognized by the Dept for Promotion of Industry and Internal Trade (DPIIT) relative to their own share on the rural population.

ensure representation

The researchers point out that the 40-page Startup India Action Plan Document contains no mention of the words “caste”, “tribe”, “marginalized”, “native” or “social group”.

In her opinion, this contradicts the idea of ​​the initiative to make entrepreneurship in India inclusive. The under-representation could be due to several factors, the paper says, such as B. caste-based economic exclusion, the urban-rural divide, lack of access to quality education and limited social networks. Furthermore, the reliance of politics on technology does not take into account India’s digital divide, particularly in relation to urban and rural areas.

Referring to government data from 2013, the paper concluded that SC and ST’s share of farm ownership, including agriculture, ranching, fisheries and forestry, was higher compared to non-agricultural holdings. They were mainly located in rural areas compared to urban areas. Most of these worked without employed labour, suggesting that a significant number of these businesses were necessity-based businesses that did not create significant employment opportunities. According to economist Thorsten Beck, emergency or subsistence entrepreneurship refers to companies that are managed informally and through self-employment. Many of them arise due to a lack of employment opportunities in the formal sector. “The evidence thus points to the need for targeted policies to foster technology and innovation-driven entrepreneurship in SC and ST communities. However, the Startup India Policy Document as it stands does not address this issue,” the paper noted.

women in the industry

In February, in response to a question on women entrepreneurship at Startup India, Minister of State for Trade and Industry Som Prakash said that out of 62,000 startups registered with the DPIIT, 46% of them had at least one female CEO. RBI’s pilot survey had previously indicated that 5.9% of startups participating in their survey had a female founder, compared to 55.5% of the opposite sex. The remaining 38.6% had both male and female co-founders.

Mr Som had also briefed the House on specific measures being taken to boost women’s entrepreneurship. 10% of the Fund of Funds operated by Small Industries Development Bank of India (SIDBI) is reserved for female-led startups. In addition, all alternative investment funds in which the SIDBI takes equity stakes have been mandated to contribute 20% to companies that are female-led, female-influenced, female-employed or consumer-oriented. He also informed the House about capacity-building programs and the portal’s dedicated webpage for women. Under the established agreement, the DPIIT allocates funds to the SIDBI, which in turn invests the money in Alternative Investment Firms (AIFs). The latter would then raise appropriate funds and track the fundraising, invest the money and pay it out to start-ups, the newspaper informs. This is done to avoid any possible accusation of “favouritism”.