Startup India Scheme
Background & Context
India has immense youth potential, but for long, innovation and entrepreneurship were held back due to complicated regulations, lack of funding, and risk of failure. To change this environment, the government launched the Startup India initiative—a Central Sector Scheme.
Its core idea is simple: create an ecosystem where young entrepreneurs can take risks, innovate, and build startups without being crushed by bureaucracy or lack of resources.
Quick Facts
- Type: Central Sector Scheme (100% funded by the Union Government).
- Purpose: Nurturing innovation and startups.
- Implementing Agency: Department for Promotion of Industry and Internal Trade (DPIIT).
- Exclusion: If an entity is formed by merely splitting or reconstructing an existing business, it will not be treated as a startup.
Objectives
- Catalyse a startup culture in India.
- Build a strong and inclusive ecosystem for innovation.
- Promote entrepreneurship and job creation.
Eligibility Criteria for a Startup
To be recognized as a startup under this scheme, an entity must:
- Be registered as a Private Limited Company, Partnership Firm, or LLP.
- Have a turnover of less than ₹100 crores in any of the previous financial years.
- Be not older than 10 years from its incorporation.
- Work towards innovation, improvement of products, services, or processes, with potential for employment generation or wealth creation.
- Not be formed by splitting up or reconstructing an existing business.
Key Features & Support
A. Benefits to Startups
- Tax Incentives: Exemption from income tax and capital gains tax.
- Government Assistance in Funding.
- Priority in Public Procurement: Startups are given preference in government tenders.
B. Key Pillars of Support
- Simplification and Handholding
- Self-certification to reduce regulatory burden.
- Easier compliance and exit process for failed startups.
- Legal support and fast-tracking of patent applications.
- A dedicated website/portal to reduce information gaps.
- Incubation & Industry–Academia Partnerships
- Creation of incubators, innovation labs, events, competitions, and grants.
- Launch of Atal Innovation Mission (AIM) and SETU program of NITI Aayog to nurture innovation and provide talent utilization.
Funding & Incentives
The scheme provides multiple funding mechanisms through SIDBI (Small Industries Development Bank of India):
- Exemptions on Income Tax and Capital Gains Tax – encourages entrepreneurs to reinvest their earnings.
- Fund of Funds – A large corpus of ₹10,000 crores managed by SIDBI, which invests in SEBI-registered Alternate Investment Funds (AIFs). These AIFs further invest in Indian startups.
- Credit Guarantee Fund – Ensures startups can access loans without collateral, as the government guarantees repayment through SIDBI.
(Note: “Fund of Funds” means the government doesn’t directly give money to startups, but invests in daughter funds which then support startups.)
In Simple Words
Startup India is like the government acting as a guardian angel for young entrepreneurs:
- It says, “Don’t worry about excessive compliance, we’ll simplify it.”
- “Don’t worry about funding, we’ll provide funds, tax exemptions, and credit guarantees.”
- “Don’t worry about isolation, we’ll connect you with incubators, academia, and industry experts.”
The aim is to make India not just a hub of job-seekers but a hub of job-creators.
✅ UPSC Relevance:
- Prelims: Questions can be asked on eligibility, implementing agency (DPIIT), or specific funding mechanisms.
- Mains: Useful for answers on Indian Economy, Entrepreneurship, Startups, Innovation, Employment, and NITI Aayog programs.