Introduction

Bureaucratic chaos, financial hurdles, and a lack of recognition marred the startup landscape before 2014. In the words of Prime Minister Modi, it was a 'lost decade' characterised by stifled growth, low investment, high inflation, poor infrastructure, and complex regulations. 

While India was languishing at the 60th spot on the Global Competitiveness Index, Silicon Valley pushed the USA to the 5th through seamless integration of government support, private investment, and academic collaboration, encouraging innovation and economic growth. By 2013, India’s growth rate had fallen to its lowest level in a decade. 

India was labelled a 'Fragile Five,' leaving global investors wondering whether the world's largest democracy posed a risk or an opportunity. At this edge of economic collapse, India desperately needed a substantial push forward. Inspired by these global success stories, India orchestrated its entrepreneurial revolution and traded the “lost decade” for a promising future.

 

What changed in 2014?

In 2014, a political shift began a new chapter for India's economic landscape. The Bharatiya Janata Party (BJP), under the leadership of Narendra Modi, took the reins, vowing to extend the financial success of the "Gujarat Model" of economic competence and clean governance nationwide. In 2014, the Indian government ushered in a new era of economic vigour, galvanising both the manufacturing and startup sectors to the forefront of global competitiveness.

The ambitious Make in India initiative, strategically devised to position India as the world's premier manufacturing hub, was at the heart of this awakening. With a laser focus on attracting targeted investments in manufacturing and services, the government's vision aimed to incubate an investment-friendly landscape bolstered by robust infrastructure.

Under Make in India, the government reduced the number of licenses, permits, and regulations required to start and operate a business. An Investor Facilitation Cell was created where one could receive assistance and guidance regarding investments. Ports, airports, roads, railways, and industrial corridors were developed through public-private partnerships and a corpus of 10,000 crores was allocated for the growth of innovation-driven enterprises. The Skill India mission was launched to train 10 million people annually in various sectors.

Simultaneously, in a similar vein, Startup India was launched in 2016 to drive the spirit of entrepreneurship among the youth. Under Startup India, the government provided seed funding, credit guarantees, and tax exemptions to eligible startups and established a fund to invest in startups. A Startup India Hub was created to connect startups with various stakeholders, such as mentors, incubators, accelerators, investors, corporates, and government bodies. Sector-specific schemes and challenges were launched. The National Startup Awards were initiated to incentivise entrepreneurs. A mobile app and a platform were also found to facilitate information exchange. Moreover, startups were given a 3-year income tax exemption, and the government exempted startups in the manufacturing sector from the eligibility criteria of “prior experience/ turnover” concerning public procurement.

 

Impact on the Growth of the Startup Ecosystem Post-2014

The Make in India movement provided a great impetus to the startups in India. Due to huge investments, India emerged as the top destination globally for foreign direct investments. These enticing benefits led companies like the Spice Group, Samsung, and Huawei to sign MoUs with the Indian government and set up factories and research bases in India.

The number and diversity of startups in the country have increased significantly, covering various sectors such as IT, biotechnology, education, healthcare, agriculture, and space. Some renowned startups that have emerged in these sectors and regions are Zomato, Ola, Swiggy, Udaan and Paytm. India has also become one of the leading startup hubs in the world, with 83 startups achieving unicorn status as of 2023. Founded in 2011, Byju’s, an edtech giant, benefitted immensely through the Start-up India and Make in India initiative. Smooth access to tax benefits and government support had propelled Byju’s to a valuation exceeding $16 billion by 2021. Byju’s previously aligned with the Make in India mission by developing and exporting its educational content globally and promoting digital literacy and skill development through strategic collaborations with government initiatives like Digital India and Skill India.

 

What Challenges did the Startups face despite Government Initiatives?

Various issues have hampered the innovation and growth of India’s startup and entrepreneurship ecosystem despite the government’s Make in India and Startup India initiatives. Starting and running a business in India takes work. One has to pay taxes, get licenses, file reports, and deal with officials who may ask for bribes or delay work. All these things cost time, money, and sometimes even sanity. For example, suppose you want to start an electric vehicle company. In that case, you have to get approval from multiple departments and agencies, who may not agree with each other or cooperate with you.

With the situation worsened by the inadequate infrastructure, the startups’ access to the basic amenities and services they need, especially in the country’s rural and less developed areas, is highly restricted.

Then there is the talent crunch. The education system does not always equip graduates with the skills needed for emerging fields. Shockingly, only 10% of Indian graduates are considered employable, according to a survey by the Confederation of Indian Industry (CII). This shortage hits sectors like engineering, textiles, and electronics.

Despite the heroic Start-up India mission, bureaucratic barriers still existed, keeping India at a not-so-heroic 63rd rank in the Ease of Doing Business Index. Many projects were stalled, and the funds needed to be wholly utilised due to inconsistencies in implementation and red tape.  Moreover, The Make in India policy depended too much on foreign money and markets, which was disrupted by the COVID-19 pandemic and many Indian manufacturers who relied on foreign inputs and customers were affected. 

 

Should Startups Rely on the Government?

Policies like 'Make in India' and 'Startup India' have been game-changers in the Indian startup ecosystem. They have provided various incentives and support to encourage entrepreneurship. However, more than government support is needed for startups to grow. Entrepreneurs need to be self-reliant, adaptive, and creative. Startups are the engines of change that break from the status quo and transform industries and economies. 

For example, the taxi sector in India was largely unorganised and inefficient until the emergence of online platforms like Ola and Uber. These startups revolutionised the way people commute and travel. Government support is appreciated, but startups must work innovatively to leverage their position while considering government policies.