Why This Is The Best Time Ever To Be An Entrepreneur In India

Prime Minister Narendra Modi in his last ‘Mann Ki Baat’ radio programme in December 2015 has promised to unveil the action plan for ‘Startup India, Standup India!’ on January 16. This could be a reason to cheer for the Indian startup community. We have a promise of difficulties coming to an end when it comes to starting up. In a comparison of per capita GDP, with $7,594 China’s per capita GDP is almost 5 times that of India, which stands at $1,596. However, all that is set to change as the government opens up and adapts to new startup-friendly policies.

We bring you some of the reasons why we believe this would be the right time to start up in India.

1. This year, the total funding in India is about $ 9 Billion, which is more than the GDP of Andaman and Nicobar, Sikkim, Arunachal Pradesh, Mizoram and Manipur combined.
2. India has the ninth largest GDP in the world, with around $2.07 trillion. With over 70 per cent of the population still living in villages, a huge portion of our GDP comes from Tier I and II cities, which means we still have huge potential to be tapped in villages.
3. Indian rail is the largest public sector enterprise in the country. It is also the eighth biggest employer in the world, with over 1.4 people. Inefficient reservations, streamlining the process, catering are still some of the problems which can be looked at as opportunities and can warrant startups of a different scale.
4. Seventeen finance companies received funding in 2015, of over $290 million, making this one of the most funded sectors of last year and also one showing great promise. With relaxed RBI guidelines in relation to payments banks, this is a new avenue for startups to innovate.
5. Rural India is a huge market for startups, and the only way to tap this market is to go local. Going into vernacular languages is one of the best ways to capture this market. Presenting the same solutions, be it hyperlocal or e-commerce or even payments, in a different packaging around local languages will help people in Tier-III and rural areas adopt it. Indian entrepreneurs are at a distinct advantage in comparison to foreign players entering the space and trying the same solutions.
6. According to the World Bank’s Doing Business report, India was ranked 120 in 2008 and has slowed to 132 in 2014. The ranking has improved to 130 in 2016 and is poised to improve further considering a startup-friendly government.
7. In the recent times, many States have come up with startup initiatives, with Karnataka being the first to come up with a startup policy, followed by Andhra Pradesh and Rajasthan. Kerala decided to invest one per cent of its budget for entrepreneurship. West Bengal government has tied up with IIM Calcutta to send training officials to different districts to assist entrepreneurs.
8. According to the World Startup Gnome Project 2015, Bengaluru is the fifth best city in the world to start up. 2015 marked the entry of Flipkart founders Sachin Bansal and Binny Bansal into the Forbes list of billionairs. This year is on the way to making more billionaires in the ecosystem.
9. Due to the vague and varying definitions of the word ‘startup’, it is quite difficult to perfectly mark the contribution of our startups towards the GDP of the country. However, there are chances that with the launch of the national startup policy, we would be able to precisely measure the contribution of startups towards the economy.
10. With greater support from the government, we are going to see more of such startup acquisitions from India, which will further strengthen our technological prowess. Last year also bolstered the attention of traditional businessmen and investors towards the ecosystem, leading to big names like Ratan Tata and TV Mohandas Pai investing in startups.

What are the Indian states doing to promote entrepreneurship?

Honourable Prime Minister Narendra Modi’s historical Independence Day speech seems to have galvanised the nation into action, with his emphatic mentions of Skill India movement and the ‘Make in India’ statement inviting multinationals to leverage India for manufacturing. In the wake of these announcements that can have far reaching impact on the Indian ecosystem, we looked at the various states and their maturity in encouraging startups and entrepreneurs. In the 1960s, the entrepreneurial movement began in India in a small way with the establishment of NISIET (National Institute of Small Industry Extension Training) for promoting and encouraging entrepreneurship amongst the people of India. India has taken many steps since then in building up a startup ecosystem. The recent financial budget presented by the Finance Minister, Arun Jaitley appears to be very promising for young entrepreneurs with the INR 10,000 crore startup fund announced among other things. However, not all 29 states and 7 union territories are at the same level in terms of encouraging entrepreneurship on Indian soil. Some states are more advanced in terms of their policy implementation due to various historical, political, law and infrastructural conditions. Some of the startup friendly states are listed below along with major initiatives.

1. Karnataka
The government of Karnataka is aiming to make Karnataka the unequivocal IT innovation and startup capital in the world by drafting a new Startup Act, the first of its kind in the country, in the next two months. In order to strengthen the academia-industry relations, as part of the ‘Karnataka New Age Incubation Network’ the government has granted INR 5 lakh to nine colleges to fund research on projects solving local problems. There are many facilities provided by the government to the startup community of the state, like plug-and-play space with internet at a reasonable rate of Rs 5-15 per square feet. It is also planning to set up two new venture funds and a network of incubators in small cities to boost up the entrepreneurial activity in the state. Women-founded companies may get free incubation space for six months in the coming future. For providing global exposure and mentorship to the startups of the state, the United Kingdom Trade and Investment board and the Karnataka Information Technology Venture Capital Fund have inked a partnership recently. The NASSCOM 10,000 startups initiative too has set up a warehouse in Bangalore for startups to function out of and collaborate while getting structured mentorship.
2. Kerala
A few weeks ago, the government of Kerala has decided to invest 1% of the state’s budget (approximately INR 500 crore) in the nascent startups of the state. The entrepreneurship culture of the state was previously restricted only to trade, transport and tourism with active trade unions. The public sector training institute, namely Kerala Institute for Entrepreneurship Development (KIED) has been set up to foster and encourage the entrepreneurship spirit of the youth of the state. Under the Student Entrepreneurship Scheme there is a 20 per cent attendance relaxation and 4 percent grace marks for the students who pursue entrepreneurship and innovation during their studies. The Startup Village of Kochi was established through a public private partnership to incubate around 10,000 product startups over a period of 10 years. At the grassroot level a Panchayat-level scheme, the Kerala State Self Entrepreneur Development Mission (KSSEDM) was set up to provide training and soft loans of up to INR 20 lakhs to 10 select entrepreneurs in each Panchayat to start an enterprise.
3. West Bengal
According to the claims of the current Chief Minister Mamta Banerjee, West Bengal has become the leading state in India in terms of credit flow in the micro and small scale Industries (MSME) sector.  According to her, this has been possible due to the persistent follow up of the West Bengal government in providing entrepreneurs all necessary assistance for setting up and running business successfully. The state government has set up myEnterprise.wb.gov.in as the single window for all applications, information and all forms. The government has also tied up with IIM-Calcutta for training officials to go over each district educating and assisting all prospective entrepreneurs with everything they need to start their own ventures. The target is to create 4000-5000 new entrepreneurs along with helping existing ones. The state government in collaboration with Bengal National Chamber of Commerce & Industry has created a non-profit institute called Enterprise Development Institute for strengthening entrepreneurship with structured training and certification programs such as Executive Masters of Business Creation & Administration (EMBCA) and other diplomas. Recently NASSCOM too has offered to build the first ever Incubation Centre for young and aspiring entrepreneurs in Kolkata.
4. Maharashtra
Mumbai is the financial, commercial and entertainment capital of India. The increased entrepreneurial activities of the state is due to the presence of technology and business hubs in Pune and Mumbai. IIT-Bombay e-cell is one of the largest business incubators of the country set up in an educational institute. The state gives many incentives for backward regions ranging from power tariff subsidy to tax refunds for MSMEs. It invests up to INR 5 lakh crore with employment generation for 20 lakh people. Maharashtra Centre for Entrepreneurship Development is an autonomous body under the Department of Industries, which has 8 different offices across the state. The MCED offers entrepreneurship training programs and other scheduled sessions focused on banking, agritech, food processing and others across different districts throughout the year. Among other incentives offered are exemptions from stamp duty on the purchase of land, partial reimbursement of equipment purchased for power and water conservation, rebate on expenditure on energy and water audit.
5. Delhi NCR
The startups growing in this region are mostly non-tech based startups. The region is the main center of political and industrial power with good infrastructure and transport services. There are many big investor and venture funds concentrated in the region. The region is not as well developed as the four states mentioned above in terms of support and initiatives. The IIT-Delhi entrepreneurship cell runs multiple small programs that are more informative in nature. The state government does has some support initiatives for handloom, handicrafts and women entrepreneurship through its industries department.
6.Gujarat
The state offers good infrastructure and business environment for the startup enthusiasts.The Gujarati entrepreneurial DNA and the high investment & deal-making potentials are key reasons which make the state’s ecosystem extremely attractive. Under the leadership of Narendra Modi when he was the chief minister of the state, Gujarat has set up a world class Center of Excellence in Entrepreneurship & Technology with its own incubation center. The centre is guided by an advisory council led by NR Narayana Murthy. It follows a model of idea identification through SparkUps at colleges, followed by grooming and then formal incubation to take the startup to the next level.  There is also the Entrepreneurship Development Institute of India, an autonomous and non-profit institute setup in 1983 and supported by the state government. It has helped set up twelve state-level centres and also runs a premier PGDM-BE, a full time two year residential program for entrepreneurs and managers. The presence of Center of Innovation, Incubation and Entrepreneurship (CIIE), IIMA also provides a large platform for the youth entrepreneurs of the state.
7.Tamil Nadu
Tamil Nadu is known as the “Detroit of India” as it hosts the manufacturing centers of the big international automobile companies like Ford and Hyundai. Given the automotive hub, there has been a tremendous growth in the ancillary and part supplier ecosystem that work closely with these OEMs. The entrepreneurial activities of the state are concentrated mostly in Chennai because of the presence of many big business parks and IITM incubation cell and also because it offers a strong local networking environment for the budding entrepreneurs of the state. The Center for Entrepreneurship Development CED has established an IT Incubation Center where 80 IT entrepreneurs can be supported at a time. The government has also committed that the subsidy given to entrepreneurs on machines and equipments is being hiked from 15 to 25 per cent up to a ceiling of INR 30 lakh. The state has also doubled the funding given for New Entrepreneur Cum Enterprise Development (NEED) to INR 100 crore which will be utilised for capital subsidy of 25 per cent and training support.
8. Andhra Pradesh/Telangana
The status of entrepreneurship in Andhra Pradesh and Telangana is in its developmental stage. Association of Lady Entrepreneurs of Andhra Pradesh (ALEAP) organises many training programs through their networks to empower women to earn a sustainable living. ALEAP has also supported the Center for Entrepreneurship Development CED which runs entrepreneurship training programs. Hyderabad and Visakhapatnam are the technology and business hubs of the state. The state government is also in talks with the Kerala government to share lessons and set up something similar to the Startup Village which has seen tremendous traction over the years.A few months back ISB Hyderabad’s incubation centre Wadhwani Center for Entrepreneurship Development launched an open accelerator named Dlabs for the budding entrepreneurs of the country.
Many other states such as Goa and Odisha are taking measures and instituting programs on similar lines to build out the ecosystem in their states. In addition to these state specific programs, there are certain training programs and support initiatives organised by central government institutions such as National Science & Technology Entrepreneurship Development and National Institute for Entrepreneurship and Small Business Development. Many of these initiatives run at a national level might also feed into the ambitions smart cities program too, since many of these cities are being set up around technology / trade hubs.

Main Schemes of SIDBI
National Equity Fund Scheme which provides equity support to small entrepreneurs setting up projects in Tiny Sector.
Technology Development & Modernisation Fund Scheme for providing finance to existing SSI units for technology upgradation/modernisation.
Single Window Scheme to provide both term loan for fixed assets and loan for working capital capital through the same agency.
Composite Loan Scheme for equipment and/or working capital and also for worksheds to artisans, village and cottage industries in Tiny Sector.
Mahila Udyam Nidhi (MUN) Scheme provides equity support to women entrepreneurs for setting up projects in Tiny Sector.
Scheme for financing activities relating to marketing of SSI products which provides assistance for undertaking various marketing related activities such as marketing research, R&D, product upgradation, participation in trade fairs and exhibitions, advertising branding, establishing distribution networks including show room, retail outlet, wears-housing facility, etc.
Equipment Finance Scheme for acquisition of machinery/equipment including Diesel Generator Sets which are not related to any specific project.
Venture Capital Scheme to encourage SSI ventures/sub- contracting units to acquire capital equipment, as also requisite technology for building up of export capabilities/import substitution including cost of total quality management and acquisition of ISO-9000 certification and for expansion of capacity.
ISO 9000 Scheme to meet the expenses on consultancy, documentation, audit, certification fee, equipment and calibrating instruments required for obtaining ISO 9000 certification.
Micro Credit Scheme to meet the requirement of well managed Voluntary Agencies that are in existence for at least 5 years; have a good track record and have established network and experience in small savings-cum-credit programmes with Self Help Groups (SHGs) individuals.
New Schemes
(i) To enhance the export capabilities of SSI units.
(ii) Scheme for Marketing Assistance.
(iii) Infrastructure Development Scheme.
(iv) Scheme for acquisition of ISO 9000 certification.
(v) Factoring Services and
(vi) Bills Re-discounting Scheme against inland supply bills of SSIs.
Major schemes
1. Technology Development & Modernisation Fund

SIDBI has set up Technology Development & Modernisation Fund (TDMF) scheme for direct assistance of small sale industries to encourage existing industrial units in the sector, to modernise their production facilities and adopt improved and updated technology so as to strengthen their export capabilities. Assistance under the scheme is available for meeting the expenditure on purchase of capital equipment acquisition of technical know-how, upgradation of process technology and  products with thrust on quality improvement, improvement in packaging and cost of TQM and acquisition of ISO-9000 series certification.
SIDBI in July 1996 had permitted SFCs and promotional banks to grant loans for modernisation projects costing upto Rs. 50 lakhs. The Coverage of the TDMF scheme has been enlarged w.e.f. 1.9.1997. Non-exporting units and units which are graduating out of SSI sector are now eligible to avail assistance under this scheme.

2. National Equity Fund

National Equity Fund (NEF) under Small Industries Development Bank of India (SIDBI) provides equity type assistance to SSI units, tiny units at five per cent service charges. The scope of this scheme was widened in 2000-01 raising the limit of loan from Rs. 6.25 lakhs to Rs. 10 lakhs and project cost limit from Rs. 25 lakhs to Rs. 50 lakhs.
(a) The following are eligible for assistance under the scheme:-

⦁ New projects in tiny and small scale sectors for manufacture, preservation or processing of goods irrespective of the location (except for the units in Metropolitan areas).
⦁ Existing tiny and small scale industrial units and service enterprises as mentioned above (including those which have availed of NEF assistance earlier), undertaking expansion, modernisation, technology upgradation and diversification irrespective of location (except in Metropolitan areas).
⦁ Sick units in the tiny and small scale sectors including service enterprises as mentioned above, which are considered potentially viable, irrespective of the location of the units (except for the units in Metropolitan areas).
⦁ All industrial activities and service activities (except Road Transport Operators).
<
(b) Project cost (including margin money for working capital) should not exceed Rs. 50 lakhs in the case of new projects in the case of existing units and service enterprises, the outlay on expansion/modernisation/technology upgradation or diversification or rehabilitation should not exceed Rs. 50 lakhs per project.
(c) There is no change in the existing level of promoters’ contribution at 10% of the project cost. However, the ceiling on soft loan assistance under the Scheme has been enhanced from the present level of 15% lakh per project to 25% of the project cost subject to a maximum of Rs. 10 lakhs per project.
(d) 30% of the investment is earmarked for tiny units.