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24 Sep, 2021

25 Min Read

Startup Ecosystem in India

GS-III : Economic Issues Industry

What is the Startup Ecosystem in India?

  • India has the 3rd largest startup ecosystem in the world; expected to witness YoY growth of a consistent annual growth of 12-15%
  • India has about 50,000 startups in India in 2018; around 8,900 – 9,300 of these are technology led startups 1300 new tech startups were born in 2019 alone implying there are 2-3 tech startups born every day.

Definition of Startup Expanded

An entity shall be considered as a Startup:

  • Upto a period of ten years from the date of incorporation/ registration, if it is incorporated 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) In India.
  • Turnover of the entity for any of the financial years since incorporation/ registration has not exceeded Rs 100 Crore.
  • Entity is working towards innovation, development or improvement of products or processes or services, or if it’s a scalable business model with a high potential of employment generation or wealth creation.
  • Provided that an entity formed by splitting up or reconstruction of an existing business shall not be considered A ‘Startup’.

Indicators of Growth in the Startup Ecosystem

  • The pace of growth in the startup ecosystem has increased to 15% year-on-year in 2018, while the growth of the number of incubators and accelerators has grown to 11%
  • Significantly, the number of women entrepreneurs stood at 14%, up from 10% and 11% in the previous two years.
  • Startups in the country have been able to create an estimated 40,000 new jobs over the year, taking the total jobs in the start-up ecosystem to 1.6-1.7 lakh
  • Bangalore has been listed within the world’s 20 leading startup cities in the 2019 Startup Genome Project ranking. It is also ranked as one of the world’s five fastest growing startup cities

Funding raised by Indian Startups in 2019

  • The Indian startups have gone on to raise sizeable ticket sizes from various global and domestic funds. The top 15 deals constituted about 40% of total deal value, demonstrating that most funds are valuing deal quality more than quantity.
  • Private equity deal volume in India rose for the second straight year, and while the average deal size declined slightly from the prior year, the total value of $26.3 billion in 2018 was the second-highest of the last decade.The num­ber of deals greater than $50 million increased from the previous year.

Drivers of Startup Ecosystem

Corporate Connect

Enterprises are realizing the disruptive potential of start-ups and are thus, partnering/investing in them.

Examples of corporate support:

  • Facebook in partnership with Startup India disbursed cash grants of $50,000 each to the top 5 selected startups
  • 10000 Women program by Goldman Sachs is providing women entrepreneurs all around the world with a business and management education, mentoring and networking and access to capital.
  • Microsoft Ventures Accelerator Program in India has recently picked up 16 startups.

Government Support

Government of India is understanding the value of working with disruptive innovators across the value chain and using their innovations to improve public service delivery.

  • Department of Animal Husbandary and Dairying has conducted a grand challenge in association with Startup India to award top startups in 5 categories 10 lakhs INR.
  • Small Industries Development Bank of India has launched a scheme to provide assistance to existing Small and Medium Businesses in need of capital for growth
  • Over 26 states in the country have Startup policies.
  • The start up India scheme envisaged

1. A common platform for stakeholders to interact, facilitation for funding support, and partnership With academia and private sector entities.

2. An 80% rebate in patent registration fees as well as a 50% rebate in trademark filing. Startups could also benefit from

3. Faster exit norms and free of cost assistance provided by patent and trademark facilitators in filing for Intellectual Property Rights (IPRs).

  • Fund of Funds was set-up in 2016 with a total corpus of Rs 10,000 Crores , it does not invest directly in startups but rather participates in the capital of Securities and Exchange Board of India (SEBI)-registered Category-1 and Category-2 Alternate Investment Funds (AIFs). The tenure of the AIF supported under FFS be initially up to 12 years. The FFS is managed by Small Industries Development Bank of India (SIDBI).
  • Ministry of Agriculture in partnership with Startup India launched the Agriculture Grand Challenge, wherein 12 pre-identified problem statements were noted for seeking solutions from the startup.

National Startup Advisory Council

  • It was constituted by the Department for Promotion of Industry and Internal Trade.
  • The main objective of the council is to advise the Government of India on measures needed to build strong ecosystem to nurture innovation and startups in the country. This is to drive sustainable economic growth in the country and also to generate farge scale employment opportunities
  • The council is constituted with both Ex-officio and non-official members. These members are nominated by the Government of India. They include members from the central ministries and also founder of successful startups.

Quick Facts

  • Unicorn is a privately held startup company valued at over $1 billion. The term was coined in 2013 by venture capitalist Aileen Lee, choosing the mythical animal to represent the statistical rarity of such successful ventures.
  • 13 Indian Startups That Entered The Unicorn Club In 2021. There are 12 ecommerce unicorns, namely Flipkart, Snapdeal, FirstCry and others. The fintech sector has 12 startups in the list with Paytm, PhonePe, Zerodha, Razorpay,etc
  • One Person Company (OPC) is a company incorporated by a single person. Before the enforcement of the Companies Act, 2013, a single person could not establish a company.

Legal status of OPC: The OPC receives a separate legal entity status from the member. The separate legal entity of the OPC gives protection to the single individual who has incorporated it. The liability of the member is limited to his/her shares, and he/she is not personally liable for the loss of the company. Thus, the creditors can sue the OPC and not the member or director.

Recent measures post COVID.

  • DPIIT had launched the United Against COVID-19- Innovation Challenge to identify innovative solutions to combat COVID-19
  • SIDBI has launched Covid-19 Startup Assistance Scheme (CSAS) for startups which aims to aid innovative startups that have demonstrated ability to adapt to economic impact from Covid-19 and ensured its employees safety and financial stability
  • SIDBI Make in India Soft Loan Fund for Micro Small and Medium Enterprises (SMILE) for financing the healthcare sector including hospitals, nursing home, clinics.

Source: PIB

Census and SECC Analysis

GS-II : Governance Governance

What is the Census of India?

  • The decennial Census of India has been conducted 15 times, as of 2011.
  • While it has been undertaken every 10 years, beginning in 1872 under British Viceroy Lord Mayo, the first complete census was taken in 1881.
  • Post-1949, it has been conducted by the Registrar General and Census Commissioner of India under the Ministry of Home Affairs, Government of India.
  • All the censuses since 1951 were conducted under the 1948 Census of India Act.
  • The last census was held in 2011, whilst the next will be held in 2021.
  • The Census of India, one of the largest exercises of its kind, enumerates and collects demographic and socio-economic information on the Indian population.

About Census 2021

  • Census exercise will be conducted in February 2021. It will have the facility of self enumeration.
  • 2 Phases
    • Phase 1: House listing and Housing census.
    • Phase 2: Population enumeration.
  • 2021 Census = 1st time data would be stored in electronically and 1st time OBC will be collected.
  • The Census 2021 will be conducted in 18 languages out of the 22 scheduled languages (under 8th schedule) and English, while Census 2011 was in 16 of the 22 scheduled languages declared at that time.
  • It also will introduce a code directory to streamline the process
  • The option of “Other” under the gender category will be changed to “Third Gender”.
  • There were roughly 5 lakh people under “other” category in 2011.
  • For the first time in the 140 year history of the census in India, data is proposed to be collected through a mobile app by enumerators and they will receive an additional payment as an incentive.
  • The Census data would be available by the year 2024-25 as the entire process would be conducted digitally and data crunching would be quicker.

Why the Census is important?

  • Enumerating, describing and understanding the population of a society and what people have access to, and what they are excluded from, is important not only for social scientists but also for policy practitioners and the government.
  • However, as early as the 1940s, W.W.M. Yeatts, Census Commissioner for India for the 1941 Census, had pointed out that, “the census is a large, immensely powerful, but blunt instrument unsuited for specialised enquiry”.
  • This point has also surfaced in later critiques offered by scholars who consider the Census as both a data collection effort and a technique of governance, but not quite useful enough for a detailed and comprehensive understanding of a complex society.
  • As historian and anthropologist Bernard Cohn had demonstrated, the Census may in fact produce an imagination of society, which suggests the epistemological complexities involved.
  • It is also important for the Delimitation exercise.

While the usefulness of the Census cannot be disregarded, for instance with regard to the delimitation exercise, there is a lack of depth where some issues are concerned. In this context, the discussion around caste and its enumeration have been controversial.

Evolution of Socio Economic and Caste Census (SECC)

  • Since Independence, aggregated Census data on the Scheduled Castes and Scheduled Tribes on certain parameters such as education have been collected.
  • With demands to conduct a full-scale caste census gaining traction over time, some have seen the inclusion of broader caste information as a necessity to capture contemporary Indian society and to understand and remedy inequalities, while others believe that this large administrative exercise of capturing caste and its complexities is not only difficult, but also socially untenable.
  • Following decades of debate, the Socio-Economic and Caste Census (SECC) was conducted in 2011 and took a few years to complete; this was a distinct exercise from the Census of 2011.
  • The SECC, which collected the first figures on caste in Census operations since 1931, is the largest exercise of the enumeration of caste. It has the potential to allow for a mapping of inequalities at a broader level.

Socio Economic Caste census (SECC):

An Expert Group under the Chairmanship of former Finance Secretary Sumit Bose was constituted to study the objective criteria for allocation of resources to States and identification and prioritization of beneficiaries under various programme using Socio-Economic and Caste Census (SECC) data. The committee has recently submitted its report to the ministry of rural development (MoRD) and has recommended the use of SECC data for all government schemes instead of the below poverty line (BPL) data.

What is SECC? (Prelims)

  • The SECC was commissioned by the previous government in 2011 to canvas every household (urban and rural) in the country to ascertain their socio-economic status so as to allow both central and state governments define poverty and to take steps to eliminate various types of deprivations faced by the Indians.
  • SECC was a mega project conducted jointly by three ministries
      1. Ministry of Rural Development
      2. Ministry of Housing and Urban Affairs and
      3. Ministry of Home Affairs.
  • This was the first time since 1931 to ask every person their caste name to allow the government to re-evaluate which caste groups are well off and which caste groups are worst off and to better target the welfare schemes.

7 Criterias used in SECC (PT Pointers)

  • Households with only one room , with no solid walls and roof
  • Households with no adult male aged 15-59.
  • Female headed households
  • Households with differently abled members
  • Households with no able bodied members
  • SC/ST households with no literate members above the age of 25years
  • Landless households deriving major income from manual labour.

Findings of SECC: (Data important for Mains and Essay)

A total of 24.39 Crore households were surveyed. Out of those, 91 Crore were rural households.

  • About 30% of the rural households are landless and derive major part of their income from casual, manual labour.
  • Among the land holdings, 40% is not irrigated.
  • Just 4% own any sort of mechanized agricultural equipment and just 10% own irrigational equipment.
  • Only 4.6% of the rural households pay income tax.
  • Nearly 75% of households earn less than Rs 5000 per month.
  • Less than 5% of SC/ST households earn more than Rs 10000 per month.
  • Only 5% of rural households depend on government jobs, 3.57% on private sector jobs.

On Literacy

  • As per the SECC data 36% of rural India is illiterate.
  • 52% rural households have no literate adult above 25 years.
  • Of the 64% literate rural Indians, only 1/5th have completed their primary education.
  • Only 5.4% have completed high school and a mere 3.4% have graduated from college.

Women Empowerment

  • A little more than 48% of the rural population is female and only 12.8% of the rural households are headed by women.
  • Lakshadweep has the highest percentage of women-headed households with nearly 40% of the houses headed by women.

Transgenders (Prelims)

  • This was the first census which released the data on trans-genders.
  • Trans-genders comprise only 0.1% of India’s rural population.

Importance of SECC:

  • Presently poverty in India is determined using the BPL method which is based on the income required to purchase food items (determined using calorie norms) and non-food items ( clothing, education etc). SECC is more targeted and precise than the BPL method.
  • While the BPL method identifies the number of poor people, SECC identifies who actually are poor. This will help in improving the efficiency of the government schemes and programmes, leads to better identification and targeting of beneficiaries and avoid duplication and fraud.
  • BPL method uses income as the sole criteria to define poverty but income alone can miss a lot. Poverty is multidimensional and SECC takes this aspect into account while determining poverty. A multidimensional approach is very necessary for the success of poverty alleviation programmes. For example, an area in which most people are deprived of education is going to require a different poverty reduction strategy when compared to an area where most people are deprived of housing facilities.
  • The deprivations faced by poor in various fields such as education, health, sanitation etc are not accounted in BPL method but are accounted in SECC. So SECC will help in not only poverty eradication but also eradication of various deprivations.
  • The gender-related issues of poverty is taken into consideration in the SECC which was missing in the BPL method.

Drawbacks of SECC

  • Even though SECC was conducted in both urban and rural areas, the government has released only SECC data of rural India.
  • SECC collates data regarding the caste of the people. This caste related information faces the danger of being misused by political parties for their ulterior motives.
  • SECC data must be regularly updated in order to remove beneficiaries who have overcome their deprivations. This will put a huge burden on the part of the government.

The main concerns

  • It would be disingenuous to ignore the emotive element of caste and the political and social repercussions of a caste census.
  • There have been concerns that counting caste may help solidify or harden identities, or that caste may be context-specific, and thus difficult to measure.
  • These discussions along with various counterarguments are not new.
  • Commenting on the 1941 Census, Census Commissioner Yeatts observed that, “Thanks to the acute interest in community figures, practically all communities this time were census-conscious and took pains to see that their houses were in the list and that they themselves were counted.”
  • In discussions around caste, scholars such as Nicholas Dirks and Cohn have demonstrated that the Census had the effect of marking out caste and community in the forms we see today.
  • The other concern is whether an institution such as caste can even be captured completely by the Census.
  • Questions remain on whether the SECC is able to cover the effects of caste as an aspect of Indian social structure in everyday life, or at least to illuminate our understanding of its impact at varying scales — from the local, to the regional and to the national scale.
  • Can the SECC take into account the nuances that shape caste and simultaneously the ways in which caste shapes everyday life in India?
  • The Census and the SECC have different purposes.
  • Since the Census falls under the Census Act of 1948, all data are considered confidential, whereas according to the SECC website, “all the personal information given in the Socio Economic Caste Census (SECC) is open for use by Government departments to grant and/or restrict benefits to households”.
  • The Census thus provides a portrait of the Indian population, while the SECC is a tool to identify beneficiaries of state support.
  • This difference is significant since it influences not only the methods of collection but also the use and potential for misuse of data.

A road map

  • What is needed then is a discussion on the caste data that already exists, how it has been used and understood by the government and its various departments to grant or withdraw benefits, and also its utility for the important academic exercise of mapping social inequalities and social change.
  • Linking and syncing aggregated Census data to other large datasets such as the National Sample Surveys or the National Family Health Surveys that cover issues that the Census exercises do not, such as maternal health, would be significant for a more comprehensive analysis, enabling the utilisation of the large body of data that already exists.
  • This linking of the Census with the National Sample Survey data has been suggested in the past by scholars such as Mamta Murthi and colleagues.
  • Statisticians such as Atanu Biswas point out that Census operations across the world are going through significant changes, employing methods that are precise, faster and cost effective, involving coordination between different data sources.
  • Care must however be taken to ensure that digital alternatives and linking of data sources involving Census operations are inclusive and non-discriminatory, especially given the sensitive nature of the data being collected.

Time lag and planning

Apart from themes specific to enumerating caste, there are other issues that the Census and the SECC in particular face.

  • The first relates to the time lag between each Census, and the second to the delay in the release of data.
  • The first of these is inherent in the way the Census exercises are planned.
  • The second, however, also has important repercussions to understanding social change since data may remain un-released or released only in parts.
  • Nearly a decade after the SECC for instance, a sizeable amount of data remains unreleased.
  • While the Census authorities present documents on methodology as part of a policy of transparency, there needs to be a closer and continuous engagement between functionaries of the Census and SECC, along with academics and other stakeholders concerned, since the Census and the SECC are projects of governance as well as of academic interest.
  • Before another SECC is conducted, a stocktaking of the previous exercise, of what has been learnt from it, and what changes are necessary, beyond changing exclusionary criteria for beneficiaries of state support, are crucial to enable the Census to facilitate effective policy work and academic reflection.
  • Concerns about methodology, relevance, rigour, dissemination, transparency and privacy need to be taken seriously if this exercise is to do what it was set up to do.

Source: TH

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