Empowering startups through policy support, infra development

India is undergoing an entrepreneurial renaissance, fuelled by a collective resolve to transform the nation into a global hub for innovation and technology. At the heart of this transformation lies the Startup India initiative, which has played a pivotal role since its inception in 2016 in empowering startups through enabling policies, robust infrastructure development, and enhanced access to funding.

Policy Support for Startups

Key measures, including simplified regulatory compliance, funding support through the Fund of Funds for Startups (FFS), amendments to Section 80IAC of the Income Tax Act and measures addressing angel tax concerns have created an ecosystem conducive to innovation and growth and fostered trust. The Startup India Seed Fund Scheme has bridged the gap between ideation and implementation, ensuring that startups can focus on building robust solutions without initial capital constraints.

Infrastructure Development for Startups

Apart from supportive policy measures, infrastructure plays a foundational role in the success of startups. The establishment of incubation centres, innovation hubs, and technology parks has provided access to critical resources, cutting-edge facilities, and collaborative networks. Flagship innovation labs within incubators, such as THub, iHub, and KSUM, serve as excellent examples of how infrastructure can nurture entrepreneurial growth. These hubs not only provide physical spaces but also connect startups with mentorship, technical expertise and industry networks. The Indian startup sector, spanning diverse areas such as fintech, edtech, healthtech, agritech and e-commerce is today the third largest ecosystem in the world. From just 452 in 2016, India currently has over 157,000 recognised startups, with over 100 unicorns to its credit — a number projected to surpass 300 by 2030. Between 2016 and 2024, startups are estimated to have generated 20 to 25 per cent of all new employment, especially among Gen Z who constitute about 25 per cent of India´s workforce and represent an important and emerging consumer segment.

Potential of Startups towards the Indian economy

The rapid growth of startups in India is indeed remarkable. But there is immense potential for even greater contribution to the Indian economy. For example, it is estimated that this sector contributes nearly 53 per cent of Israel’s exports in 2023. While Israel’s leadership in areas like cybersecurity is well known, its agritech startups are also making significant impact towards promoting food security. Technology companies in the US constituted approximately 27 per cent of the S&P 500 Index companies’ market capitalisation, positively impacting wealth creation across income segments. Reports on projections in India suggest that this sector can contribute $ 1 trillion to the country’s GDP by 2030. The prospects of the emerging Deep Tech sector are even more exciting. Reports suggest that Gen AI alone can contribute an additional 5.9 per cent to 7.2 per cent to India´s GDP by 2030.

Corporates fostering Startups

In this context, corporates have emerged as key stakeholders in fostering startup success. By partnering with startups, corporates offer mentorship, market access, and collaborative opportunities for co-creating solutions to pressing challenges. Such partnerships are critical for startups to leverage existing expertise and resources to refine their products and scale effectively. Startups also help diversify investment portfolios, reducing risk across various sectors and stages of development. Additionally, engaging with startups provides access to talented entrepreneurs and innovators, besides gaining valuable insights into emerging market trends and consumer behaviour.

Equally, family offices with their long-term investment horizon are ideal partners for startups needing patient capital to grow. They offer more than just capital, providing mentorship, industry expertise, and valuable networks. Many family offices are interested in impact investing, supporting startups that align with their values and contribute to social or environmental causes. Investing in high-potential startups also helps family offices preserve and grow their wealth over generations.

Both corporate and family offices thus play a crucial role in the startup ecosystem, providing essential capital, resources, and support to drive innovation and economic growth. CII is strongly encouraging the corporate sector and family offices to consider investing in startups and propel a higher growth trajectory.

India’s impressive startup journey is a testament to the power of collaboration between policymakers, corporates, investors and entrepreneurs. By fostering a culture of innovation, addressing policy gaps, and investing in infrastructure, the nation can unlock unprecedented opportunities for startups to thrive.

CII Centre of Excellence for Innovation, Entrepreneurship and Startups

We in CII are committed to championing initiatives that align with the vision of Startup India — driving innovation, creating jobs, and fostering economic growth. In this direction, CII’s Centre of Excellence for Innovation, Entrepreneurship & Startups, works on strengthening the linkages in the startup ecosystem. The centre works with different stakeholders to facilitate collaboration and consequent increase in innovation pipelines.

Clearly, Indian startups are catalysts for societal transformation and economic empowerment, as India continues its journey towards becoming a $ 5 trillion economy. By building an inclusive and sustainable ecosystem, we can ensure that startups not only fuel economic progress but also address some of the most pressing societal challenges of our time.

This article is by Sanjiv Puri, President, CII, and Chairman & Managing Director, ITC Limited.

The article first appeared in Business Standard, dated January 15, 2025.