 Scope For Growth:

 Policy initiatives for startup growth- Indian government intends to construct a startup
system that advances entrepreneurship at the startup level and has also taken various
activities to guarantee that the new companies get suitable support. Several policy
initiatives have been undertaken in this regard as follows-

a. Make in India: In September 2014, Prime Minister Narendra Modi presented a major gambit
"Make in India" to advance the manufacturing area by encouraging organizations to put
resources into the sector. The plan of the idea was to draw in foreign investments and urge
domestic organizations to take an interest in the manufacturing industry and in this manner
adding to the development story. The administration additionally also found ways to
construct a favorable environment to conduct business in the country. For instance, an
online framework for environment clearances, filling government income tax returns and
expansion of legitimacy of industrial licenses to three years have been set up. The
government increased the FDI limits for a majority of the sectors. Provide insurance of the
intellectual property rights of innovators and creators by overhauling infrastructure, and
using state-of-the-art technology.
b. Standup India: The government also intends to build a system to enable startups and wants
to make India a number one destination for setting up a business. In August 2015, the PM
announced the campaign “Standup India” to support startups with bank funding and to
inculcate entrepreneurship among the youth of the country. He also requested 1.25 lakh
bank branches to provide funding to least one startup founded by SC & ST community.
On 6th January 2016, the Union Cabinet approved Standup India campaign which intended
at promoting entrepreneurship among women, SC & STs. Some important features include:•
Loans under the plan to be given for greenfield projects in the non-farm sector, •Aim of
the scheme is to facilitate at least two of these projects per bank branch, •The initiative is to
benefit at least 250,000 borrowers in 36 months from the launch of the scheme. It also
seeks to ease the existing regulatory regime for startups and is looking to extend further tax
incentives to them. The Department of Industrial Policy and Promotion (DIPP) is working
around a solution for startups to ensure that the regime is open to businesses.
c. Digital India: This is an initiative by Indian govt to ensure that government offerings are
made readily available to each citizen through on-line platform. In July 2015, the PM
introduced the Digital India initiative that seeks to connect rural areas with the aid of
growing their virtual infrastructure. This interprets into a huge commercial enterprise
possibility for startups. E-Commerce companies are making plans to delve into India’s rural
marketplace as part of the government’s Digital India initiative. In September 2015, PM
Modi visited Silicon Valley, US and had conferences with business leaders and CEOs of a
 number of corporations and enterprise, such as Satya Nadella and Sundar Pichai to talk
about his aims of growing a better startup ecosystem in India. According to NASSCOM
startup report 2015, each year, more than 800 tech startups are being set up in India. By
2020, a projected 11,500 tech-startups are going to be launched that will hire round 250,000
workers

 Financial assistance- In the Budget speech for 2015-16, FM Arun Jaitley announced the
initiative to set up Micro Units Development Refinance Agency (MUDRA) Bank and a Credit
Guarantee Fund with a refinance capital of INR 20,000 cr and INR 3,000 cr. •In April 2015,
the authorities released Mudra Bank to push the growth of small corporations and
manufacturing plants - the Bank would provide a credit facility of as much as INR 50,000 to
small businesses, loan of as much as Rs. 5 lac to bigger corporations and as much as INR 10
lakh to the MSME sector.

a. MUDRA Scheme: On 6 January 2016, the Cabinet approved the subsequent proposals:•
It accredited the creation of a Credit Guarantee Fund for MUDRA loans- the fund will
guarantee loans of over INR 1,00,000 crore to micro and small companies in the first
phase. MUNDRA scheme is expected to offer advantages to 1.73 crore people. - The
fund will ensure loans sanctioned under Pradhan Mantri Mudra Yojana from 8 April,’15•
The cabinet also gave its permission to convert MUDRA Ltd. Into MUDRA Small
Industries Development Bank of India (SIDBI) Bank as entirely owned subsidiary of SIDBI.
Additionally, the authorities set a target to provide a complete mortgage of INR 1.22 lac
crore to support new entrepreneurs and fund the unfunded corporations with the
assistance of banks.
b. Aspiration Fund: The finance minister additionally announced the India Aspiration Fund
to encourage the startup environment and allotted Rs. 400 crore to numerous venture
funds. He also launched another scheme known as SMILE (SIDBI Make in India Loan for
Small Enterprises) with Rs. 10,000 cr. The aim of the scheme is to offer soft loans as
quasi-equity and term loans on soft phrases to MSMEs.

 Impact of Startup Incubators: Startup incubators are companies that support new
startups in their initial phase of development by giving out various services. Incubators are
made up of both tangible and intangible resources such as equipment, office space, services
such as accounting, computing and legal services. They also help startups in raising capital
and perform various networking tasks to reduce the financial burdens and resource
problems. Incubators help entrepreneurs in building sustainable business environment
along with aiding the larger corporate communities.
 According to NASSOCM report, there is a 40% boom in the cluster of incubators in India,
from around 80 in 2014 to around 110 in 2015.
 About 50 percent of total incubators are situated in non-metro cities i.e. outside NCR,
Bengaluru and Mumbai.
 An increasing number of educational institutions have started putting in place incubator
systems either independently or jointly. For example, Shri Ram College of Commerce, New
Delhi has set an incubator to aid students with their own startups, VESIT college of
engineering has set up an incubation centre with the same objective.
 Many big companies are also setting up incubator programs to help startups, including Tata,
Google, Microsoft Ventures etc. Tata has launched the country’s largest technology
incubator centre ‘T-Hub’ in Hyderabad.
 Google has initiated with a Launchpad accelerator program to especially aid the mobile
startups in India, Brazil and Indonesia with training & developmental support and with as
much as $ 50,000 in equity-free funding.
 Y-Combinator, a well-known incubator in San Francisco Bay Area, United States has also
shown its interest in making investments in India in the near future.

 Challenges for Startups Growth In India:

World Bank’s Report in Ease of Doing Business 2019-

India is ranked 77th out of 190 economies in the ease of doing business index, 80th on the ease
of trading across borders and 157th in the ease of paying taxes. On an average, Indian
businesses need to make 33 tax payments per year with about 243 hours spent to prepare and
pay taxes in a year. In contrast, China needs just nine tax payments annually, while the US
doesn’t worry its taxpayers more than 11 times annually for tax payments. •Among South Asian
economies, India made the biggest jump in reforms and improvements in business regulation,
increasing its distance to the former score.

Culture and Awareness- The Indian tendency conditions people to look down upon failure. The
risk takers rarely get enough encouragement. Entrepreneurship is usually about small defeats
and learning from the failures and starting all over again. People have to start accepting failures
and learn to be risk averse.

 Most common questions for anyone to become an entrepreneur include-What to do:

problem related to finding a business idea, getting a business opportunity or having a vision-
Why to do: issues regarding reward/incentive analysis, risk evaluation or any other benefits-
How to do: issues regarding the legalities and requirements such as clearances, licenses,
approvals required. Issues regarding resource availability like finances, technology and
manpower supply.
 Most people assume having a domain name, setting up a website, getting on social media
are complex, costly and time consuming
 People are worried about risk and rewards, and India being a price sensitive market, the
majority are unaware about how can they contribute to economic growth, generate
employment, contribute to social development.

Social Issues-
 Mentorship/Guidance: Most founders of failed startups believe that the lack of proper
guidance and mentorship is a big reason behind their failure. Some major factors behind
failures and slow growth of some organizations involves lack of quality mentorship,
especially in terms of industry knowledge/support.
 Market structure: Indian markets are largely unorganised and fragmented that results in a
roadblock for startup to succeed
 Consumer behaviour: Behaviour of Indian consumer changes regionwise that makes it really
difficult for a startup to form a business or market strategy for their products or services.
Most startups usually get stuck in stagnancy and eventually shut down.
 Location: Another important issue faced by startups is location of their business. India is a
place with diverse culture and tastes and hence every product may not be welcomed the
similar way in every region.

Technological infrastructure-
 A suitable IT infrastructure has become a need for businesses given the growing number of
consumers online-It is vital for new startups to train their employees to handle useful
customer information like credit card numbers and related data
 Cyber security- Most of our startups run according to a B2B business model. This poses
potential cyber risk that might exist for their startup business- in case no backup plan to
keep the company running if an accident destroys some key info in their data centre.

Financial Issues-

 Most startups are self/family funded with limited workforce that makes it difficult to
maintain records both financial and operational.
 Flawed business model and lack of innovative revenue strategies leads to the failure of many
startups forcing them to shut down operations.
 Funding/Capital Deficiencies: Capital and access to capital is a universal problem for
startups-Government and private sector investors set aside funds through investment
channels but they are unavailable for all kinds of business. In initial phase of operations,
startups can’t get funds from banks given no credit history of the firm. Also, there is limited
number of credit rating firms for SMEs.
 Startups are unable to bridge the gap between burn rate and revenue.
 Cash flow management-An effective cash management is important to achieve goals both
short term and long term Cash is still a more opted option for payment in India because of
the fact that electronic payment has yet not achieved complete penetration to Tier 2 &Tier 3
cities.
 Gap b/w burn rate and revenue: With increased competition from competitors, both from
big and small, it becomes significant for startups to improve the business and attain external
funds for sustainability/growth in the market.

Sustainability Issues-

 The degree of knowledge that businesses keep regarding ecological issues and their
willingness to discuss this with their clients is important in creating business ventures.
 Lack of information-The provision for more information conveyed directly to business
founders could help in the adoption of more sustainable business practices.
 Being unaware of the potential that might exist for their startup business.
 The role of public funding in promoting sustainable companies is also huge but
underappreciated.

Regulatory Issues-
 Multi window clearances: Many new entrepreneurs have to make multiple trips to
government offices to register and seek clearances. There is an increased need to scrap
multiple regulatory clearances.
 Taxation issue: Taxes like octroi, VAT, excise create problems for entrepreneurs while setting
up a business. NASSCOM has asked for the exemption of both direct and indirect taxes for
all startups in India-Taxation is a barrier for technology adoption and proves to be an
immense hurdle for budding entrepreneurs-With taxation out of the way, startups will be
able to stem the cash outflow.