2019: A year of startup empowerment

Over the past year, several new policies and amendments were introduced by the Government of India to improve the national startup ecosystem, to achieve its goal of 50,000 startups in India by 2024.

December 23, 2019

The govt set up a Fund of Funds for Startups (FFS) with a corpus of US$1.4 billion to provide a boost to the Indian startup ecosystem

Certain startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) are now exempt from tax

The new National Policy On Electronics aims to achieve a turnover of US$400 billion by 2025, in which startups will play a big role

Several states, such as Meghalaya, Karnataka, Madhya Pradesh, etc, have implemented smaller scale policies to create an enabling environment

To achieve the goal of 50,000 startups in India by 2024, several new policies and amendments were introduced in the year 2019 that improved the ease of doing business for startups. As a result, India rose from 81st to 52nd rank in the Global Innovation Index, with Indian startups expanding into new products and services every day. The Indian startup industry, meanwhile, has retained its position as the world’s third-largest, especially in the technology domain. Despite an economic slowdown, Indian technology startups attracted investments worth around US$4.4 billion during the first nine months of 2019, cementing confidence in the nation’s technological ingenuity and skilled workforce. The strength has spilled over to startups serving all sectors of the economy and contributed towards nation-building. 

Some of the biggest policies to contribute to this are as follows.

Angel Tax Abrogation: Certain startups recognised by the DPIIT are now exempt from tax under Section 56(2)(viib) of the Income Tax Act. Introducing Section 54EE in the Act, exemption from tax has also been made on the long-term capital gain (up to US$70K) if it is invested in a fund notified by the central government. Meanwhile, the minimum turnover from the supply of goods GST registration limit has been doubled to US$56K. 

In a big relief to the EV sector, the GST rate on electric vehicles was reduced from 12 per cent to 5 per cent. 

Startup India Fund Of Funds Disbursal: In June 2016, the government set up a Fund of Funds for Startups (FFS) with a corpus of US$1.4 billion to provide a boost to the Indian startup ecosystem and enable access to domestic capital. Reportedly, over 280K jobs have been reportedly created by 23,657 DPIIT-recognized startups, as on 4 December 2019.

National Policy On Electronics: The new NPE 2018 aims to achieve a turnover of US$400 billion by 2025. This will include targeted production of 1 billion mobile handsets by 2025, valued at US$190 billion. This National Policy on Software Products 2019 was released to promote tech entrepreneurship in India and help make Indian software product startups to scale up to become US$70–80 billion market by 2025. The government will initially outlay US$210 million to implement the programmes for software development and research, for over a period of seven years.

India’s State-Level Policies: The North East has seen the Meghalaya Startup Policy 2018 and Nagaland Startup Policy 2019. Karnataka released a new state IT policy, and Madhya Pradesh launched a new scheme for small businesses. Maharashtra set up the Mumbai Fintech Hub to bridge the gap between investors and fintech startups. Several other states continued to make a number of international collaborations to promote startups, investments, and innovation in the state. Additionally, the MeitY constituted four Committees on AI to understand various issues. 

This enabling environment created by the Government of India through policies and their implementation will surely go a long way in opening up a huge market for Indian startups in the coming year and beyond.

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