Indian States – Riding the Startup Wave: A BW Disrupt article By WF Policy Team

By October 17, 2016 No Comments

With so much startup action occupying the center-stage in States, India is buzzing with entrepreneurial activity like never before. Needless to say that with more states joining the bandwagon, a second industrial revolution in the country is not far away.

When the Prime Minister talked about launching a policy specifically to support startups in his August 15 speech from the rostrum of the Red Fort in 2015, little did we realize that the state governments would play such a major role here. Post the declaration, apart from the central government’s “Startup India Policy”, more than fourteen states have launched their own Startup policies, with many to follow suit soon. The initiative has clearly brought the spirit of “competitive federalism” to the fore.

Southern states such as Andhra Pradesh, Karnataka and Kerala were among the first ones to come out with their Startup policies. They were soon followed by others like Gujarat, Haryana, Jharkhand, Odisha, Rajasthan, Telangana, Uttar Pradesh, West Bengal, Chhattisgarh, Madhya Pradesh and Bihar, have not only launched the policies but are seen to be persevering to make them lucrative. Gujarat, for instance, has two startup policies—first, for the overall industry, and second catering to just electronics and IT/ ITES. Karnataka’s booster kit, which is a comprehensive package of software tools, cloud credits, access to mentors and consultants, state funds and incubators, etc. elicited more than 600 applications in less than a week. Kerala is mobilizing a whopping 1% of the state’s annual budget to start-ups. And West Bengal is starting its startup reality show to promote linkages, showcase opportunities, and facilitate networking.

Another notable feature of the Startup policies across the states is how different states have defined startups differently. While the Center necessitates startups not to be older than five years, states like Kerala and West Bengal consider only up to three-year-old corporations as startups, with Karnataka deeming up to four-year-old businesses as such. With that, the policy plans for most of the state startups fall primarily into three buckets:

# developing the required physical infrastructure
# promoting research and innovation at school and college levels, and
# providing fiscal incentives

To develop the physical infrastructure, states are focusing on strengthening the existing incubators as well as establishing new ones, mostly in collaboration with higher education and R&D institutes. Andhra Pradesh, Gujarat, Kerala and Telangana aim to develop one million square feet of incubation space in the next five years. Different states have different targets for the number of incubators they wish to establish, which ranges from 50 in Gujarat and Rajasthan to 100 in Andhra.

Startup festivals, international exchange programs, and innovation awards seem to be the most widely adopted strategy to promote innovation at school and college levels. Andhra Pradesh, Kerala, Odisha and Telangana also talk about updating school and university syllabus to be in tune with the emerging technologies.

Concepts like “entrepreneur in residence” to provision a break of one year to the outstanding students willing to pursue entrepreneurship full time, and “Massive Open Online Courses (MOOCs)” to promote entrepreneurship education, are also touted in a lot of state startup plans.

On the funding part, almost all the states are providing reimbursement of VAT/CST and patent filing costs. Andhra, Odisha and Uttar Pradesh also plan to create an initial innovation fund of Rs. 100 crore for investing in startups. Karnataka, Kerala and Telangana aim to facilitate venture capital funding of minimum Rs. 2000 crore, in the next five years. Some states are also seen to be providing sustenance allowance and marketing funds to startups for introducing their products in the market.

It’s encouraging to see the state governments marching along with the central government to fulfil India’s startup dream. Ministry of Commerce and Industries is actively working towards integrating the state drafted policies with the central plans. A recently organized “Startup India States Conference” by Department of Industrial Policy and Promotion (DIPP), provided a platform to the States to discuss their good practices and the progress made on Startup India initiative. DIPP says that it wants to integrate the States’ efforts with the Center in a hub and spoke model.

With so much startup action occupying the center-stage in States, India is buzzing with entrepreneurial activity like never before. Needless to say that with more states joining the bandwagon, a second industrial revolution in the country is not far away.

About the Authors

Kushal Sagar Prakash and Mansi Arora – They are Analysts at the Wadhwani Foundation’s ‘Policy Research Network’and are currently studying SMEs, startups and jobs in emerging economies. Kushal has experience of driving development in more than 25 countries as an Executive Director of an international youth organisation and has been a Young India Fellow. Mansi has done Masters in Economics from JNU.
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