India is among the world’s largest entrepreneurial ecosystems worldwide and continues to grow rapidly. The Indian Government has taken multiple measures and initiatives, including the “Make In India” and “Digital India” campaigns that translated into huge business opportunities for entrepreneurs (1, 2).
Our honorable prime minister has unveiled many other initiatives since 2014 to address issues with entrepreneurship in India. Yet, there is still a need for much consideration from a regulatory and policy perspective for a successful startup revolution.
The overall vantage point about entrepreneurship is also changing in the country, especially with the rise of shows like Shark Tank India. People no longer only focus on working hard and securing a decent job. Today, there is much more enthusiasm to start their own business, even if it means taking a risk and putting in endless hours of hard work to test their business ideas.
Dawn of A New Era in the Indian Entrepreneurship Space
As we discussed in our previous story, Indian-origin CEOs are Leading Some of the World’s Biggest Tech Companies; it is perceptible that Indians are quite enterprising. The top leaders of multiple MNCs worldwide are of Indian origins. Hence, we believe that it has some effect on the Indian market (3).
Today, our young generations want to do something that’s beyond a typical 9-5 jobs within tiny cubicles and build their own empire. In addition, the education system that was previously used to prepare us for jobs until recently has also started to encourage studies to look for innovative ideas and start a business around them (4, 5).
“When the coronavirus pandemic hit, we witnessed an unprecedented number of new businesses as millions of individuals found new opportunities brought by the ‘new normal,’ or as they reevaluated their priorities. Now, after two years, we are continuing to see the trend, and 2022 promises to deliver even more small business growth,” stated Alex Chriss, Executive Vice President of Intuit’s Small Business and Self-Employed Group (6).
We can also add easy access to information thanks to increased internet and smartphone penetration, especially in rural India, among the growth drivers. Overall, the combination of these elements has led to a significant number of people being prepared to take a chance and establish their own business.
It is also interesting that nationwide lockdowns amid the pandemic also helped people who previously had a business idea but never had enough time to work on it.
For instance, Koppula Sri Durga, founder of Folktale22, quit her job to work on her business idea in 2020 (7). “After I completed my degree, I was placed in a reputed MNC. However, because of the pandemic, my joining was delayed. During that time, my friend and I came up with an idea and thought to give it a go. Since I had a good academic report, I was confident in my ability to land another job if the idea didn’t work.”
We believe that many young individuals have started to think these days, especially after the success of the Startup India campaign that has helped so many business ideas grow and mature into successful ventures.
Another factor we believe has contributed to more young people leaning towards entrepreneurship is the unsatisfactory job profiles of the majority of companies offered (8), also leading to a rise in demand for HR Tech.
Overall, there has been an unprecedented increase in the number of people looking to turn their ideas into startups. In addition, until five years ago, only people starting a tech company were considered entrepreneurs in India. However, the present scenario is downright different. And in time, we will see more entrepreneurs in India.
So, What Can Our Government Do?
In this robust, innovative, and fast-paced business ecosystem, India needs to enhance its digital infrastructure to strengthen itself. Moreover, our entrepreneurs need to focus on finding innovative solutions that are scalable and adaptable worldwide instead of focusing solely on local markets.
There are various ways the Indian Government can encourage and prompt successful startups in the country.
One of the most solid strategies is creating integrated programs to reward and recognize outstanding and innovative startups that contribute to our economic dynamism. In other words, our Government needs to focus on helping startups that are injecting competition by creating innovative products and solutions, scalable organizations with high potential for employment generation and wealth creation while also demonstrating a huge social impact (9, 10).
The Current Scenario of the Indian Startup Ecosystem
The Government of India keeps evolving its definition of an “Eligible Startup,” a company entitled to have the privileges of tax and regulatory incentives offered by the Government.
At present, an Indian company is considered a “startup” if it fulfills the following conditions:
- Up to ten years from the date of registration or incorporation as a private limited company (as defined in the Companies Act 2013), partnership company (registered under section 59 of the Partnership Act, 1932), or limited liability partnership (under the Limited Liability Partnership Act, 2008)
- The company’s turnover for any financial years since its registration or incorporation has not exceeded 100 crore INR.
- The business is creating, innovating, or improving processes, products, or services, and it has a scalable business model with a strong potential for wealth growth and job creation.
Also, it is worth noting that a company created after splitting up or reconstructing an existing business is not considered a “Startup” in India.
As per recent reforms made by the Government of India under the Startup India initiative, any entity eligible to be recognized as a startup can recognize itself by applying to DPIIT, Department for Promotion of Industry and Internal Trade to access a host of tax benefits, IPR fast-tracking, easier compliances, and more (11).
The Ease of Doing Business Project by the World Bank (12) is the primary driver of regulatory reforms happening across the entrepreneurial ecosystem in India. It ranks 190 economies based on ten parameters from the cradle to the grave of a business cycle on a set methodology indicating how easy it is to do business in a country.
These parameters include:
- Starting a business
- Registering property
- Dealing with construction permits
- Getting electricity
- Paying taxes
- Getting credit
- Trading across borders
- Enforcing contracts
- Protecting minority investors
- Resolving insolvency
And if the Indian Government wants to translate its vision into reality, it needs to focus on next-generation reforms to reduce the compliance burden for entrepreneurs. It also needs to ensure the availability of sufficient domestic and foreign funds for them.
Many compliance requirements are unnecessary and irrelevant with technological development and changing times. In line with the same, DPIIT also needs to implement a time-bound systematic exercise across states and ministries.
DPIIT needs to direct this exercise towards simplifying and rationalizing compliance and removing redundant laws to ensure breathing space for startups to enter the market and compete with top competitors.
The endeavor aims to make the entrepreneur’s interface ecosystem a pleasant experience. With administrative and political will, an endeavor can move closer to best international practices. In short, the Government of India needs to focus on taking dedicated steps towards translating its objectives and goals for ease of doing business for founders.
Challenges in the Indian Startup Ecosystem
For the Indian Government to encourage people to become entrepreneurs and stimulate their operations, it needs to ensure further relaxations in compliance with the Companies Act 2013.
It can focus on decreasing fees and penalties for non-compliance to avoid unnecessary hassles and deterrents for young startups. Moreover, the Government should also focus on equipping entrepreneurs with lenient timelines to focus on their core projects rather than being burdened by statutory compliance.
Besides, starting a company today in India needs several permissions from government agencies. While there is a perceptible change, it is still a huge hassle to register a company and gain recognition as a Startup in India (13, 14).
There are strict labor laws, dispute resolution, and intellectual property rights regulations. The Government can implicate easy and fewer regulations to ensure ease of doing business in India.
There is also a need for implementing specific and strict timelines in case of fast-track examination of a patent application.
While the foreign investment coming in India has gone up at a significant rate in recent years, further liberalization is needed under FDI norms. There should also be proper accessibility and awareness of government policies and initiatives to ensure that startups gain all the benefits.
Overall, the Indian entrepreneurial ecosystem is still in a progression model. And we need the Indian Government to implement further moderation, easier fund accessibility, ease of compliance, recognition, and rewarding programs to build a superior startup ecosystem to help India reach its long-term goals.
If India manages to offer financial incentives and world-class infrastructure facilities in the upcoming years, not only would India retain successful startups within the country, it would also manage to lure the best talent worldwide to start a business in India (15).
Tips Start a New Business in 2022
While there has been great uncertainty amid the pandemic, several businesses fully adapted themselves. And if you plan well, you can also harness your passion for launching a small business and achieve success in this new year.
Find A Niche
We have time and time told our entrepreneur friends to find a niche, filling gaps in their market to prosper. You can create value in niche markets that your larger counterparts don’t offer as a new small business.
Establish Your Online Presence
It is impossible to start a business, however small, without establishing an online presence these days. You can also find and use the right digital tools to thrive your business online during these turbulent times.
You can also consider taking advantage of social media platforms and offering personalized content. And there is always SEO and email marketing (Suggested Reading: Best Content Marketing Tools For Your Startup (2021)).
Leverage the Power of Your Network
While traditional networks happen via in-person events or meetings, online networking has also become more accessible with social media platforms like LinkedIn, Reddit, and Clubhouse.
You can find local networking groups or events near you to build professional relationships. You can also consider joining a Slack community since it is one of the most effective methods to connect with professionals in your industry and share new ideas.
Building an effective entrepreneurship development program is not an easy task, and however, it is not an impossible one either. The only challenge is determining which ones are worth it and making them stick.
The jump from working to owning a business will dramatically affect the overall Indian economy. After all, nearly half of the burgeoning small businesses will apply for a small business loan.
Fintechs will play a big role since they have greatly expanded the funding available for small businesses (Suggested Reading: Fintech is On Fire; Here are Eight Trends to Look Out For in 2022). For entrepreneurs, fintechs also provide a simpler and faster way to access capital.
Nonetheless, we may see an entrepreneurship revolution happening in India in 2022. Stay tuned for more updates!