A Decade of Startup India

UPSC Syllabus Topic: GS Paper 3 –Economy-Indian Economy and issues relating to planning, mobilisation of resources, growth, development and employment.

Introduction

National Startup Day on 16 January 2026 marks ten years of the Startup India Initiative. What began in 2016 as a policy push has grown into one of the world’s largest startup ecosystems. The initiative has reshaped entrepreneurship, strengthened innovation capacity, and supported inclusive development. It aligns closely with the vision of Viksit Bharat 2047 by combining economic modernisation with regional and social uplift.

Evolution of India’s Startup Ecosystem (2016–2025)

1. Rapid Expansion of Startups: India has more than 2 lakh startups as of December 2025, placing it among the largest startup ecosystems in the world. This growth has spread across technology, services, and manufacturing sectors, making startups a key driver of economic transformation.
2. Rise of Startup Hubs: Cities such as Bengaluru, Hyderabad, Mumbai, and Delhi-NCR have emerged as major innovation centres. These hubs attract investment, skilled talent, incubators, and global partnerships, strengthening India’s startup competitiveness.
3. Growth Beyond Metro Cities: Nearly 50% of startups now originate from Tier II and Tier III cities, reflecting the widening reach of entrepreneurship. This shift highlights the role of Startup India in decentralising innovation and promoting balanced regional development.
4. Bridging the Rural–Urban Divide: Startups are addressing development gaps through solutions in agri-tech, telemedicine, microfinance, tourism, and ed-tech. These innovations support rural livelihoods, improve service delivery, and connect local economies with national markets.
5. Women-Led Entrepreneurship: More than 45% of recognised startups have at least one woman Director or Partner as of December 2025. This trend reflects growing gender inclusion and the emergence of entrepreneurship as a tool for social equity.
6. Economic and Developmental Significance: Startups play a critical role in driving innovation, improving productivity, and accelerating technology adoption across sectors. They generate large-scale employment, strengthen digital and financial inclusion, and promote grassroots entrepreneurship, making Startup India a central pillar of India’s long-term growth strategy.

Key Flagship Schemes Under Startup India

1. Fund of Funds for Startups (FFS): The Fund of Funds for Startups is managed by SIDBI with a total corpus of ₹10,000 crore. It provides capital support to SEBI-registered Alternative Investment Funds. More than 140 AIFs have together invested over ₹25,500 crore in 1,370+ startups.
2. Credit Guarantee Scheme for Startups (CGSS): This scheme facilitates collateral-free loans for startups through eligible financial institutions. Under CGSS, more than 330 loans amounting to over ₹800 crore have been guaranteed.
3. Startup India Seed Fund Scheme (SISFS): With a corpus of ₹945 crore, SISFS supports early-stage startups. It provides financial assistance for proof of concept, product development, prototyping, trials, market entry, and commercialisation through 215+ approved incubators.
4. Startup India Hub: The Startup India Hub functions as a national digital platform for the startup ecosystem. It enables interaction among startups, investors, mentors, incubators, corporates, academic institutions, and government bodies.
5. States’ Startup Ranking Framework (SRF): The SRF evaluates states and Union Territories based on startup-friendly policies and their implementation. The framework promotes competitive federalism and encourages continuous improvement in startup governance.
6. National Mentorship Portal (MAARG): MAARG provides startups with access to experienced mentors across sectors. It supports strategic guidance, resilience building, and long-term growth.
7. Startup India Investor Connect Portal: Developed in collaboration with SIDBI, this digital portal links startups with venture capital funds and investors. It allows entrepreneurs to reach multiple investors through a single application and pitch process.

Complementary Schemes Strengthening the Ecosystem

1. Atal Innovation Mission (AIM): Launched in 2016 with an outlay of ₹2,750 crore till March 2028, AIM promotes innovation across schools, universities, startups, and industry. AIM 2.0 focuses on scaling proven models and strengthening Atal Tinkering Labs.
2. GENESIS (Gen-Next Support for Innovative Startups) Scheme: Launched in 2022 by MeitY, GENESIS supports 1,600 technology startups in Tier II and Tier III cities with an outlay of ₹490 crore.
3. MeitY Startup Hub (MSH): Established in 2016, the MeitY Startup Hub acts as a central platform for technology-led entrepreneurship. As of December 2025, it supports over 6,148 startups, 517 incubators, and 329 laboratories across the country.
4. Technology Incubation and Development of Entrepreneurs (TIDE) 2.0 Scheme: Introduced in 2019, it supports Information and Communication Technology (ICT) startups in areas such as AI, IoT, blockchain, robotics, healthcare, agriculture, and clean tech through 51 incubators.
5. National Initiative for Developing and Harnessing Innovations (NIDHI) Programme: Launched by DST in 2016, NIDHI has supported 12,000+ startups, created 1,30,000+ jobs, backed 175+ incubators, and generated 1,100+ intellectual property assets.
6. Startup Village Entrepreneurship Programme (SVEP): It is implemented under the Deendayal Antyodaya Yojana–National Rural Livelihoods Mission (DAY–NRLM). It promotes rural entrepreneurship by enabling households to establish and expand local enterprises.
7. ASPIRE Scheme: ASPIRE stands for A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship. Launched in 2015 by the Ministry of Micro, Small and Medium Enterprises (MSME), it supports innovation and enterprise creation in rural and underserved areas through Livelihood Business Incubators.
8. Prime Minister’s Employment Generation Programme (PMEGP): The Prime Minister’s Employment Generation Programme (PMEGP) is implemented by the Khadi and Village Industries Commission (KVIC). It promotes self-employment and grassroots enterprise creation by ensuring financial support and effective last-mile delivery.

Challenges Faced by Startup India

1. Limited Access to Funding: Early-stage funding remains uneven and metro-centric. There is a significant reliance on foreign venture capital, and deep tech startups, which require long-term investment, struggle with the typical short fund lifecycles of venture capital (VCs).
2. Regulatory & Compliance Burdens: Complex tax structures (like frequent changes in GST regulations), bureaucratic delays, and an overall high compliance burden raise the cost and difficulty of doing business. Inconsistent policy enforcement also creates friction.
3. High Failure and Closure Rates: By October 2025, 6,385 DPIIT-recognised startups had closed due to funding gaps, cash flow issues, and scaling problems.
4. Market Saturation and Intense Competition: Overcrowding in sectors like fintech, e-commerce, and food delivery leads to high cash burn and low margins.
5. Talent Shortage and Retention Issues: Startups face difficulty attracting skilled workers in AI, data science, cybersecurity, and semiconductor design.
6. Weak Deep-Tech Ecosystem: The ecosystem remains dominated by service-based models, with limited progress in advanced manufacturing and core technology.
7. Infrastructure and Geographic Disparity: Startups in Tier II and III cities often face greater challenges due to inadequate infrastructure, such as unreliable internet and power, and a lack of local support systems like incubators and mentors.
8. Corporate Governance Issues: Incidents of corporate mismanagement in high-profile startups have raised concerns among investors, leading to increased scrutiny and potentially tighter regulations, which can deter investment and innovation.
9. Cultural and Societal Barriers: A traditional cultural preference for job security can make entrepreneurship less appealing due to the inherent risk aversion and potential social stigma associated with business failure.

Way Forward

1. Strengthen Early-Stage Domestic Funding:,India needs deeper domestic capital pools to reduce dependence on foreign venture capital and ensure stable long-term funding for startups.
2. Promote Long-Gestation Deep-Tech Startups: Dedicated patient capital, research infrastructure, and policy support are required for sectors such as artificial intelligence, robotics, and advanced manufacturing.
3. Simplify Regulatory and Compliance Frameworks: Reducing licences, harmonising state-level rules, and easing tax compliance can lower operational burden for early-stage startups.
4. Expand Startup Infrastructure Beyond Metros: Improved internet connectivity, incubation centres, testing labs, and logistics facilities are essential in Tier II and Tier III cities.
5. Strengthen Mentor and Industry Linkages: Deeper engagement between startups, corporates, academia, and global firms can support technology transfer and market access.
6. Improve Governance and Transparency Standards: Strong corporate governance norms are needed to build investor confidence and ensure sustainable ecosystem growth.
7. Encourage Risk-Taking Culture and Entrepreneurial Mindset: Awareness programmes and academic integration can reduce fear of failure and promote entrepreneurship as a viable career path.

Conclusion

After a decade, Startup India represents a structural shift in India’s economic model. With strong institutional support, expanding regional participation, and growing innovation capacity, startups have become central to employment generation and inclusive growth. Addressing funding, infrastructure, and governance gaps will be essential to sustain momentum and realise the vision of Viksit Bharat 2047.

Question for practice

Discuss the impact of the Startup India Initiative on India’s startup ecosystem over the past decade.

Source: PIB