NLI Research Studies Series No 141

Promoting Youth Employment & Entrepreneurship:
A Study with Special Focus on ‘Startups’
NLI Research Studies Series No. 141/2020
Dhanya M.B
V.V. Giri National Labour Institute

(Ministry of Labour & Employment, Govt. of India)
Sector -24, Noida - 201301
Associate Fellow, V. V Giri National Labour Institute.
ISBN: 978-93-82902-71-3
Copyright © V.V. Giri National Labour Institute, Noida
No. of Copies : 300
Year of Publication : 2020
This document can be downloaded from the Institute’s website at www.vvgnli.gov.in
Opinions expressed in the study are solely of the author and do not necessarily reflect the views of
the Institute.
Printed and Published by V.V. Giri National Labour Institute, Sector–24, Noida–201301, U.P.
Printed at: Chandu Press, D-97, Shakarpur, Delhi-110092
Foreword
This exploratory research study is envisaged investigation on startups
samples to explore the objective of employment generation and examines the
role of educational institutions in creating an ecosystem for the young
population to facilitate entrepreneurship. This study is significant in the
context of growing educated unemployment and increasing youth labour
force. Considering the demographic dividend in the country, the importance
of promoting innovation and entrepreneurship cannot be ignored since it is
an effective alternative opportunity to create employment. In addition to that
the sustainable development goal 8.3 mentions the policy interventions to
promote entrepreneurship/innovation to generate employment and also
clearly indicates the significance of social enterprises to facilitate a world with
fewer inequalities.
Based on the field survey and case studies along with secondary literature, the
study mainly explores the effectiveness of the startup initiative of the
government of India and also discuss how the current policy surrounding the
country's context to the growth of youth employment generation
opportunities. The study begins with contextualizing the situation and
explaining the significance of youth involvement in startups and attempts a
detailed analysis of the theoretical perspectives and emergence of startups in
India. Then, procedures and regulatory process, schemes and programmes,
exploration of various issues and challenges of employment provision, and
role of academia to create an ecosystem highlighted in a detailed manner.
While the government has been actively trying to facilitate ease of doing
business and formulating well informed policies focusing on implementation
strategies, however, the urgency of these well-designed policies to reach out
of the young population need to be given attention on a priority basis and at a
rapid pace.
This research report is an insightful resource to youth and labour market
studies since there are very few literature specifically on young people and
startups and it would be of immense interest not only to the policymakers but
also academicians and others working in this area and enables us to
comprehend the entrepreneurship/innovation trends and challenges among
Indian youth.
(Dr. H Srinivas)
Director General
Acknowledgement
I am grateful to Shri (Dr.) H Srinivas, Director General, VVGNLI, NOIDA for
his encouragement and support to complete this study. I extend my thanks to
the experts and policymakers from the Ministry of Labour & Employment
(MoLE) and also from different ministries involved in the meeting chaired by
the Secretary, MoLE during the presentation of my research study titled
“Quality Employment Generation in Micro and Small Enterprises (MSEs) in India:
Strategies and Way forward’ at MoLE on 12th September 2018. The inputs
i
received from this discussion on MSEs prepared me to contemplate on
employment and related issues on startups.
I would also like to thank the experts and participants who were attended in
the dissemination Workshop on ‘Startups and Young Entrepreneurs:
Opportunities and Challenges’ on 28th February 2020 at VVGNLI. My sincere
thanks to Dr. S K Sasikumar, Senior Fellow, VVGNLI; Ms. A Srija, Economic
Adviser, Ministry of Finance, GoI; Ms. Radha R Ashrit, Statistical Adviser,
Ministry of Science & Technology, GoI; Ms. Shivangi Jain, Invest India; Prof.
M S Farooqui, Ambedkar University, New Delhi; Shri V.K Mishra, PhD
Chamber of Commerce and Industry; Dr. Malika Basu, Proprietor-
Development initiative for change; for their intellectual inputs provided
during discussions that have helped me in enriching this study.
I am grateful for the tremendous support extended by all the VVGNLI Faculty
colleagues, officers, staffs and all my project staffs associated with this project
duration especially Ms. Shraddha Rishi, Mr. Amrinder Singh, Mr. Sango
Bidani, Mr. Deepak George to mention a few names. Sincere thanks to Shri
Harsh Singh Rawat, Administrative Officer and Shri S.K Verma, Asst. Library
Information Officer; Mr. Rajesh Karn and also the entire publication section
for their support.
Moreover, I remain indebted to the interviewee who took time from their
work & shared their information and experiences to the entire project staff.
Finally, I would like to thank my friends and family especially Dr. P
Sivakumar, and my son Aarjav Sivakumar for all their support and
encouragement throughout this research work.
(Dhanya M.B)
Contents
Chapters Page
No.
Youth Employment and Entrepreneurship: Situational Analysis.
 Background: WFPR, unemployment rate, general education, formal
vocational and technical education of Youth
 Entrepreneurship or Self Employment - An alternative strategy?
I 1-7
 Entrepreneurship through startup ventures
 Role of Academic Institutions in the growth of Startups
 Main Objectives, Method, Data and Framework
 Limitations of the Study
Theoretical Perspectives on entrepreneurship/startups
 Theoretical discourse
 Emergence of startups in India
II 8-11
 Funding Sources for Startups
 Constraints for Growth of Startups
 Factors Determining the Growth of Startups
ii
Procedure, Policies and Regulatory Process of Startups in India
 Definition, Procedure and Regulatory Process
 State Policies and Geographical spread on Startups
III  Financial Supporting and Incentives to the Startups 12-17
 Facilitation and Promotion of Startups through Partnership between
Research and Industry
 Other Schemes and Programmes supporting the Startups
Role of Academia in creating a New Eco System to flourish Entrepreneurship &
Innovation: Case studies
 Supply side aspect of role of universities in creating a new eco system to
IV flourish 18-22
 Startups associated with incubation centres
 Social entrepreneurship
 Building Innovation Centre at National Institutes
Startups and Youth Employment Provisions: Field Survey
Results  Small firms and job creation  Does Innovation
V matter? 23-27
 Demand side aspect of employment generation- Field survey results
 Few more case studies on Issues and challenges faced by startups
Government initiatives to restore labour/monetary market equilibrium-
implications on ‘startups’ in India
 Entrepreneurship formalization
VI  Single market-goods can move freely 28-30
 Labour law amendment, reforms and codification
 Overhaul of bankruptcy law
 Formalisation process through big push
Conclusions and Public Policy interventions to promote Startups
VII  Recommendations and interventions 31-34
 Conclusion
References & Appendix 35-38
List of Figures & Tables

Figure No. List of Figure Page No.
Figure 1.1 Work Force Participation Rate (WFPR) of Youth across Age groups 2
Figure 1.2 Unemployment rate among the youth 2
Figure 1.3 Unemployment Situation among Age Group 18-29 by General Education 3
Figure 1.4 Formal vocational/technical education across age groups 3
Figure 1.5 Vocational/technically training population who were out of the labour force 4
Figure 2.1 Emergence of Start-ups in India 9
Figure 3.1 Geographical spread of the start-up policies of different states 14
Figure 5.1 Gender Distribution of entrepreneur in the sample (Percent) 24
iii
Figure 5.2 The composition of skilled, semi-skilled and minimally skilled workers 24
employed
Figure 5.3 Comparative details of the number of employees at the establishment time and 25
at present
Figure 5.4 Details of university incubator startups and non-university startups 25
List of Tables
Table No. List of Tables Page No.
Table 3.1 Major policy initiatives of the states 13
Table 4.1 Role of selected universities/institutes in nurturing future entrepreneurs 19
Table 4.2 List of Startup Centres 22
Table 4.3 List of Technology Business Incubators 22
Table 5.1 Comparative details of the number of employees at the establishment time and 25
at present
Table 5.2 Disaggregation of sample startups and the employment generation 26
Table 7.1 Five major areas of direct policy intervention to promote Startups 31
Annexure 1 Growing NEET rate among youth in major countries (Per cent) 34
iv
CHAPTER 1
Youth Employment and Entrepreneurship: Situational Analysis

1.1 Background
Since 1995, global youth unemployment has been approximately three times that of adult
unemployment rates (ILO, 2015) and more proportion of young people are underemployed
or low paid if at work (OECD, 2019). In developing countries, youth are mostly affected by
working poverty due to the irregularity of work and lack of formal employment (ILO, 2015).
Nevertheless, in the Indian context there has been a rise in the high-skill segment over these
years, but simultaneously rise in low-skill wage work is a major concern as well (ILO, 2017).
Further, a large share of Indian youth finds themselves not in education, employment or
training (NEET). These are particularly worrisome because inactivity at an early stage in life
negatively impacts employability, future earnings and access to quality jobs (ILO, 2016).
More than 30 percent of Indian youth are not in education, employment or training, this
inactivity is three times more than China (11.22) and more than double the OECD average
(14.56) (See Appendix 1).
In India, employment generation is a major discussion and concern of public policy ever
since independence. There have been major transformations in the economy brought about
in the last three decades by globalisation process and rapid integration with the global
economy. Few studies shows that globalisation is creating employment opportunities
(Kaliappa & Kanhaiya, 2009). However, while considering the labourintensive growth path
in India, globalisation did not achieve much success in employment generation. Moreover,
the share of informal sector employment and the distribution of informal workers within the
formal sector have also increased substantially (Dhanya, 2013).Even though the informal
economy in India has been playing an important role in national income, the changing
market conditions lead to pressures for greater flexibility in the employment and utilisation
of labour. It leads to a reduction in employment security and an overall deterioration in the
quality of employment (Papola T S, 2005). There are various challenges for youth to enter
into the labour market in the era of subcontracting due to globalization. The number of
people engaged in informal employment has risen in the past and this also led to engage in
multiple jobs to meet their ends (Husain 2014). Youth are likely to be over represented in
precarious jobs, like temporary and informal jobs, which are normally short-duration jobs
with limited stability (GoI, 2012). Most of the studies suggest that people, who undertake
multiple jobs are younger, less educated, are faced with lower wage rates and live further
away from towns (Unni J, 1992 & Husain 2014). At present, multiple-job holding is also more
common in developing countries.
Many countries are looking into youth entrepreneurship as a means of reducing youth
unemployment (Eurofound, 2016), including India. Government of India has introduced
many employment generating schemes either promoting entrepreneurship or wage
employment, and also ‘Skill India’ scheme to train over 40 crore people by 2022. ‘Startup
India’, one of the important initiatives by the Government of India to promote startup
ventures to boost youth entrepreneurship, and encourage start-ups with job creation is
facilitating ease of doing business. As youth are the driving force behind most of the
innovations and creations, it can also be a huge talent base for startups.
In the changing world of work, innovative ideas mostly originate through emerging startups,
for example, Ola and Uber and their innovative model created many jobs in the Indian
labour market but, on the other side, this innovation leads to new forms of employment.
Some of the challenges they entail has therefore required policy action and also it plays an
important role in shaping the future of work. Nonstandard workers; mostly include self-
employed, temporary and part-time and platform workers; and at the global level, one in
seven workers is in self-employed and one in nine employees is on a temporary contract
(OECD, 2019). Hence, the standardization of self-employment/ entrepreneurship is one of
the most important strategies of the development organizations around the globe and in
2 Promoting Youth Employment & Entrepreneurship: A Study with Special Focus on ‘Startups’
India as well. Thus, considering the youth bulge and the unemployment/ underemployment
situation in India, it is significant to unfold the prospects and problems of youth employment
and entrepreneurship to explore the economic soar, provided invest in their education and
skill.
1. 2. Situational analysis
Figure 1.1: Work Force Participation Rate (WFPR) of Youth across Age groups
53.4
33.4
31.4
11.6
15-19 20-24 25-29 Total
Source: PLFS-2017-18,(in percent)

The unemployment rate among the youth is much young job aspirants. During the last two educated
higher over these years, but the following figure unemployment in the labour market, particularly
shows that recently there is a sudden increase in decades, the unemployment rate among young
rate. This increase is larger for young female women increased much higher rate than young
relative to young men. It points out the prevailing men (figure 1.2).
Figure 1.2: Unemployment rate among the youth
60 27.2
50
18.7
40
17.4 13.1
30 13.6
8.1 14.9
20
5 4.8 8.8
10 3.9 4.2
0
rural male rural female urban male urban female
2004-2005 2011-12 2017-18
Source: Various NSSO Rounds & PLFS 2017-18, usual status (ps+ss).
According to the National Youth Policy of India, youth is defined as persons aged 15-29 years
and it is accounted for 30 percent of the total population. Young people’s work participation
rate (WPR) represents a total of 31.4 percent and the highest (53.4 percent) WPR is witnessed
in the age group of 25-29 years. However, increase in enrollment of youth in higher studies
due to lack of job opportunities according to their aspirational level in the labour market is
Youth Employment and Entrepreneurship: Situational Analysis 3
cited as one of the major reason for the declining labour force participation among the youth
(PLFS, 2017). Figure 1.1 presents the workforce participation rate of youth across age groups.
Simultaneously, the distribution of persons by educational classification according to
unemployment rate shows that graduates and above are much high. In the case of less-
educated persons, the unemployment rate was estimated at less than seven per cent.
According to the PLFS Report unemployment rate ranged from 9.7 to 15.2 per cent between
2004-05 and 2011-12 which rose to 17.3 per cent in 2017-18 for educated rural females. The
same for urban areas ranged between 10.3 per cent (2004-05) to 15.6 per cent (2011-12) which
rose to 19.8 per cent in 2017-18.
Figure 1.3: Unemployment Situation among Age Group 18-29 by General Education
45.0
37.3 35.9
40.0
35.0
30.0
25.0 21.1
17.8
20.0 14.4
13.7
15.0 9.3
10.0 7.1
5.3
5.0
0.0
Illiterate Below Primary Middle Secondary Higher Diploma/Graduate Total
Primary SecondaryCertificate& Above
Course
Among the 54.1 per cent of youth receive force2 at all and also a substantial share of
vocational/technical training, 42 percent of the women were out of the labour force in all age
youth (28 percent of the young men and 60 percent groups (see figure 1.5 below).
of the young female) were not part of the labour
1
hereditary, self-learning, and on the job training 2
they were not working or seeking employment opportunities.
Source: PLFS 2017-18
Among the total population in India, other than a significant achievement but at the same time,
1.8 formal and 5.6 informal1 training received, the alarge share of them was either unemployed or
rest of the population didn’t receive any out of the labour force (see figure 1.5). Percentage
vocational/ technical training so far (PLFS, 2017- of the population that received formal vocational/
18). However, more than half of the 15-29 years technical education across age groups is shown in
youth received formal vocational/technical figure1.4 below:
training is
Figure 1.4: Formal vocational/technical education across age groups
60 54.1
50
40
30 26.6
20 13.4
10 5.7
0
15 to 29 30 to39 40 to49 50 to 59
Source: PLFS 2017-18, (Population %)
Figure 1.5: Vocational/technically training population who were out of the labour force
60
60 51.6
41.9 43.3 45.3
33.1 31.1
40 28.5
20.2 18.4 16.5
13.7
20 5.3
1.4 3.1
0
15 to 29 30 to 39 40 to 49 50 to 59 Total
Male Female Person

Source: PLFS 2017-18, (Percent)
For a variety of reasons, especially considering the large share of trained youth out of the
labour force and unemployment situation in India; it is very hard to make the youth to face
the challenges and provide the facility to enter into the job market. Finally, the challenge for
legal policy is to strike the right balance between economic growth and employment creation
considering the context of demographic dividend.
1.3 Entrepreneurship or Self Employment - An alternative strategy?
Entrepreneurship has the potential to increase economic development (Monsen;
Mahagaonkar; Dienes, 2012). Many researchers believe that entrepreneurship can create
wealth, employment and contributes to government taxes and hence it can lead to
development (GEM 2014). The environment of a country’s economy and its institutions has
an impact on entrepreneurial activity. It affects the “quality of governance, access to capital
and the perceptions of entrepreneurs” (Acs, Desai, Hessels, 2008). Discussing the field of
development economics and entrepreneurship, Naudé states that, though the absence of
entrepreneurship may not restrict development but its presence can be vital for “economic
development because many of the most binding constraints are channeled through
entrepreneurship” (Naudé, 2010) and hence the governments across the world are promoting
entrepreneurial activity (OECD, 2013).
The relationship between self-employment and entrepreneurship is not that straight forward.
Monsen, Mahagaonkar and Dienes (2012) have found that an increase in self-employment
rate reduces transitioning and nascent entrepreneurship rates. High self-employment rate is
indicative of competition and hence plays a role in reducing entrepreneurship. They also
found that in Indian states that have a higher State Gross Domestic Product (SGDP),
individuals are more reluctant to switch to self-employment but they did not find a
significant decrease for nascent entrepreneurship (Monsen et al, 2012). A similar trend was
found for unemployment rate in relation to transitioning to self-employment and nascent
entrepreneurship. It is noted here that self-employment and entrepreneurship are distinct
concepts. Though both are entrepreneurs, persons who are selfemployed do not employ
others under them where as entrepreneurs employ other workers under them. In this way, it
can be said that “those who are self-employed with employees are more entrepreneurial –
they assume the additional risk of employing others –and therefore this category could be
regarded as a more useful measure indicating the potential of entrepreneurial activity
(Eurofound, 2016).” Hence, an entrepreneur without any workers is self-employed persons
and entrepreneurs who employ paid workers are proper entrepreneurs. At the global and
national policy agenda, promotion of youth entrepreneurship has gained significance as a
way to encourage employment and earning opportunities (OECD, 2017). Entrepreneurship
cannot be promoted in isolation and government support is essential for their germination
and growth (Avasthi 2011; Dhanya 2018).
1.4 Entrepreneurship through startup ventures
Although the Startup India scheme has been launched recently, the concept of startup is not
new to India. Various studies have been undertaken to study the emergence, survival and
growth of startups in India. Dinesh Avasthi (Avasthi, 2011) in his paper, “Approaches to
Entrepreneurship Development: An Indian Experience”, documented various governmental
efforts taken from time to time to encourage entrepreneurship in India like concessional
finance, exclusivity of 675 products for MSME sector, infrastructure facilities through Export
Processing Zones (EPZ) and industrial parks, marketing support through National Small
Industries Corporation, Performance and Credit Rating Scheme and credit support through
MUDRA bank .
The new policy directions on entrepreneurship through start-ups by the government points
out the fact that job creation has been given prime thrust and start-ups can be a boosting
force in this direction. This is evident in the fact that the incentives affecting start-ups in the
Union Budget from 2017 include the following (Start-up India 2017): 1) Proposal to reduce
the Income Tax rate for companies with an annual turnover of up to INR 50 crore to 25%.
This would provide Micro Small and Medium Enterprises (MSME) a reduction of 5% from
the current applicable rate of 30%. 2) The Government has announced that a Start-up would
be able to avail income tax exemption for 3 consecutive assessment years out of a block of 7
years. Many more initiatives have been done in consecutive years for startups. Economic
growth and employment are achieved through promoting entrepreneurship and
entrepreneurs are encouraged to innovate across industries which boost livelihood options
available in the area.
1.5 Role of Academic Institutions in the growth of Startups:- Entrepreneurship Learning in
the academic institutions play an important role not only the growth of startups but for the
economy and society as a whole (Hahn et.al. , 2017). Entrepreneurship skills, attitude and
traits can be developed through pedagogical activities, processes and courses among
students (Bae et.al. 2014, Fayolle and Lassas, 2006). The universities not only encourage
students to take new ventures but also promote entrepreneurial thinking so that ideas can be
converted into actions (Leitch, Hazlett and Pittaway, 2012; Mustar, 2009). Universities are
provider of technological knowledge critical for innovation and economic growth (Mian
2011; Markman et al. 2005) ranging from simple skills like math, budgeting, panning
marketing and saving to providing important lessons about value of failure, ethical
decisions, negotiating and networking (Abel, 2016).
The importance of the role played by universities can be seen in a comparative perspective of
the research universities and teaching led universities (Abreu et.al.). Research intensive
universities are known for the transfer and commercialisation of technical knowledge while
the teaching led universities are less intensive on this part (Bonaccorsi et al. 2014). The
research oriented universities act as repository of technological knowledge and act as a link
between industrialists and the research communities through facilitation of patent
procedure, licensing and knowledge intensive spinouts. The teaching led universities on the
other hand can play a leadership role in promoting technological clusters through regional
capacity building and networking. The research and education related to entrepreneurship
also helpful in creating a knowledge base for generation of opportunities for new ventures
(Shane, 2000). The universities play an important role opportunity generation, opportunity
discovery, opportunity occurrence and opportunity search by providing prior knowledge
base (Alsos, 2004).
The brief review of literature above, unfolds the various aspects and issues being researched
and carefully analyzed. But in general, it could be understood that in most of the cases youth
are being considered as a tool for facilitating growth especially in the context of the growing
young population in India as the National Youth Policy 2014 recognizes they can be used as a
means of development. Hence, to tackle demographic dividend it would also be important to
examine the current status of entrepreneurship among youth to analyse the intervention
strategies to address youth employment. In the specific context of educated unemployment
and increasing labour force and low level of work participation in India, an enquiry into the
recent startups initiatives with special focus on youth entrepreneurship seems to be pertinent
at this juncture.
1.6 Main Objectives
In the subject matter, this study widely examine how the government policies are geared
towards creating an environment in which startups flourish and contribute to the growth of
youth employment generation opportunities and also analyzing the role of educational
institutions to create a startup ecosystem. Concurrently, field surveys and case studies were
conducted to examine the provision of employment generation by startups initiatives. Hence,
this study generally aims at the effectiveness of the startups initiatives on achieving the
employment creation objectives; it is also directly focused on the supply side and demand
side aspects of the schemes via educational institutions. The supply side aspect of creating an
ecosystem for the young population to facilitate entrepreneurship and the demand side
aspect of employment generation is the major discussion of this research. This demand and
supply side angle together discuss the general effectiveness of the programme.
Specific Objectives:
1) To explore how startups promote employment among youth and understand how the
‘startups’ make changes over youth in India
• Study the procedure, regulatory process, and the
challenges of startups in India.
• Are the startups a method for formalisation of
entrepreneurship for youth and how youth’s economic and social life changes with
startups.
2) Examine role of universities in creating a new ecosystem to flourish entrepreneurship &

innovation.
3) To discuss the current policies surrounding startups and how the government policies
are geared towards creating an environment in which startups flourish and contribute to
the growth of youth employment generation opportunities.
1.7 The method, Data and Framework
This study is based on primary and secondary data. This exploratory research work
envisaged investigation among 48 startups samples in the different part of Delhi-NCR region
for the collection of primary data. Separate case studies and Focus Group Discussions (FDGs)
has been done for analysing the situation more detailed manner. Startup samples include
only the registered firm or companies which are registered with startup under DIPP of
Ministry of Commerce and Industry, Govt. of India. The details of Delhi- NCR startups were
collected from the list of official startup India website of the government of India during the
field survey. For employment generation details, the study is based mostly on primary data
and the researcher had to depend on the information given by the respondents. While
collecting details from the official website, it was found that few startups were not functional
and also the researcher couldn’t trace them out with the given address.
Details of the selection of the sample is given below. The startup work under four stages
namely- Ideation, Validation, Early Traction and Scaling; and also the operation of Startup
comes under 49 Industries.
Stages of Operation Startup in Delhi-Noida:
Measures Ideatio Validatio Early Scalin Total
by n n Tractio g
n
Numbers 689 1797 1447 386 4319
In 15.95 41.61 33.50 8.94 100.0
Percentag 0
e
Ideation validation Early Scaling Total

Traction Startup
sample
Total 16 42 33 9 100
percent
Number …. 24 19 5 48
of
Samples
The field survey was conducted from October 2018 to January 2019. Information was
collected through the direct interview method. Moreover, among the 48 accessible startups
interviewed, the representation was selected from young entrepreneur located in NCR-Delhi,
wherein personal interviews of individual entrepreneurs were conducted, and also interview
organized with young people in a safe environment where they could express themselves
freely. Only successful startups were included in the sample, the researcher couldn’t include
the information on failed startups. Though the researcher tried to get information on failed
startups through various RTIs, no information has been received from any of the incubators.
Secondary data collected from several governmental sources such as periodicals, census,
NSSO etc.
1.8 Limitations of the Study

One of the main limitations of this research is it is confined only on 48 startups due to the
resource constraints. But still, this exploratory study comes out with many new areas of
research to explore in future. The researcher tried to avoid the high successful startups
among Delhi and Noida and confined other than high profile startups as per their availability
for interviewing employment generation and other details. Hence, the field survey has been
done among such startups which are not included in any high profile or big players such as
Zomato, Paytm, OYO, to mention a few. With all these limitations, the generalization of the
inferences of this study has to be done with maximum care. Therefore, the conclusion of this
study is indicative rather than imperative.
9
Chapter II
Theoretical Perspectives on Entrepreneurship/Startups

2.1 Theoretical discourse
There has been renewed interest among the academicians to study various
perspectives regarding Startups. The term ‘Entrepreneurship’ has a history that
dates back to 1732 when the Irish economist Richard Cantillon used the word in
reference to individuals with ‘a willingness to carry out forms of arbitrage
involving the financial risk’ of a new venture (Minniti and Levesque, 2008).
Defining entrepreneurship is one of the difficult tasks as there has been no
consensus over the basic attributes and functions of the entrepreneur among the
scholars, and thus any definition of entrepreneurship reflect individuals point
of view (Oviawe, 2010). There are two contrast views about the origin of
entrepreneurship, one holds entrepreneurship as an intentional and reasoned
activity, and the other assumes it a result of impulsive and heuristic activities.
The first view is supported by Entrepreneurship Intentional Model (EIM) given
by Krueger, who was one of the first to foresee the entrepreneurial events as a
result of interacting situational and social-cultural factors (Krueger, 1993;
Krueger and Brazeal, 1994; Krueger et al., 2000).
Recently, a context-based study has been added to the EIM, so that the
entrepreneurship model has become more precise and accurate. It proposes that
each entrepreneurial event occurs as a result of a dynamic process providing
situational momentum that has an impact upon individuals whose perceptions
and values are determined by their social and cultural inheritance and their
previous experience (Elfving et.al, 2011). Some others suggest that only regions
with specific cultural tendencies will engender a strong entrepreneurship
orientation (Lee and Peterson, 2000). Thus, one conclusion may be drawn that
public policies based on a better understanding of the region-based social
attitude of entrepreneurship are more likely to be successful (Loveridge et.al.,
2012).
The other view about entrepreneurship is proposed by Learner et.al. and
explains entrepreneurship is more related to unreasoned and impulsive actions
which can and do result in entrepreneurial outcomes (Learner et.al. 2018).
Lerner argues that entrepreneurship is birthed by wide assortment logic-
ranging from deductive, causation based reasoning, to heuristic and effectual
reasoning altogether to a shifting blend of all types (Lerner et.al. 2018).
Prominent entrepreneurs like David Neeleman, Richard Branson and Paul
Orfalea have admitted that their disinhibitory and highly impulsive activity has
been central to their entrepreneurial action and resultant success (Branson, 2002,
Hantula, 2006, Orfalea and Marsh 2005). Similar diversity of opinion is also
there about the basic decisive attributes to be an entrepreneur. On one hand,
American researchers have taken the individualistic approach while discussing
the basic attributes required for an entrepreneur. Thus, they give primacy to the
personality traits having a decisive impact over the entrepreneurship. On the
other hand, for the European researchers; the institutions are more important as
a driving force behind starting a new business (Brush et’al. 2008).
The basic decisive attributes to be an entrepreneur is one of the widely debated
questions for a long time and also another related equally debated question is
whether entrepreneurs are born or made. Some narrates entrepreneurs having
inborn qualities, for example, McClelland narrates psychological traits playing
determinant role in deferring entrepreneurs from non-entrepreneurs (Clausen,
2011), while for others, the social context is more important for
entrepreneurship, for example, Max Weber has maintained the primacy of
cultural context as a driving force behind entrepreneur (Schumade et.al, 2008).
The argument of cultural context led by Weber has been widely criticised
because it has only contextual importance and it applies to only Europe
(Favillonar and Peters, 1973). The other argument led by McClelland which
seems to be more universal than Max Weber, it does not apply to the
developing societies since there is no freedom to adopt occupation in these
societies and the psychological traits cannot always be converted into
entrepreneurship (Favillonar and Peters, 1973). Additionally, behavioural
research has also invalidated the trait approach, and it maintains that
entrepreneurship is a set of activities. Moreover, the Resource-Based Theory has
also challenged the trait approach, and it gives more importance to the
resources which the entrepreneurs have access to than the entrepreneur as a
determinant of entrepreneurship (Alvarez and Busenitz, 2001). 2.2 Emergence
of startups in India
The startups of the earliest form were the cottage industries known as livelihood
entrepreneurship, which shifted the traditional economic activity from
agriculture to industry and services. It is also known as village industries whose
primary function was to provide ensure non- farm needs of the rural
population. Hence, they promote non-farm employment jobs such as
shoemakers, handicrafts, carpenters, builders and masons, and other crop
processing activities. This was largely influenced by the prevailing market
conditions and it is sometimes referred to as the household industry were
recognized as ‘Own Account Enterprises’ (OAEs) when the Economic Census
was introduced in 1977. They had a huge contribution in creating employment
opportunities. The growth of non-agricultural OAEs between the periods of
1998-2005 had been much faster than the total employment generated by such
enterprises. Post-independence economic reforms policy led to the inception of
many new ventures led by private players growing steadily year on year basis
Figure: 2.1 Emergence of Start-ups in India

11
known as policy-induced entrepreneurship. In the modernization era, startup

evolved to become Small-Scale Industry. The second phase of the start-up
growth in India had significantly thus promoted the Small Scale
Industrialization. They did sufficient contribution towards employment
generation with better wages. The transformational revolution of the
Information and Communication Technology (ICT) and free movement of
labour and capital in the early 1990s’ economic liberalization caused the new era
of entrepreneurial activity globally. Several newer ecosystems came into being
which mentored the startup-like ICT industries, public sector institutions,
technology business incubators and accelerators. The new generation of
entrepreneurs is willing to take the risk and these startups are at the crucial
stage of evolution. The emergence of start-ups in India is shown in figure, 2.1
below.
(Source: M H Balasubrahmanya 2015)
2.3 Funding Sources for Startups

Finance is the most integral part of any entrepreneurial activity. Entrepreneurs
require capital to develop their idea into products or services, and the
investment methods in such companies are evolving and changing. The
following are some of the methods by which financiers will represent an
opportunity for all start-up companies, thus help them to learn and succeed in
the world of start-ups.
a) Seed accelerators:
These are fund providers who create an ecosystem where start-up tend to grow
and mature. Their objective is to gather as many new ventures which have
future prospective and could provide secure jobs so that they can invest in
them. In return, they expect good margins, or mass creation of job if it
initiated by the government. A seed accelerator consists of experts who
have experience in startups. They are industryfocused and sufficient
knowledge of technology and future trends. The difference in taking a loan
from bank and funds from seed accelerators is that these accelerators
convert their fund into majority stakes in the startups funded by them.
They are also known as crowd-funding accelerators. World’s most
recognized and successful accelerators are Y Combinator and Techstars.
They even engage develop industry-focused accelerator (Čalopa, Horvat, &
Lalić, 2014).
b) Startup Boot-camp:
Accelerators for entrepreneurship program where they provide a wide network
of the mentor who will help develop the startups. They are quite selective
while investing in companies with the implementation of their ideas
(Čalopa et al., 2014).
c) Fundable:
Fundable is an online platform source of financing where funds are gathered in
forms of charities into small companies. Various amounts are collected to
fund different startups and in case of failure the money is returned back to
those contributed. This type of financing of capital makes sure those
exchanges of money are made fairly (Čalopa et al., 2014).
d) Seedcamp:
As opposed to seed accelerators, these venture capital/ business angels
financers present the startups with important insights about the industry
before the launch of their product into the markets. This program may
provide expertise in the fields of innovation development, marketing,
workforce, arbitrators, media support and public relations (Čalopa et
al.,2014).
e) Venture Capital or Business Angel Agency:
The Private Equity players’ investment and the venture capital investment
provide the strategic development and growth guideline for any idea that
is put forth by the budding entrepreneurs. Sometimes due to lack of
entrepreneurship in a country, these agencies support the initiative of self-
employment among the youth. This helps in creating the right platform for
strengthening investment activities. It continues to collect and manage
venture for future endeavours (Čalopa et al., 2014).
f) Bank loans/ Unsecured loans:
This traditional source of financing enables the entrepreneur to develop his/her
idea initially to further product research and development. The banks have
special discounts on interest rates for entrepreneurs in case they find a
better prospect of the startup. Unlike seed accelerators, it is devoid of
mentoring, wide-networking and other fields entrepreneurial activity
expertise. The failure of startup is not subjective to the bank’s fund. Timely
instalments are needed to be paid back (Čalopa et al., 2014).
2.4 Constraints for Growth of Startups
There may be various reasons causing problems in the growth of the new
enterprises and sometimes become the cause of their shutdown. Failure in
marketing of the product or services, failure of the business model, inability to
get appropriate employees, failure in raising cash and failure in developing a
product according to the needs of the market, lack of touch with customers etc.
The problems faced by startups can be classified based on the stages of their
growth (Churchill and Lewis (1983). In the stage one of Existence Stage, the
organisation is very simple and the strategy is driven by survival and the
problems faced at this stage are obtaining customers, delivering the services or
the products contracted for. At the second stage, the firm becomes a workable
business entity however, the primary goal is still survival driven by the problem
of maintaining a balance between the revenue and expenses. At the third
“success” stage, the challenge to keep business profitable and stable. The next
stage is the “Takeoff” stage and the major problem faced is an adaptation of the
ecosystem as the rapidly rising firms are more capable to adapt themselves than
the firms at the fifth stage. The successful firms at stage IV are in most cases
unsuccessful at stage V mainly because they grow very rapidly or they run out
of cash (Churchill and Lewis, 1983).
The indulgence of the entrepreneurs into unproductive activities can lead to
restrained growth in new enterprises (Baumol, 1990). Baumol explains that
entrepreneurs play a variety of roles in society; they can be categorised into
productive like innovation and unproductive like rent-seeking or organized
crime. The intensity of these roles depends on the reward structure of the
economy and society, tweaking of which can be helpful for the restructuring the
activities of entrepreneurs for the sake of high growth of startups (Baumol,
1990). While Beck et.al. suggests that as far as the financial, legal and corruption
problems are concerned, they affect all types of business activities in a negative
manner but again finds that it is the smaller firms which are affected most (Beck
et.al. 2005). Further, he concludes that if the financial and institutional
development takes place, and consequently removing the financial, legal and
corruption constraints, it is the smaller firms which are benefitted most.
13
Finding Sources of Funds as a Constraint to Growth:- As far as the constraints in the

growth of new enterprises is concerned; there is consensus among the
researchers that finding sources of funds is the biggest problem for the startups
(Berger et.al, 2011; Hahn et.al., 2016). Financial capital is the positive predictor
of self-employment and entrepreneurial success (Blanchflower et.al., Evans and
Jovanovic, 1989; Evans and Leighton, 1989; Holtz-Eakin et al., 1994; Hurst and
Lusardi). The start-up founders first turn to internal financing sources (their
own funds), and afterwards, they use external financing sources (Paul, Whittam
and Wyper (2007). Startups need to reveal reliable information about their
ability to attract investors during the early financing stages. While Atherton
demonstrated that multiple factors influence the decision of a startup founder
on the financing sources (formal and Informal). Dzukpa et.al. suggest that
sources of finance change at each stage of the development of firms. He
suggests that innovation based new firms mostly use bank loans for their
industrial activities (Dzupka, 2016). After surviving the first stage of
development, the firms get enough courage to procure other sources of funds
like business angels and structural funds. Startup companies which collaborate
with other firms have better access to funds (Dzupka, 2016).
2.5. Factors Determining the Growth of Startups
According to Global Entrepreneurship Monitor, there are two types of
entrepreneurs, opportunitydriven and necessity driven. It is only the
opportunity-driven who can make changes in the economy. Opportunities are
central to entrepreneurial activities, without opportunities; there is no
entrepreneurship (Alsos, 2004). India has a higher number of necessity driven
entrepreneurs who are indulged into this activity not because of any
opportunity but they are pushed into it out of survival needs. On this basis,
Abhijit Bhattacharya calls India a country of default entrepreneurs. For Miller
and Miller,
these are the challenges and hardships in life which drives a person into
entrepreneurship. The challenges in life create conditions and experiences that
motivate particular adaptative requirement and foster the qualities like work
discipline, risk tolerance, social and networking skills and creativity that both
compel and enable entrepreneurship (Miller and Miller, 2016). In this context,
information generation is very important to be able to identify the opportunities
by the entrepreneurs. Theoretical and empirical research acts as the introduction
of new knowledge into the market-leading to various perspectives surrounding
various factors determining the new venture creation and performance of small
firms.
The factors determining growth of enterprises can be classified into some
internal factors like personality of the entrepreneur, resources, strategy,
organizational structure of the firm etc. and some external ones like startups
geographical location and policies of the government (Subrahmanya, 2015).
Sandberg model of new venture growth finds new venture performance as a
function of the entrepreneur, industry structure, and strategy (Sandberg, 1986).
In the Sandberg model, other factors of resources, organizational structure,
processes, and systems have been included on the basis of study of Chrisman,
Bauerschmidt, and Hofer (1998). Again, the factors of entrepreneur’s
accessibility to resources, choice of opportunity and availability of managerial
skills is included (Thakur, 1999). Box, White and Barr have emphasized the
psychological characteristics and background of the entrepreneur, scanning
intensity and industry dynamics affecting the growth of new ventures (Box
et.al., 1993), Baum, Locke and Smith have developed an empirical model to
measure the importance of each of these factors combining strategic
management theory, organizational behavior theory, organization theory, and
entrepreneurship models to form an integrated model of venture growth (Baum
et.al., 2001). They find out that venture growth cannot be explained through
single domain perspective instead all factors figure in the prediction of venture
growth when these total effects are considered. The growth of startups depends
upon many factors like finance availability, government policies and
programmes, education and training, R&D transfer, commercial, legal
infrastructure, internal market openness, access to physical infrastructure,
cultural and social norms (Avasthi, 2011).
CHAPTER III
Procedure, Policies and Regulatory Process of Startups in

India
3.1 Definition:
The term ‘startup’ can be best defined as a commercial enterprise which is
aiming at a specific market requirement by way of building up a feasible
business model involving a novel product, service, process, or a platform. In the
Indian context, a startup is defined as an entity incorporated or registered in
India not prior to ten years, and with an annual revenue generation not
exceeding rupees hundred crores in any preceding financial year. Therefore, an
early-stage company solely driven by technology or intellectual property that
has been working towards innovation, development, launching or
commercialization of new products, processes or services is called startup.
Moreover, regarding recognition or tax benefits, no letter of recommendation
from an incubator/industry association is required.
3.2 Procedure and Regulatory Process:
Various steps have been undertaken under the Startup India Action Plan to
simplify and make the registration and certification process hasslefree for
startups and support them through funds and incentives as well as facilitating
the interaction between the academia and business community.
These steps can be explained as follows:-
a) Registration of startups: The newly established firms can register them on
Startup India App or Portal. The later offer as a single-window system for
startups to register themselves through a simple form, track the status of
the registration application and anytime download the registration
certificate. The portal offers a convenient platform for startups as it is
integrated seamlessly with the ministry of Corporate Affairs and Registrar
of Firms. The mobile app and portal also act as a collaborative platform
and national network of various stakeholders related to startups like angel
investors, venture capital funds, incubators and academia. To support the
Startups in their crucial formation years, the government has tried to make
the day to day functioning of startups relaxed and hassle free by
exempting them from time consuming inspection on labour and
environment laws and favouring them on patent and intellectual property
rights filings as well as procurement of goods and services by Government.
b) Compliance Regime based on Self Certification: - compliance with labour
and environment laws has been made easier for registered startups by
reducing the regulatory burden and thus enabling the startups to focus on
15
their core business and keep the compliance cost low. For newly
established small firms, the regulatory formalities and compliance with
various labour and environment laws may be time consuming. The
government has made the compliance regime on labour and environment
laws friendly and flexible through self certification by the registered
Startups. The Startups can do self certification on the Startup Portal or the
Mobile app to comply with 9 labour laws and environment law.
Accordingly, in case of the labour laws, no inspections will be conducted
for a period of 3 years and in case of environment laws the startups are
given the status of white category of industries (as defined by the Central
Pollution Control Board (CPCB)) would be able to self-certify compliance
and only random checks would be carried out in such cases. The startups
can self certify them in case of following Labour regulations. 1) The Law on
the Building and Other Constructions Workers’ (Regulation of
Employment & Conditions of Service) Act, 1996; 2) The Law on the Inter-
State Migrant Workmen (Regulation of Employment & Conditions of
Service) Act, 1979. 3) The Payment of Gratuity Act, 1972. 4) The Contract
Labour (Regulation and Abolition) Act, 1970. 5) The Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952. 6) The Employees’ State
Insurance Act, 1948. The registered startups can self certify them in case of
following Environment Laws: - 1) The Water (Prevention & Control of
Pollution) Act, 1974, 2) The Water (Prevention & Control of Pollution) Cess
(Amendment) Act, 2003. 3) The Air (Prevention & Control of Pollution)
Act, 1981. Thus, the benefits of getting registered will trigger the new
emerging firms to start with formal registration and in this way helping the
formalization of the economy.
c) Relaxed Norms of Public Procurement for Startups:- Under this the
startups (in the manufacturing sector) have been provided level playing
field vis-à-vis the experienced entrepreneurs/ companies by relaxing the
norms of public procurement. As per the typical norms of public
procurement, the condition of either
‘prior experience’ or prior turnover’ is required at the time of tender floating by a government. This
condition may prohibit startups from participating in the government tender. The government by
releasing an order has mandated the offices of the Central Govt., State Govt. and PSU to procure
minimum of20% from the Micro Small and Medium Enterprise. This will benefit the Startups which are
supposed to be small as they are at their initial stage. Additionally, the government has exempted
Startups (in the manufacturing sector) from the criteria of “prior experience/ turnover”. However, the
Startups have to demonstrate the requisite quality standards as well as the capability to execute the
project.
d) Fast-Tracking Patent Applications by
Startups:-
Innovation is the sine qua non for the startups which are mainly the market disruptors through new and
innovative products and technologies. Innovation is required for the continuous growth of startups and
sustains in the competitive market. The innovation of new products or techniques requires them to file
applications for patents and IPRs. For this, the government has started Startup Intellectual Property
Protection (SIPP) to facilitate the filing of Patents, Trademarks and Designs by innovative Startups.
Under this, the patent application by the startups is fast-tracked for examination and disposal, so that
they can realize the value of their IPRs at the earliest possible. Apart from it, there is a provision of the
panel of facilitators, constituted by the Controller General of Patents, Designs and Trademarks
(CGPDTM) to assist the filing of IPRs application by advising and providing the relevant information to
Startups. The panel will appear on behalf of Startups at hearings and contesting opposition, if any, by
other parties, till final disposal of the IPR application. To reduce the cost of filing IPRs for Startups the
government will bear any incurred facilitation cost of proving patent, trademark or designs and the
Startups will bear only the statutory fee payable. For this Patent (Amendment) Act 2016 has been passed
according to which 80% fee reduction has been provided to Startups. Till 31 December 2016, 538 Startup
firms have availed the benefit of 80% fee reduction. Similarly. Trade Marks Rules have been amended to
provide a 50% fee reduction to Startups, and 587 Startup firms have availed their benefit (GoI, 2018).
3.3 State Policies on Startups:
According to the report on India Venture Capital and Private Equity Report 2017, there is a solid
correlation between comprehensiveness of the policy and the level of Start-up activity. Those states that
have a more dynamic policy also have a higher proportion of start-ups that have received funding. State
policies details are shown in table1 and figure 3.1 below:
Table 3.1: Major policy initiatives of the states
State Major startup policy initiative
Haryana Single Window System
Gujarat 100% reimbursement of Stamp Duty and
Registration Fee
Telangana Reimbursement of Patent Filing cost
Karnataka Travel reimbursement for international
marketing
Haryana Concept of Student Entrepreneur in
Residence
Maharashtra Incentivized to establish sector-specific
Innovation Zones
Panjab Sector specific incubators in and around
the existing and envisaged industry
clusters
Jharkhand Half yearly boot camps / conclaves in
colleges and universities
3.4 Financial Supporting and Incentives to the Startups:-
Access to finance is one of the key challenges faced by the Startup, especially during their formation
years. Startups face the challenges of arranging the collateral, credibility issues vis a vis angel funding
Procedure, Policies and Regulatory Process of Startups in India 17
and lack of funds due to dwindling profit and saving of funds. The government is supporting the
Startups financially through various measures undertaken, the description of which is as follows:
a) Funding Support through a Fund of Funds with a Corpus of INR 10000 Crore:- The government
has set up a fund with an initial corpus of INR 2,500 crore and a total corpus of INR 10,000 crore over a
period 4 years (i.e. INR 2,500 crore per year) . The Fund of Funds shall be managed by Small Industries
Development Bank of India (SIDBI) and will give funding support to various Alternative Investment
Funds (AIF) registered with SEBI and they will further support the Startups.
Fig 3.1: Geographical spread of the start-up policies of different states
Source: India Venture Capital and Private Equity Report 2017

b) Credit Guarantee Fund for Startups:- Startups are the emerging businesses and many a time they
may not be able to repay the debt. The banks are hesitated to give loan to these new firms which are
supposed to be with high risk in the absence of any credible record. Therefore, the government has
established the Credit Guarantee Fund for Startups to enable the new business venture experiment with
market disrupting products. Credit Guarantee Fund has been established through the National Credit
Guarantee Trust Company (NCGTC) under SIDBI.
c) Tax Exemption on Capital Gains:- Attracting investment at their initial stage is very hard for the
high risk entity i.e. Startups. Investors are to be attracted through incentives like tax exemption on
Capital Gains. It means that those firms which have invested their capital gains in the fund of funds, will
not be levied Capital Gains Tax. The exemptions from Capital Gains tax will augment the funds
available to various VCs/AIFs for investment in Startups. Besides, existing capital gain tax exemption
for investment in newly formed manufacturing MSMEs by individuals shall be extended to all Startups.
Currently, such an entity needs to purchase “new assets” with the capital gain received to avail such an
exemption. Investment in ‘computer or computer software’ (as used in core business activity) shall also
be considered as purchase of ‘new assets’ to promote technology driven Startups.
d) Tax Exemption to Startups upto Three Years: - The profit made by the Startups has been
exempted from the Income Tax for three years so that these can experiment the ideas freely without any
fear of failure of their idea or business model. Innovation is the essence of every Startup. This will help
the cash constrained Startups to get some relief on the side of finance.
e) Tax Exemption on Investment above Fair market Value: - Under the Income Tax Act, 1961,
where a Startup (company) receives any consideration for issue of shares which exceeds the Fair Market
Value (FMV) of such shares, such excess consideration is taxable in the hands of recipient as Income
from Other Sources. In the context of Startups, where the idea is at a conceptualization or development
stage, it is often difficult to determine the FMV of such shares. In the majority of the cases, FMV is also
significantly lower than the value at which the capital investment is made. This results in the tax being
levied under section 56(2). Currently, investment by venture capital funds in Startups are exempted
from operations of this provision. The same shall be extended to investment made by incubators in the
Startups.
3.5. Facilitation and Promotion of Startups through Partnership between Research and Industry:-
There is a need for providing a single platform to facilitate the interaction between academia, industry
and incubators to create a healthy ecosystem for Startups. Various efforts in this direction have been
undertaken like:-
a)Startup India Hub: - The startup hub is imagined to work as a hub and spoke model connecting
startup and all other key stakeholders like Central and State Government, Indian and Foreign VCs,
Venture Funds, angel investors, banks, researchers, legal consultants etc. The hub and spoke model is
based on the lifecycle approach to assist Startups, focusing on all important aspects at various stages of
their growth like finance, marketing, technology improvement and management skills. Apart from this,
free entrepreneurship courses have also been available under it.
b) Startup Fests to Provide a Collaborating Platform and to display Innovation: - The government
holds Startup Fests from time to time at the national and international level. It provides a platform to
display the innovative ideas and products launched by startups and to provide budding entrepreneurs
with the opportunity to interact with various interested stakeholders like mentors and investors.
Accordingly, fests are organized annually at national and international level at places known for startup
activity. Many activities are undertaken in these fests like exhibition stalls to showcase top innovative
products, Startup fest contests, mentoring sessions and knowledge sharing platforms etc.
c) Launch of Atal Innovation Mission (AIM) with Self Employment and Talent Utilization
Programme: - The AIM has been launched to promote entrepreneurship through Self-Employment and
Talent Utilization (SETU), wherein innovative ideas will be encouraged to be converted into real
products through entrepreneurship. The entrepreneurship is being promoted through various measures
under AIM like establishment of 500 Atal Tinkering Labs, pre-incubation training to potential
entrepreneurs at academic institutions, establishment of sector specific incubators through PPP mode,
strengthening existing incubation centres and mentoring of centres, innovation awards and grand
innovation challenge award for finding ultra-low cost solutions to India’s pressing and intractable
problems.
d) Support through Incubators: - Incubators can support early stage startups by guiding and
nurturing them and providing a good Startup ecosystem. Government has taken various initiatives to
set up world class incubators in India. The government is helping in establishing the incubators in
existing institutions as well as through PPP. Incubators will provide the facilities of mentoring, access to
network, physical infrastructure, and access to market etc. There will be 10 world class incubators and
incubators in Public Private Partnership. The PPP incubators are financially supported by the
government but ran and managed by the private players only for the sake of professional management.
Under this 35 new incubators have been established in existing institutions with the 40% funding
support by Central Government, 40% by the respective state government and 20% by private player. The
Government will provide 10 crore financial assistance to 10 incubators which have capability to become
world class. An “Incubator Grand Challenge” exercise shall be carried out for identification of these
incubators. Apart from it, 35 another private sector incubators will be established in existing institutions
with the support of 50% grant (up to max INR10 crores) by central government. It is noticeable that
Startup Village is India’s First Startup Incubator in PPP set up under department of Science and
Technology. These incubators will be set up under AIM by Niti Ayog with department of Biotechnology,
department of Higher Education, Department of Industrial Policy and Promotion will be participating
agencies. The incubators will act as academia-industry tie-ups for providing the best ecosystem support
to Startups.
e) Promoting Startups in Biotechnology Sector:- Witnessing the strong growth trajectory of
Biotechnology sector, Government endeavours to promote and nurture 300-500 new Startups each year
targeting around 2000 Startups by 2020. To accomplish this task, Government has taken various
measures like setting up Bio-clusters, Bioincubators, technology transfer offices and Bio connect offices.
The Government has launched equity based fund by the name of BIRAC AcE fund in partnership with
National and Global Equity funds for focused mentorship of nascent biotech startups. The Bengaluru-
Boston Corridor has been formed to connect and share ideas and mentor the entrepreneurs in the area of
biotechnology. Bio entrepreneurship is being promoted through BIRAC Regional Entrepreneurship
Centre (BREC) by imparting knowledge and skills among bioentrepreneurs.
f) Launching of Innovation Focused Programs for Students:- The government is promoting
research and innovation among young students through various measures like Innovation Core
Program for promoting innovation among kids, a grand challenge program by the name of NIDHI and
Uchchatar Avishkar Yojana to provide funding support to foster ‘very high quality’ research among IIT
students.
g) Faster Exit for Startups:- For an efficient Startup ecosystem, not only the flourishing of startups
are necessary but the swift and simple exit procedure too. The faster exit is helpful to relocate the capital
and resources in case of startup failure. This will promote entrepreneurs to experiment with new and
innovative ideas, without having the fear of facing a complex and long-drawn exit process where their
capital remain interminably stuck. The Insolvency and Bankruptcy Code 2016 (“IBB”), has provisions for
the fast track and / or voluntary closure of Startups through insolvency professional for Startups.
Startups with simple debt structures or those meeting such criteria as may be specified may be wound
up within a period of 90 days from making of an application for winding up on a fast track basis.
3.6. Other Schemes and Programmes supporting the Startups:-
Apart from the schemes and supporting programs discussed above, other programmes and provisions
which are indirectly promoting startups can be discussed below:-
a) Electronic Development Fund Policy: - It is a policy by the Department of Electronics and
Information Technology (DEITY) under which companies related to IT services, analytics, enterprise
software, technology hardware,
Internet of things, Artificial Intelligence and Nanotechnology will get risk capital from daughter funds
set up by Electronic Development Fund. This scheme was started as part of the Digital India campaign
in order to develop Electronic System Design and Manufacturing sector to achieve “Net Zero Imports”
by 2020. This policy will lead to the growth of Startup in electronic sector in the beginning and spread to
other sectors also at later stage.
b) Modified Special Incentive Package Scheme (M-SIPS):- Introduced in 2012 and modified in 2015,
this scheme is run by DEITY with the objective to promote investment in electronics manufacturing.
Under the scheme, DEITY provides 20% capital subsidy to companies working in SEZ (25% in nonSEZ)
engaged in electronics manufacturing.
c) Scheme to Support IPR Awareness Seminars/Workshops in E&IT Sector:- This scheme is ran by
Ministry of Communication and Technology to support IPR awareness seminar and workshop by
providing financial grants from 2 lakhs to 5 lakhs. Educational institutes, Industrial bodies and other
related societies which want to organize such seminars or workshops can apply for grant on the website
of Ministry of Information and Communication Technology. This scheme will promote Startup activity
in the area of innovation based electronics manufacturing.
d) New Gen Innovation and Entrepreneurship Development Centre (NewGen IEDC):- This centre is
ran by DEITY with the objective of promoting knowledge based and technology driven startups by
harnessing young minds and their innovation potential in an academic environment. Under this,
Entrepreneurship Development Cell have been established in various universities, deemed universities
and other institutions.
e) Performance & Credit Rating Scheme: - This scheme is ran by National Small Industries
Corporation (NSIC) to develop performance and credit rating of Micro and Small Industries to make
trustworthy and independent third party opinion about these companies, to help these companies access
credit facilities at attractive interest, to attain recognition at global scale and to prompt clearance of bank
loan to these small firms. Thus, the Performance and Credit Rating Scheme will certainly help
promoting Startup companies.
f) Raw Material Assistance: - Under this scheme, financial assistance is provided to small
industries to enable them procure raw material up to 90 days. Thus economics of purchases can be
achieved for small industries to help them procuring bulk raw material. The National Small Industries
Corporation (NSIC) supervises this scheme facilitating the small firms focus on core business activities
without concerning about arranging funds to buy raw material.
g) Multiplier Grants Scheme:- This scheme under DEITY, aims to nurture and promote
collaborative R&D between industry and academics/R&D institutions for development of products and
packages. Under the scheme, there is provision that if industry invest in the research and development
of any product that can later be commercialised, the government will provide financial assistant to such
projects up to twice the investment made by the industry. It is supposed to activate the innovation based
Startups in India.
h) Software Technology Parks of India (STPI): The STPI has been set up with the objective of
encouraging, promoting, and boosting software exports from India by providing infrastructure and
stator support. The STPI is an autonomous society set up under Ministry of Electronics and Information
technology registered under Scheme, by the Indian government, provides statutory services, data
communications servers, incubation facilities, training and value-added services. The scheme allows
software companies to set up operations in convenient and inexpensive locations and plan their
investment and growth, driven by business needs.
i). Revamp Scheme of Funds for Regeneration of Traditional Industries (SFURTI):- The fund headed by
Khadi and Village Industries will provide financial support to traditional industries and artisans to form
clusters. The incentive is given on the basis of the size of the clusters categorized into Heritage
Cluster( 1000-2500) artisans-INR 8 Crore per cluster, Major Cluster (500-1000) artisans- 3 crore per
cluster, Mini Cluster (up to 500 artisans)- 1.5 crore per cluster.
j) ASPIRE Scheme: - It is a scheme for promotion of innovation, rejuvenation and entrepreneurship
in agriculture sector started by MSME, Aspire has been launched by the Indian government with an
objective to set up a network of technology centres, incubation centres to accelerate entrepreneurship
and also to promote startups for innovation and entrepreneurship in rural and agriculture-based
industry.
k) Infrastructure Development Scheme: - This scheme is ran by National Small Industries
Corporation aims to solve the problem of availing office space for small industries. Under this the office
space is provided by the NSIC in major cities on rental basis to those companies falling under the
category of MSMEs.
l) Nasscom Industry Partnership Program: - This industry agnostic program seeks to provide a
platform of interface between large corporate and small innovative ventures so as to provide executive
support, provide access to global market, branding support, executive mentoring support etc.
m) Finally,Pradhan Mantri MUDRA Yojana (PMMY), Prime Minister Employment
Generation Programme and Other Credit Support Schemes,Credit Link Capital Subsidy Scheme for
Technology Upgradation, Marketing Promotion Schemes etc. are also supporting new business
ventures.
CHAPTER IV
Role of Academia in Creating a New Eco System to Flourish
Entrepreneurship & Innovation: Case Studies
This chapter widely examining the role of educational institutions in creating a startup ecosystem and it
is directly focused on the supply side aspect to aims at the effectiveness of the startup’s initiatives on
achieving the employment creation objectives. The supply-side aspect of creating an ecosystem for the
young population to facilitate entrepreneurship is the major discussion in this chapter. Finally, both
supply and demandside (in chapter V) angle together discuss the general effectiveness of the
programme.
4.1) Supply side aspect of role of universities in creating a new eco system to
flourish
The role academia plays in fostering entrepreneurial intention is a popular way to augment overall
economic activity and the process of discovery. Research in the field of entrepreneurship has grown
exponentially with the growing concerns about the laggard growth of a large number of micro and small
enterprises in India (Bhattacharya, 2008). Unfortunately, mainstream economics has overlooked the role
of entrepreneurship in the economic systems, as there is uncertainty due to many stakeholders being in
the field of entrepreneurial research with diverse interests and the increasing relevance of “swarm”
tendency in this field of research (Landstrom, 2010). The need of the hour is to bring academic rigour in
entrepreneurship in India (Bhattacharya, 2008; Landstrom, 2010). Entrepreneurial university model is a
technique to attract individuals with ideas and give them the needful entrepreneurial and managerial
skills in the new socio-economic landscape.
In India, seventy percent of the incubators are in educational institutions to encourage the real
innovation and entrepreneurship spirit among the youth of the country. An interactive online learning
and development module has launched by Startup India Hub to educate Startups and aspiring
entrepreneurs, through various stages of their entrepreneurial journey. Over 1, 50,000 applicants have
signed up for the course, out of which around 5,300 applicants have completed 100% of the course
successfully (Startup India-status report, 2017). The university guided startups are providing the
entrepreneurs with mentors who inculcate in them leadership skills to run a business. Mentoring is vital
for acquiring knowledge of technical domains and business skills, where the students are connected
with industry leaders and alumni as mentors, and also clubbing students with appropriate faculty
mentors. There are several startups jointly run across India which are having student-faculty
collaboration.
The role of some prominent universities/institutes of Delhi in nurturing future young entrepreneurs is
much appreciated and the facilities provide are explained in below table 4.1. Technology business
incubators in IIT Delhi provide co-working space for high tech and biotech startups with lab facilities
and also provide support for company incorporation and product patenting. Frequent interactive
sessions/seminars at IIT Delhi facilitate the startups related to entrepreneurship with top industry
leaders. There is an optional one credit course on entrepreneurship for all engineering students. This
will add up the mentoring and entrepreneurial training facilities for their students. At the same time,
Ambedkar University runs a masters course in social entrepreneurship to help build an appropriate
entrepreneurial attitude for the students. This university entrepreneurship model provides a university-
backed social working space, or grant for paying rent for office and also facilitating for real-life field
experience before product launch. The University of Delhi also runs short term certificate courses in
entrepreneurship and mentoring from successful entrepreneurs holding leadership roles, veterans of
industry etc. providing an opportunity to connect with industry and government.
Considering the experiences of academic excellence of IIT Delhi comparing other university systems,
there are higher chances of getting angel investment. Financial facilities received by IIT Delhi include
scientific grants from Department of Biotechnology; Biotechnology Industry Research Assistance
Council; stakes in exchange for funds by venture capital funding etc. In the case of Ambedkar
University, grants are from the university itself for social-intended enterprises in exchange for company
ownership. Their chance of availing venture capital funding is low and also startups face frequent fund
crunch. The University of Delhi has funding via the network of angel and venture investors.
Role of Academia in Creating a New Eco System to Flourish Entrepreneurship & Innovation: Case Studies
Table 4.1: Role of selected universities/institutes in nurturing future entrepreneurs

University Infrastructure facilities Financial facilities Mentoring and Entrepreneurial-
Name Training facilities
IIT-Delhi TB provides co-working Scientific grants from One faculty member compulsory in
space for high tech/biotech DBT/BIRAC, stakes in board company. Frequent
startups with lab facility. exchange for funds by VCs, interactive sessions/ seminars
Supports in company related to entrepreneurship with top
higher chances of getting
incorporation and products industry leaders.
angel Investment.
patenting. One credit course on
entrepreneurship for all engineering
students.
Ambedkar University-backed social Grants from Ambedkar University runs a Master’s course in
University, working space, or grant for University Delhi for social- social entrepreneurship to help
New Delhi paying rent for office. intended enterprises in build an appropriate entrepreneurial
Reallife field experiment
exchange for company attitude. Guidance from domain
prior
ownership. Startups face experts in management of social
to product launch
frequent fund crunch. Low enterprises.
chances of availing VC
funding.
University Provides strong branding, Funding via network of Mentoring from successful
of Delhi managed by STPI. angel and venture investors. entrepreneurs holding leadership
Electropreneur Park which Financial support for roles, veterans of industry. DU also
is an academic incubation prototyping, free credit or runs short-term certificate courses in
aims at ESDM- related subsidized interest rate. entrepreneurship. Opportunity to
startups. Co-working space connect with industry and
and state of art lab government.
equipments. Support to
startups at ideation stage.
Note: TB- Technology Business Incubator, DBT/BIRAC- Department of Biotechnology; Biotechnology Industry Research
Assistance Council, STPI- Software Technology Parks of India, ESDM- Electronic System Design and Manufacturing, VC
Funding- venture capital fund.
4.2) Startups associated with incubation centres:

Many Startups in Delhi such as Fitnano Technologies, Cerelia Nutritech and Sanjhi Tokri has been
receiving mentorship under the Universities’ business guidance and incubation centre. Details are as
follows:
1. Fitnano is an early growth stage startup which offers smart wearable devices that can be worn on the
body of children as well as older persons as implants or accessories. Such devices work as activity
trackers that enable electronics such as mobile phones, sensors to exchange information/data through
the internet with any other connected objects, without requiring human intervention. The Global
Positioning System (GPS) watch for children that keeps parents connected with their children on their
mobile phones by installing the Fitnano App. Tarun Shekhar is the founder of Fitnano (2015).
2. Sanjhi Tokri was founded by Mayank Gandhi in 2014. Sanjhi Tokri meaning common basket in Hindi,
which is a digital grocery items supply-chain platform where one can place his/her orders.
Different kinds of organizations such as university, research organizations, funding agencies, big
corporations and services providers interact at a location to explore and develop, adapt, grow and mature
new startup companies as a system. At the academic level, several universities apart from teaching,
awarding degrees and publishing scholarly literature, they are running business incubation centers to foster
entrepreneurial intention among the students who are accustomed to being job-seekers, by conducting
experiments before the development and launch of a particular startup’s product which would influence
the economic development of the country (Elfving, Brännback, & Carsrud, 2009). It is one such place where
23
the startups are formed and allow the founders or entrepreneurs to explore all the possibilities of showing
commitment towards the startup. Few cases are as follows:
3. Valetude Primus founded in 2015 by IIT Delhi Alumnus is a pharma firm which is designing
technology enabled diagnostic medical devices to find the typhoid strain in human body at faster
time compared to the current diagnostic technique world over. The startup is under the
mentorship of FITT incubatees and founders Saurabh Singh and Vikas Pandey are B.Tech
graduate from IITDelhi. They mentioned that because of the incubator’s supportive environment
the demand for getting incubated is quite high among many budding tech-entrepreneurs.
Exposure to seminars organized by FITT has immensely helped the startup to grow the
entrepreneurial network and connect with industry mentors.
4. Case of a graduate: This is the story of how Jawwad Patel, a 23 year old young man, who
completed his graduation from Jawaharlal Nehru Technological University in Hyderabad came
with an innovation, a 3D printed smart self filling water apparatus. He was recently honored by
the government with the National Youth Award Excellence in Research and Innovation. From a
very young age of 10 years he has been an electronics freak. During school and college time he
accumulated many medals and certificates in competitions related to the field of electronics and
Robotics, his acumen lead to the invention of many new devices at regular intervals. He had this
inner ambition to lay the foundation stone of his own Private lab, so he founded one named JP
Lab. He envisions inventing things in accordance with the problems and situations that the
masses are facing now.
Story of an early stage tech startup- How a university system facilitating for innovation and
employment generation
5. Cerelia Nutritech Pvt. Ltd. was founded in July 2016 by Kiran Vuppala, Ruchi Omprakash Singh
and Deepti Mohanty. Cerelia Nutritech is about to launch life science products mainly
nutritionbased medical device called trans-dermal patches, which help in transferring nutrients
through the skin for those who face problems in consuming food orally. The early-stage health
related company is a for-profit enterprise registered under the Company Act. Kiran Vuppala did
his Master of Science in Biotechnology from Acharya Nagarjun University Hyderabad in Andhra
Pradesh and Ruchi Singh did her Master in Pharmacy from Mumbai University. Prior to working
in Cerelia as full –time researcher, Kiran was employed at Syngenta Private Limited, Hyderabad
A. P. and had SIIP (Social Innovation Immersion Programme) Fellowship. This startup is located
inside the Synergy Building of IIT Delhi campus. They have got the incubation training and
mentoring support under IIT-D TBI incubation hub – Federation of Innovation and Technology
Transfer (FITT) which provides the office space for the tech startups. Before this, their company
was affiliated to Kalinga Institute of Industrial Technology Bhubaneshwar’s technology business
incubator. The affiliation with the incubator has helped the Cerelia Nutritech in availing the
benefits of equipment and other facilities provided by the incubator. The founder agrees that the
services provided by the incubators are critical for the early-stage companies because being small,
they cannot buy the equipment’s and other required products themselves. They have never
approached any banks for funding. The reason they stated here that the collaterals assetbased
funding is all banks minimum criteria for eligibility. The prototype is not launched in the market
yet. It is in the Clinical Trial and Regulatory clearances phase. The Cerelia Nutritech has filed for
patent application and got the benefit of fastening the patent application procedure as well as
subsidy in Patent fee as per the Startup India Action Plan. They filed the Patent through Private
party i.e.TBI so they did not face any difficulty in this procedure. It is also noted that they have
taken the benefit of the Startup Hub Program and toll-free numbers while taking help in getting
regulatory clearances for a grant from Canada. They also pointed out that there is a huge
workload, and the work hours extend beyond 12 works at times. The founder is aware of the
facilities of self-certification to the labour laws and environmental laws. They do not agree with
the neglect of knowledge-based innovation. They expect a good response from the consumers
soon after the launch of their product. The transdermal patches are a niche market. The
competition is near to existent for its product. There seems to be an ineffective strategic
partnership between the regulatory authorities and new ventures in health care. The founder
agrees that there is an absence of a well-documented policy for young entrepreneurs across
technology and technologyenabled spectrum.
Role of Academia in Creating a New Eco System to Flourish Entrepreneurship & Innovation: Case Studies
25
The Jawaharlal Nehru Technological University in Hyderabad (JNTUH) is also having a dedicated dais
to facilitate interaction between industry and university, called University Industry Interaction Centre
(UIIC). JNTUH-UIIC believes that the industry drives the economic development and the university
fuels it and hence the JNTUHUIIC attempts to organize and catalyze the various joint activities between
the Industry and the University. Therefore, the students must be engaged in entrepreneurial activity as
early as possible. Universities should provide entry level support which induces budding entrepreneurs
to choose safer projects. Several policy initiatives by the government to support and promote
entrepreneurship in universities and schools have sprung out to counter joblessness and social
inequality, e.g. Atal Innovation Mission is establishing Atal Tinkering Laboratories in schools across
India to foster creativity, curiosity and needfulness in young minds. 941 schools selected for establishing
tinkering labs and Rs. 12 Lakh each has been disbursed to 374 tinkering labs (GoI, 2018).
International think-tanks such as Ewing Marion Kauffman Foundation, Wadhwani Foundation, Korea
Labor Institute W.E. Upjohn Institute for Employment Research, and Koltai & Co. are engaged in
employment services research to disseminate the information and to promote entrepreneurship that
would serve some social purpose and hence reproduce new knowledge in this field. Support from such
organization educate, inspire and support entrepreneurs without hampering the type of
entrepreneurship in order to create highvalue companies and jobs. The business cycle has an effect on
the entry of an individual in the field of entrepreneurship, meaning that there is an association between
aggregate business cycle and firm creation.
4.3) Social entrepreneurship:
The business incubators may encourage entrepreneurs to take up social projects for improving the
welfare of the community and in most cases technology based innovation or concept is welcomed that
accelerate structural changes in the economy (Clausen, 2011). Moreover, the purpose of
entrepreneurship depends on what the entrepreneur or the enterprise is trying to maximize as its
primary objective (Audretsch & Thurik, 2001). In social entrepreneurship, the goal is to create some
social impact which usually addresses a social issue; one of the cases is as follows:
Case of Empathy and today’s change-makers - Social Entrepreneurship
‘I want to bring an impact in our society by helping the project related displaced farmers so that they lead of life
of dignity.’ (Nishant Chowdhury, social entrepreneur, Delhi)
Nishant Chowdhury is the founder of a ‘Rooftop Farming’ concept startup venture which began its
operation in 2016 and he is a development fellow affiliated with AUD Centre for Innovation,
Incubation and Entrepreneurship (ACIIE). To transform the state of farmers’ life after displacement
from previous work site due to project-affected consequences, the main influence for this project was
community – based livelihood practices. The startup is specialized in providing agro-farm services to
the urban residents of Delhi and the practice of growing fruits and vegetables has been picked up in
several places.
The community based social livelihood project ensures farmers an alternate employment platform.
Art for Social Change India

Arts for Social Change India (ASIC) formed by Gaurav Singh and Jigyasa Labroo is an early-stage
startup enterprise, which develops social entrepreneurship in youth culture. It started in February 2014
as an NGO. Previously they both were Teach to Lead Fellows. Presently, both are working as a full
time associate with Slam Out Loud which is an initiative of ASCI. Gaurav completed his professional
course in Hotel Management and Jigyasa is B.Tech graduate. Art for Change is a non-profit private
organization registered under section 8A of Company Act. They are involved in the imparting artistic
skills like theatre and poetic skills in children below age 12 for both government and private schools.
They also sell artmerchandise for such schools. Under the initiative of Art for Social Change, ‘Jijivisha’
Fellowship for poets, artists and theatre enthusiast was started. It is a nine month programme for
children and youth of the marginalized section to build in them leadership, human expression and
mindfulness. There are around 30 fellows selected for this programme who shall undergo an art based
creative training workshop.
They have been gaining guidance and mentorship under Startup incubation training cell at the ACIIE.
The business is sustainable and it wants not to just relieve on AUD (Ambedkar University Delhi)
grants. They would like to diversify their products and services to enhance the cultural and literary
skills of children up to class 8. The administrations and teaching staff of schools in Delhi –NCR are
clients of this startup in the Delhi region. They have not availed any loan facility from banks. The
founders disagreed to any competition in the market. The founders do strongly agree with the fact that
there no well-documented policy for entrepreneurs having social enterprises. The founders want to
turn the enterprise into a forprofit enterprise. The business has to have an edge about knowledge and
creativity. There is strategic partnership between the existing players in the market and new players
struggle to over the unwanted hurdles for the launch of new products. The need to connect new
business people, seek new challenges and respect in society are some of the main influencers to the
behaviour of the entrepreneurs.
The social entrepreneurship has been rapidly emerging in private, public and non-profit sectors and
India started developing an appropriate environment for such initiatives, have recently increasing
gained traction Self-efficiency is contended to be an important determinant of entrepreneurial
behaviour.
4.4) Building Innovation Centre at National Institutes: - Innovation centres have been established to
provide innovation support to the startups through R&D. Under this 13 Startup innovation centres have
been established in various institutions given in Table 4.2. Similarly, 18 Technology Business incubators
have been established with the support of the government, the details have been given in Table 4.3.
Table 4.2: List of Startup Centres1
RGIIM MNIT NIT VNIT Nagpur IIITDM PDPM-IIITDM ABVIIITM
Name of
Centres
Startup
Shillong Allahabad Agartala Kancheepuram Jabalpur Gwalior

NIT Delhi NIT Goa NIT IIT NIT Patna NIT Arunachal
Silchar Bhubaneswar Pradesh
Table 4.3: List of Technology Business Incubators
Technology Business Incubators
MANIT Bhopal IISER Bhopal NIT Warangal
NIT Raurkela IIM Rohtak MNIT Jaipur
NIT Jalandhar IIT Mandi NIT Tiruchirappalli
IIT Udaipur IISER Mohali IIT Patna
NIT Calicut IIT Roorkee
IIT Ropar IIM Kozhikode
IISER Thiruvananthapuram IIM Raipur
The Government has proposed to set 7 new research parks modeled on Research Park in IIT Madras
with the aim to boost R&D supporting innovation and startup ecosystem. The government will initially
invest 100 crores in each research park. They will encourage the industries to undertake research
activities in these research parks and support with the academic expertise support by the incumbent
institution. These research parks will derive best practices from successful Research Parks such as those
at Stanford, MIT and Cambridge. As per the status report on Startup India Action Plan, the research
park in IIT Khadakpur is already under construction and the research park in Gandhinagar is being set
by the Department of Science and technology. The remaining five are being established by Ministry of
Human Resource and Development (MHRD) and DST in IIT Guwahati, IIT Hyderabad, IIT Kanpur, IIT
Delhi, IISc Bangalore.
1 Source: Government of India (2016), Startup India Action Plan, p. 27

CHAPTER V
Startups and Youth Employment Provisions: Field Survey Results
This chapter is directly focused on the demand side aspects of the startup initiatives via
educational institutions. The demand side of employment generation is the major discussion in
this chapter. Both demand and supply side (previous chapter IV) angle, together discuss about
the general effectiveness of the programme. 5.1 Small firms and job creation
The entrepreneurship, growth and job creation are linked (Glavin, 2013). Trends also shown that
startup firms2 contribute substantially to job creation (Subrahmanya, 2015). Like all brands,
`Brand India` as a brand stands for being a product in itself. It is a campaign to project the
business attractiveness of India in fields of Information technology, manufacturing, and services
sectors. A positive impression has been created worldwide in the mind of foreigners after India
jumped 30 positions to become rank 100 in the Ease of Doing Business Global Rankings 3 (World
Bank, 2017). In addition to that, in the Report on Readiness for the Future of Production Report
20184 which is a study conducted by the World Economic Forum (WEF) in collaboration with AT
Kearney, a global consulting firm has ranked India at 30 th position on a global manufacturing
index, above other BRICS5 nations except for China (WEF, 2018). If one evaluates chances for
success of `Brand India`, a number of initiatives were launched recently by the Indian
governments and non-governmental organizations such as Digital India, which is set to
transform India into a digitally empowered society, several global MoUs with foreign nations in
the area of trade, industry and services, and Startup India which aims at promoting innovation
by creating an ecosystem. This would empower entrepreneurs to create an impact in the
macrolevel through startups. Valliere (2010) highlights about the significant portion of Gross
Domestic Product (GDP) growth rate of developed nations are by young firms, who exploit the
opportunities made available through state support in terms of both moral, physical financial
support (Valliere & Peterson, 2010). Privatization and the neoliberal economic policy can have
significant impact on
the overall entrepreneurial activity in an emerging country like India.

The employment statistics point towards that labour market for youth is plummeting (OECD,
2017). Although the economic growth in India is gaining substantially, the job creation and rate
of employment is decreasing (Economic Survey, 2017). Due to such prevailing conditions of
status of unemployment among the persons aged between 15 – 29 years, new economic policies
or strategies are formulated to create opportunities for revival of the Indian startup culture. For
a jobless person6, entrepreneurship becomes a necessity, a last resort to prevent the risk self-
degradation and impoverishment (Hurst & Pugsley, 2011). As per the BSE CMIE survey 7, in the
year 2017 the potential workforce (till August 2017) has added around 26 million people, while
just 1.5 million got employed and by 2050 in India every year 12 million people are expected to
join the pool of employment. Until and unless the pace of job creation is not accelerated, we will
not be able to harness the demographic dividend, where the population aged 15 and above is
968 million (Muthukumar, 2017). By letting new business enter the market, huge employment
opportunities is generated and the `startups’ euphoria which is been currently experienced in
2 Firm is a business organizations consisting of one or more establishment that were under ownership and control, whereas
an establishment is defined as a single physical location where business is conducted. Existing firms create new
establishments.
3 Ten prime thrust areas is included in this year’s Ease of Doing Business report like starting a business, construction
permits, getting essential utilities (water and electricity), protecting investor, paying taxes, resolving insolvency, trading
across borders, and enforcing contracts
4 The report has categorized 100 countries into four groups – leading, high potential, legacy and nascent. India has been
placed under the legacy group along with Mexico, Hungary, Russia, Philippines, Thailand and Turkey. They all have
strong current base and at risk for future.
5 BRICS stands for Brazil, Russia, India, China and South Africa.
6 According to OECD, an unemployed youth is someone aged between 15-24, who report that they are without work, that
they are available for work and that they have taken active steps to find work in the last four weeks.
7 Bombay Stock Exchange and Centre for Monitoring Indian Economy conduct three surveys in a year on employment.
Sample size - 1, 01,724 households in 25 States.
many nations. The young establishments or firms which are based on innovative concepts or
ideas set out to disrupt the markets with its product or services.
5.2 Does Innovation matter?
The high rate of increase in the number of startups worldwide has been the key for the rapid
expansion and development in both advanced and emerging market economies. Schumpeter’s
theory of innovation reveals that the entrepreneurs are motivated by will power, their
characteristics being an inherent capacity to select correct answers, energy will and mind to
overcome fixed talents of thoughts and a capacity to withstand social opposition (Schumpeter,
1934). There are various roles performed by entrepreneurs like initiators, risk taker, innovator,
decision maker, and leader and as manager. The weak and unstable formal institutions
encourage more unproductive than productive innovation – driven activities. The creativity of a
disadvantaged minority group is the main source of entrepreneurship and a suppressed
community has more creativity (Landstrom, 2010).
The Global Competitiveness Index divides nations into three categories: factor-driven,
efficiency-driven and innovation-driven. Competiveness is evaluated based on 12 pillars. The
competiveness in factor driven stage is depended on the first four pillars, namely- institutions,
infrastructure, macroeconomic environment and health and primary education. From this stage,
a country then moves to the efficiency-driven stage as the competiveness rises and leads to
increase in wages and productivity. Here competitiveness is determined by pillars 5-10, namely,
higher education and training, good market efficiency, labour market efficiency, financial
market development, technological readiness and market size. In the innovation-driven stage
competiveness is based on the last two stages- business sophistication and innovation (pillars 11
and 12 respectively). The scenario in this stage is one where wages and standards are so high
that to survive, innovation is very important. A country’s stage of development is an important
factor when it comes to innovation. Entrepreneurship enterprises in highly developed countries
are more innovative than enterprises in lesser-developed countries. In lesser-developed
economies, entrepreneurship and self-employment are an alternative to unemployment and in
large number of cases- necessity driven. Countries in the factor-driven stage “neither create
knowledge for innovation nor use knowledge for exporting”. The innovation-driven stage on
the other hand sees an increase in entrepreneurial activity along with a decrease in firm size,
increase in service firms (which are more conducive to entrepreneurship than manufacturing)
amongst other factors. India remains the most competitive economy in south Asia and also rank
40th in the global competitive ranking of 137 countries by world economic forum (Schwab, Klaus
2017). However, India ranks 68thin 2019 due to significant progress made by several other
countries ranked close to India and also this drop is only partly the consequence of a relatively
small decline in score. According to the Global Competitiveness Report 2019, India ranks high in
macroeconomic stability and market size but its financial sector is relatively deep and stable
despite the high delinquency rate (10% of the loan portfolio, 106th), which contributes to
weakening the soundness of its banking system. At the same time, India performs well when it
comes to innovation (50.9, 35th rank), well ahead of most emerging economies and on par with
several advanced economies (Schwab, Klaus 2019).
5.3) Demand side aspect of employment generation- Field survey results
This research study envisaged investigation among

48 startups samples in the different part of DelhiNCR region. It includes only the registered firm
or companies which are registered with startup under DIPP of Ministry of Commerce and
Industry, Govt. of India. The details of Delhi- NCR startups were collected from the list of
official startup India website of the government of India.
While considering the gender distribution in the sample data, female entrepreneurs are only 15
percent of the total sample comparing 85 percent of male entrepreneurs (Figure 5.1). In general,
there is ample evidence that fewer women are associated with technical education in India
compared with men, and that may be the reason for the less women engaged in startups.
29
Figure 5.1: Gender Distribution of entrepreneur in the sample (Percent)
15
85
Male Female
Source: Field survey data
In the sample data, 89.6 percent is skilled workers, followed by 6.3 semiskilled and 4.1
minimally skilled workers. Figure 5.2 clearly shows that majority of the workers employed in
startups are skilled workers, and it shows the opportunity of skilled workers to employ in
startups.
Figure 5.2: The composition of skilled, semiskilled and minimally skilled workers
employed
Skilled
Semi Skilled
Minimally skilled
Source: Field survey data

There is an enormous debate regarding the

employment creation of startups in the current there is an increase in the number of employees
scenario. The data collected from the field shows engaged in the same startups and 25 startups
that out of 48 startups at the time of establishment increased the level 6-10 employees and 11 startups
33 startups had less than 5 employees and later started employing more than 11-15 employees.
after few years (approximately in the range of The details are given in figure 5. 3 below.
within 4 years)
Figure 5.3: Comparative details of the number of employees at the establishment time and at
present
40
35
30
25
20
15
10
5
0
No.of Employees at Establishment Time No. of Employees at Present Time
Table 5.1 Comparative details of the number Among the total sample, the total number of
of employees at the establishment time and at workers in the establishment time was 239 and the
present number of employees at present increased
to 422, an increase of 183 more (Fig. 5.4). One
No. of Les Betwe Betwe Betwe Betwe Betwe Not
workers s en en en en en Men
interesting fact is that twenty five percent of
tha 6 to 10 11-15 16-20 21 to 26 to - the startups samples is nurtured from the
n 30 tione university-
25 incubator based ecosystem.
5
d Among these samples of university based
Total No. 33 13 1 0 0 0 1
startups, there is an increase of 123 employees
of Worker at present i.e. 53 new employment is
at generated from 70 at the time of
Establishm establishment. Among the sample startups,
ent time lowest salary drawn was 6000 and the highest
Total No. 9 25 11 0 1 1 1 level of salary drawn was 50000.
of
Workers at
Present in
Source: field Survey data
the Startup
Figure 5.4: Details of university
incubator startups and non-university startups
Total out of 48 asmple startups Out of12 university- incubator
422
450
400
350 239
300 183
250
200 123
150 70
53
100
50
0
No. of Worker at No. of Workers at Increased number of
Establishment time Presentin the Startup workers
In Table 5.2 among the 48 startups 10 sample startups were already functional some years before
(with in the last ten years) as an enterprise and they have been registered as startup after 2014.
31
In these cases, it is noted that the increase in employment at establishment time and at present is
only 12. Moreover, these enterprises narrated various problems of the sustainability of their
enterprises including funding, marketing etc. as various reasons.
Table 5.2 Disaggregation of sample startups and the employment generation
Total No. of No. of Increased
Worker at Workers at number of
Establishment Present in workers
time the Startup
48 sample 239 422 183
startups
university- 70 123 53
incubator
(Out of 48)
Startups which 31 43 12
have been
started earlier
and registered
after 2014 (Out
of 48)
Another interesting fact is that one by fourth of the sample startups make use of the toll-free
helpline number and were satisfied with the response as all their queries were answered. Their
experience with the incubators was also positive as they didn’t face any problem. But, still few of
the startups reported that searching and finding out incubator is one of the concerns since the
knowledge about how to start with and whom to contact and also what all are the facilities
available etc. needs public awareness/attention. So, business incubator related awareness
generation in the educational system is the need of the hour. 84 percent of the university
incubator based startups samples attended the mentor training programme, workshops and
seminars. Incubators like AUD Centre for Incubation, Innovation and Entrepreneurship (ACIIE),
IIT Delhi, Ambedkar University, IIT Mandi, Department of Science & Technologies (DST),
NASSCOM, Amity University, Technology Business Incubator (Delhi University) helped them
for knowledge management.
Chapter III already discussed various facilities for entrepreneurship development and financing
facilities for startups. Broadly, it can be classified as two: entrepreneurship development
schemes and financing schemes. Development schemes include Entrepreneurship mentoring,
training and incubators etc. and financing schemes include bank loans and government grants,
venture capital investment. Field survey results show that rentfree services were provided by
the incubators along with access to utilities such as water, telecom, electricity, internet etc.
It is also important to point out that five per cent of sample startups operated on a virtual basis,
without physical space. They also informed that the use of the incubator postal address was
required to help business and advertise their product. Concurrently, those who are using the
physical space is meant to promote networking among entrepreneurs, and their mentors. In the
field survey, it is also noted that incubators support business assistance like marketing
assistance, enhancing presentation skills and also help with business etiquette and regulatory
compliance.
5.4 Few more extra case studies on Issues and challenges faced by startups:
a) The Webliska Technologies Pvt Limited, by Manish Manchanda located in Faridabad,
Haryana state and they are providing the facility of web development to clients at the lowest
cost. Mr Manish Manchanda informed that GST initiative is a good step of the Government for
the low price for each commodity than previous. But, funding, location and availability of the
skilled labour are the main problem which the entrepreneur stated. Mr Manish Manchanda says
“If we get an update from government side regarding the funding and guidance like available government
schemes for funding, how to get the help of an incubator, and concerned training programme details, it
would be an immense help for us to do much more in our business”. He also suggested that proper
guidance is required about the startup ecosystem and also this information is not much captured
at the grass roots level. Even we do not get any emails about the different conference/
exhibitions and workshop related to the business.
b) The case of Mashiva Technologies Private Limited situated in Nehru Place, Delhi, is mainly
focusing on the supply of laptop and desktop to the corporate on a reasonable price with a
guarantee of a longer period. They are only dealing with the Exporter Company and Corporates.
Mr Chandan Kumar Singh, startup founder told that he has approached nationalized bank for
funding but the officer told that there is not any loan facility for startups. Even when he
contacted the bank for the MUDRA Yojana Kishor scheme, the officer told him to submit capital
or property details and lastly, he arranged money from his friends and relatives to revive his
business. He also suggested that “If we get regular information and web portal by which we can claim
or drop our problem that will be an immense help for us to continue our businesses. Such
portals/platforms would be helpful for both entrepreneur and the government to aware the grassroots level
problem on the operation of startup”.
c) Case of Edisoft Digital Private Limited: This is an enterprise belong to Sector 3, Noida and
the institution was registered as a startup on 27 th August 2016. The owner of the enterprises is
Mr Ankit Sharma, who was completed B.Tec from ITS engineering college and started his
business in the area of Digital Marketing. He told that we couldn’t find the details of an incubator to
join, or other training programmes, which are the prime objective of the startup.
d). Case of Esyfix Technologies Private Limited: This is an IT service product development
enterprise operates by the Mr Amit Sharma, who has completed his MSc from Delhi. He has
registered as a startup in October 2016. On the starting point, he invests 2 lakh and now it is rise
to 10-12 lakh (i.e., annual turnover). He told his experience related to different Government
tender for various projects. “I have still seen almost all the government projects tendered which are
asking for last two years financial statement and it is to be above 4-5 crore to bid for the project. How can
a small company or entrepreneur compete in such scenario with a bigger organisation even if they have
much better technology and better rates? Startups are not helping to getting any financial support neither
from the government side nor from the bank. Even if we are registered with DIPP and also got the
certificate from that but the bank does not provide any financial support to us for our business purpose.
No incubator has approached us to work in their centre and we are investing our own fund and continue
the business and generate employment. Government may come with schemes where startup may be better
aware of such schemes.”
e). Case of Innovation India: This is an enterprise located in Sarai Julena, Friends Colony Delhi. Mr
Vijay Kumar Sharma is the Director of the company and more than five workers are working in
the innovation businesses. Currently his business annual turnover around 60 lakh. He started
his business with an investment of 2 lakh. He points out that the innovative businesses reduce
the cost of production and also increase competitiveness in the market. He received the fund
from MUDRA schemes. But he informed that getting skilled manpower is very difficult. He said,
“I need trained workers who can give new ideas and help to reduce the cost of production and startup
Mitras in the each Tehsil/ Block level is required to help the need of the entrepreneur related to funding
and other details”.
Chapter VI
Government Initiatives to Restore Labour/Monetary Market

Equilibrium- Implications on Entrepreneurship
Formalisation
6.1 Entrepreneurship formalization
The Startup India program has also encouraged the formalization of the firm setting
activities by providing facilities and incentives to registered startups. Whether
formalization of the firm is good on the growth of the firm is widely debated among the
scholars. Some are of the view that those firms which start with formal registration with
the government are likely to succeed faster in terms of sales and employment but the
success rates varied from country to country; higher in those countries where people have
more trust in their government (Assenova and Sorenson, 2017). On the other hand, some
have established the opposite while taking the case of informal entrepreneurial activity in
developing societies (Williams et.al.). In developing economies, registration requirements
are seen as overly burdensome, due to formal institutional imperfections and their
circumvention thus deemed socially legitimate (De Soto, 1989). That’s why registered
enterprise that start up unregistered and spent longer operating unregistered are revealed
to have significantly higher subsequent annual sales, employment and productivity
growth rates compared to those that registered at the onset (Williams et.al, 2017).
Apart from these factors, some other minor factors also sometimes lead to big impact over
the growth of startups for example the impact of the attitude of the entrepreneur on
growth of the enterprise (Cliff, 1998). If entrepreneur form negative opinion towards
growth while considering his concerns that larger size of the firms may compromise
wellbeing of employees, ability to control the growth and withstand any crises,
independence of firm vis-à-vis other stakeholders, it will affect the growth and size of the
startups (Wiklund et.al, 2003). Similar is the impact of experience as a factor and as per the
firm behavioural theorist,
the experience is poor teacher in the case of entrepreneurship and prior learning is difficult
to be applied in new business environment (Levitt and March 1988). Gottschalk et.al. argue
that experienced entrepreneur are not as good as novice entrepreneur as far as the risk
taking and other steps are concerned. The cognitive biases such as over optimism and over
confidence and subjective beliefs about the geographical location of the startups like access
to the industrial cluster has also been considered as a determining factor in their growth
(Folta, Cooper, & Baik, 2006; Stuart and Sorenson, 2003). Glaeser et al. have documented
the impact of urban economics on the location of enterprises. They conclude that the large
cities have more demand for specialized products which makes them particularly
attractive places for startups creating new products (Glaeser et.al 2009). It is evident from
previous chapter III, those states that have a more dynamic policy also have a higher
proportion of start-ups that have received funding. This chapter examines how the
demonetization, adoption of a nationwide sales tax (GST), overhaul of bankruptcy law,
labour law reformsinitiatives affecting the economy to correct the labour/monetary market
distortions from informal to formal and its impacts on startups.
6.2 Single market-goods can move freely
The implementation of GST on 1st July 2017 is definitely a historical initiative since the GST
tax reform reduces the multiplicity of taxes, compliance costs and also to avoid paying
taxes on inter-state transfer and movement.As per our previous tax system, any business
with a turnover of more than Rs 5 lakh had to get VAT registration and pay VAT might
differ by states. How this initiative of Goods and Services Tax (GST) impact startups,
SMEs, and small businesses provided that half
34
10
Under Payment of Bonus Amendment Act, eligibility limit for payment of bonus enhanced from Rs 10000/- to Rs.
21000/- per month and the Calculation Ceiling from Rs. 3500/- to Rs. 7000/- or the minimum wages.
11
Payment of Wages (Amendment) Act 2017 enabling payment of Wages to employees by Cash, Cheque or crediting
to their bank account.
12
Maternity Benefit Amendment Act, 2017, increases the paid maternity leave from 12 weeks to 26 weeks.
13
Child Labour (Prohibition and Regulation) Amendment Act, 2016 provides for complete ban on employment of
children below 14 years in any occupation or process.
14
The Employee Compensation (Amendment) Act, seeks to rationalize penalties and strengthen the rights of the
workers under the Act.
15
Ease of Compliance to maintain Registers under various Labour Laws Rules, 2017 replaced the 56 Registers/Forms
under 9 Central Labour Laws and Rules made there under in to 5 common Registers/Forms. This will save efforts,
costs and lessen the compliance burden by various establishments.
Government Initiatives to Restore Labour/Monetary Market Equilibrium- Implications on Entrepreneurship
Formalisation
of our workforce depends on self-employment. As per current GST, the turnover threshold
is 20 lakhs thus it may exempt many small businesses including startups (Ranabir, 2017).
GST also has a scheme of lower taxes for small businesses with turnover between 20 to 50
lakhs though it is optional (called the composition scheme). This will definitely bring relief
from tax burdens to newly established startups/businesses.
GST may also safeguard level playing field between Small and Medium Enterprises (SMEs)
and corporate houses since logistics and infrastructure capabilities of the big corporate
houses may shell out by escape paying taxes on inter-state transfer and movement; due to
limited resources and infrastructure, SMEs and startups aren’t able to do that (Som Dutta,
2017). By the way, new businesses can get rid of this ‘stock transfer’ from one state to
another without restricting the business climate. GST tax reform also reduces the usual turf
wars between the centre and states due to the current differential tax regime as well as the
logistic inefficiencies, including slow transit times and disruption in business climate
(Dilasha & Indivjal, 2016). Under GST regime startups in the service industry can set off the
VAT paid on the purchases with the service tax on their sales will be a big boon to the
startup industry and it will result in the reduction of costs. Since the new tax proposed to
bring down tax exemption limit for manufacturing units, there are few criticisms by
pointing out the principle of equal treatment for small and medium enterprises and it will
bring a large number of SMEs in the tax net. Technologically innovative and other online
startups differ treatment by states and confusing compliance also removed in GST.
Reduction in unnecessary logistics costs will increase profits and efficiency for startups
involved in the supply of goods through transportation. Finally, Indian economy bring one
single market where goods can move freely as well as tussle free compliances to deal with
for businesses/ startups to streamlining supply chains.
6.3 Labour law amendment, reforms and codification
Fostering conducive labour environment by protecting labour rights and harmonious
labour relations facilitate ease of doing business and finally lead to higher productivity and
economic growth. By considering the age-old labour laws in India and its rigidity, various
legislative, administrative and e-governance initiatives have been taken by the government
since job prospects in India has really grown up over the years. Second National
Commission on Labour also advocates the need for flexibility to encourage
competitiveness and efficiency in the current wake of globalization (Datta & Milly, 2008).
To the simplification of existing labour laws, labour codes were being formulated in four
areas namely wages, industrial relations, social security and working conditions to
strengthen safety and social security of workers by amalgamating all the existing labour
laws. Moreover, wages code would unify the wage of a worker throughout the country
across all sectors; the industrial relations code will amalgamate all industrial laws; social
security code will provide workers with health insurance and pension; safety and working
conditions code will ensure that a worker is secure at his workplace. It would simplify,
amalgamate and rationalise the relevant provisions of the central labour laws.
The very recent legislative initiatives of the government on Bonus payment 10, Payment of
Wages11, Maternity Benefit12, Child Labour13, Employee Compensation14 etc is showing few
35
examples of labour reform. Governance reforms such as ease of compliance to maintain

registers15, model shops and establishment’s bill, rationalisation of forms and reports etc.
have been introduced recently. A model Shops and Establishments Bill, 2016 provides for
freedom to operate an establishment for 365 days in a year without any restriction on
opening/closing time and enables employment of women during night shifts if adequate
safety provisions exist. Fixed Term Employment has been introduced under Industrial
Employment (Standing Orders) Act, 1946 to impart flexibility to an establishment to
employ people in case of Apparel Manufacturing Sector to meet the fluctuating demands
of the sector due to its seasonal nature (GoI, 2017). These amendments, codifications and
reforms would lead to ease of doing business and flexibility in labour laws ultimately
provides confidence to keep nurturing the startups of India.
6.4 Overhaul of bankruptcy law
Promoting Youth Employment & Entrepreneurship: A Study with Special Focus on
‘Startups’
The government of India’s stimulus push for the debt recovery from the defaulter shows
India lacks an adequate framework to resolve non-performing loans in a timely manner.
Poor rankings on the World Bank’s Ease of Doing Business made things worse because
non-performing assets had acquired an alarming proportion impacting the availability of
credit needed to rejuvenate the economy. 3 trillion rupees of loans have been recognised as
“non-performing” by banks in the past two quarters the vast bulk of them at Public Sector
Banks; 17% of all loans there have either been written off, provisioned for or categorised as
impaired (The Economist, 2016). The multiplicity of laws dealing with insolvency is one of
the reasons for the slow progress to provide an overarching framework to ensure
resolution of all cases which would make India’s one of the world’s fastest-moving
bankruptcy regimes. This law will enhance the ease of doing business and make life easy
for a prospective entrepreneur who wishes to start a new venture.
The Insolvency and Bankruptcy Code, 2016 and came into force on 28th May 2016 and the
main objective of Insolvency and Bankruptcy Code is to consolidate multiple laws and
adjudicating authorities dealing with insolvency, bankruptcy, revival and/or liquidation of
various entities including individual, partnership firms, corporate entities etc. The
Insolvency and Bankruptcy Code 2016 sets out an 180-day deadline with a grace period of
another 90 days (if majority 75% of creditors agrees) to resolve bankruptcy cases - currently
it takes 4.3 years on average (The Economist, 2015). It has provisions for the fast track
and / or voluntary closure of Startups through insolvency professional for Startups.
Startups with simple debt structures or those meeting such criteria as may be specified
may be wound up within a period of 90 days from making of an application for winding
up on a fast track basis. It will definitely create a more business-friendly environment.
Hence, reforms in bankruptcy laws can play an extremely crucial role in financial stability
and enable an environment for the growth of India.
6.5 Formalisation process through big push
Other arguments remaining constant8, definitely demonetization had a potential to
facilitate an environment that developed a formal culture in India’s labour market. The
Informal labour market in India is so wide approximately 90 percent had no changes over
these years in nature, conditions and quality of employment; lack of proper remuneration
mechanism and labour market distress remains pervasive. There has been an increased
tendency to outsource, offload or subcontract in the Indian labour market and the
8 Short term effect of liquidity crunch, loss of growth momentum etc

36
majority of the work is allotted without any written agreement or contract. Most of the
industries are outsourcing their incidental/ancillary activities to avoid the direct
connection between employer and employee (Dhanya M B, 2013). If we dig deeper, lack of
labour reforms as the main reason that dissuade hiring of labour but as exploring the state
which implemented labour reforms, the jobs created were vastly informal in nature. Hence,
instead of these policy changes, there is needed to make a valiant effort at facilitating a
widespread situation that will develop a formal culture in Indian labour markets. Of
course, Demonetization made routing wages and salaries through bank accounts,
electronic and mobile payments created a formal culture of employment. In addition, this
also would force employers in the country to consider employment contracts.
Demonetisation together with the amendments in the payment of wages act through
cheques or by electronic modes made mandatory is another example for formalization of
informal employment. Finally, demonetization pushed to labour reforms. The inter-
linkages of demonetization effect are very vast when we connect it with digitalization and
the financial inclusion for the long run.
6.6 Conclusion
New insolvency framework coupled with GST is being seen as an important piece of
legislation to help to create a more businessfriendly environment. This, in turn, boosts
productivity in the economy at large and the successful implementations definitely restore
the distortions in the monetary market equilibrium. Moreover, the interventions to correct
the labour market distortions by labour law reforms and recent demonetization policies
would definitely encourage startups/businesses to facilitate job opportunities and also
would lead to conducive and trustworthy environment in future. These reforms and
recommendations by highlighting the need for structural and functional rigidity or
flexibility correcting both labour and monetary market distortions would facilitate ease of
doing business to compete in international markets. The transitional economy is ready to
getting momentum to reap the demographic dividend as well as the challenges in the
future.
CHAPTER VII
Conclusion and Public Policy Interventions to Promote Startups
7.1 Introduction in their laboratories to spread awareness and
commercialize their products through interaction
Among the different viewpoints over the
between researchers and the entrepreneurs
definition of entrepreneurship, innovation is one
(Habiby and Coyle, 2010). Universities and other
the widely debated attributes supposed to be
research institutions thus can play an important
important for entrepreneurs as they are the role in promoting innovation-based
market disrupters for which innovation of new entrepreneurship e.g. Shantha Biotechnics started
technology, business model, idea or product is as a research outfit in Osmania University campus
necessary. Drucker (1985) called entrepreneurship and subsequently able to commercialize India’s
as an “innovative act, which includes endowing first low-cost Hepatitis B vaccine (Chakma et.al,
existing resources for new wealth-producing 2011) and more examples are already explained in
capacity.” Innovation is one the basis for the previous chapters.
growth of startups in India. The linking of the
It is evident that public policies are an effective
Startup India programme with Atal Innovation
tool to promote start-ups which facilitates the ease
Mission underlines the need for
of doing business and promotes innovation and
commercialization of the new innovative products
competence. Policies created a conducive
through registration and patenting (Gokhle 2016).
ecosystem to do business, and this ecosystem
The advances in science and technology have
worked in tandem with other sectors which are
increased the activities of patenting, licencing and
indirectly connected with start-ups. This included
innovation-based entrepreneurship. It is easier
creating infrastructure, promoting awareness
now to get funding through domestic and
through education etc. An OECD report points of
international sources for innovative products
five major areas of direct policy intervention
impacting the life at grass-root level. Easy access
which are crucial for promoting start-ups. It is
to information, higher internet speed and efficient
explained in table 7.1 below:
business research have now made easier for the
scientist and researchers; earlier confined
Table 7.1: Five major areas of direct policy intervention to promote Startups
Gap Policy action Types of actions/programme
Funding gap Closing funding gaps Seed-capital programmes and borrowing for Start-ups, as
well as incentives for the financial sector to work with
startups, such as the promotion of venture capital, angel
investor, etc. In recent years, countries have also introduced
action to support crowd funding.
Information Facilitating linkages Support services for start-uppers. In recent years, platform,
asymmetry and providing mentoring network and collaborative work spaces have
services grown in number. They operate alongside traditional
intermediary institutions like incubators and accelerators.
New platforms to facilitate linkages between large firms and
start-ups also emerged.
Absence Creating markets The inclusion of start-ups in public procurement
of programmes and initiatives that challenge start-ups to
demand provide innovative solutions.
Little tradition Transforming Action to raise awareness about start-ups (including prizes
for business mindsets and events).
and innovation
Legal and Reforming legal Legal and administrative reforms to suit the needs of
administrative frameworks startups, such as easier procedure from starting and
barriers winding up a business.
Source: OECD 2013
38
Promoting Youth Employment & Entrepreneurship: A Study with Special focus on ‘Startups’
Reanalyzing into the OECD gap and policy action intervention to promote Startups, the type of
action, the government of India have initiated discussed earlier whether it is for funding (seed
funding & venture capital), information asymmetry (Startup India hub & website), absence of
demand (relax norms of public procurements), the little tradition for business and innovation
(awards to budding innovators & National Entrepreneur Award) or legal and administrative
barriers (self-certification & Faster patent), confirm that Government tried to take action in all these
areas. However, there is a need to reach out to the people. It is also noted that in the case of ease of
doing business, the Government of India has ensured not only formulating well-informed policies
but also has been focusing on implementation strategy. This is being acknowledged by World Bank
in their study which mentions that the Government of India has established clear stakeholder
feedback mechanisms which help to close the gaps between policy formulation and
implementation (World Bank 2017).
In a competition-driven economy, for start-ups to flourish, the major thrust needs to be given
7.2 Recommendations and interventions:

for innovation and technology-enabled, and technology-driven innovation dominates the trend.
This is evident from the fact that India is the second largest ecosystem in the world. The box below
shows the macro-trend in this regard. Deep technology companies play a leading role in providing
a techno-based solution to a large number of enterprises.
Startup Landscape of India

• The Second largest startup ecosystem
in the world
• Approximately20,000 startups in
India including 4,750 are
technology-led startups
• 1400 new start-ups
incorporated in 2016
alone (3-4 tech startups born every
day)
• 100K talent employed in
start-ups
• Bengaluru, NCR, Mumbai
accounts for 70% of
the total start-ups
• USD 3.8 -4.0 Billion funding
in 2016
Source: Startup India Website & NASSCOM 2016
But still, there are few suggestions highlighted from the studies along with recommendations are
as follows:
1. Incubation offered by universities provides startups with working spaces, assistance in
the proper documentation for company registration, industry leader interaction and seed
financing – all under one roof. The role of research organizations is to minimize the
information asymmetry about the various kinds of government policies and strategies
under different socio-economic arrangements. However, the link between these
university incubators along with the outside startups through a platforms will definitely
facilitate for knowledge transformation. Another key suggestion emerged from the field
study is that to avoid the information asymmetry, there should be a Startup Community
developed with the collaboration of startups in the same sectors to receive support,
motivation and sharing of learning.
2. In a competition-driven economy, for start-ups to flourish, the major thrust needs to be

given for the knowledge platforms which connects each startup to share knowledge and
collaborate instantly and also it can share the formal and informal information in a single
location. Even though the platforms are existing for startups and in the application
procedure applicant have to submit links to their website, any videos and press cover of
entity, most of the links are either nonfunctional or not providing sufficient information.
3. In the field survey, it is noted that due to lack of knowledge and understanding about the
financing of startups, the budding entrepreneurs are not able to raise capital adequately
at the right time. Moreover, the dearth of information regarding the relevant documents
and the process of applications to start a business is another issue. Hence, there is a need
for the requirement of spreading massive awareness programmes for the effective
implementation of startup initiatives.
4. Regarding the functioning of the incubators, in an interview with an executive director,

many problems have been raised. There is no legal document in a uniform way to follow
and various
Conclusion and Public Policy Interventions to Promote Startups 33
institutions follow a different kind of practices appropriate to their requirements. Also,

there is no benchmark which should be followed for either mentorship, seed funding,
extending infrastructure or linkages with other investors. Consequently, there is need to
provide a legal information or proper guidelines/document to follow in a uniform
practice which should applicable to all the incubators so that the transparency in the
system will lead ease of doing business, and will help newly budding incubators to take
decisions quickly, especially those from the interior parts of the country.
• Streamlining of incubators particularly, on seed funding

required to be analysed, e.g. if we assume in the
form of equity, how would you define equities and on what per cent; how do you
evaluate the innovative idea in terms of the worth of that idea in commercial terms.
Proper research is required to draft the guidelines applicable to all institutions.
• The term ‘social enterprise’ required to be definedmore

clearly since in social sector defining the enterprise is more
complicated and it requires research work for articulation.
• Regarding the right mentors, there is no clarity or

platform for giving mentorship according to each startup
concerned in their sectors and it mostly depends on informal networking. Some of
the international organisation have chapters in Delhi and Chennai and charges much
higher. There is an urgent need to make networking of the experts available in each
sector, and also it should be made available to various parts of the country for
mentorship. So, the lobby of the international organisation and the public
institutions spending the much higher cost for their services can be minimized if
there is more formal, disciplined transparency in mentorships, otherwise,
informality does not work well and it can go into its dynamics.
5. Entrepreneurial education at the school and university setting can help in creating
awareness of self-employment as a viable career option. Hence, all the universities and
schools should involve ‘entrepreneurship and innovation’ as part of its curriculum
accordingly.
6. There needs to be an emphasis not only on the skill development of the employees but
also a quick and effective way of disseminating information regarding the latest
innovations taking place. The pace at which changes are taking place in each sector, the
startups are not able to cope with these changes as there is no dedicated effort to conduct
research and disseminate knowledge at a mass scale. This means that entrepreneurs
continue to use outdated modes of technology, driving the cost of production upwards,
with productivity remaining stagnant thereby increasing the financial burden. There is a
need for the coordination of innovation happening among startups in each sector, and
40
this information should be made available to those who want to establish a new startup.
It will provide the entrepreneurs to know about the marketability and further innovation.
More emphasis needs to be given on research and development so that not only the
startups know the latest innovations but also the startups know how to maximize the
potential for development in that sector provides.
7.3 Conclusion
The Economic survey 2018-19, clearly explains that small firms in India never grow, instead of
infant firms that have the potential to grow and become giants rapidly. Firms with less than 100
workers despite being more than ten years old, account for more than half of all organized firms in
manufacturing by number, their contribution to employment is only 14 per cent and to
productivity is a mere 8 per cent. In contrast, large firms (more than 100 employees) account for
three-quarters of such employment and close to 90 per cent of productivity despite accounting for
about 15 per cent by number. There is also evidence from the field survey that among the sample
startups even though sample is few, already functional some years before as an enterprise is
having less employment generation when compared with the new firms. However, among the total
sample startups, it is evident that there is an increase in employment at present while comparing
with the establishment time. The increasing number of
business incubators providing seed-stage support to start-ups is one of the major reasons for the growth
of start-ups in the country (The Hindu 2016). The educational platforms are creatively used for talent
identification and interest of the private sector towards such initiatives is a welcome trend in this regard.
While considering the youngest nation of the world with 72% founders less than 35 years, Indian
startups endeavours have recently brought in a surge of huge employment opportunities among the
youth. There were 4750 startups in 2016 (DIPP, 2016), and this number reached 20,000 by 2019.
Moreover, there is evidence from the field survey that the generation of employment due to startups
ecosystem is valid. A process of action and innovation response towards establishing a new enterprise
or a firm is the main vehicle for socio-economic development. It is often considered as the major source
of new ideas to foster innovations. Hence, startup initiative is aimed to foster innovation, create
employment and facilitate investment.
Appendix I:
Figure 1: Growing NEET rate among youth in major countries (Percent)
40 36.65
35 30.83
30
23.24
25 19.96 20.3 20.62
20
14.04 14.56
15 11.22
10
5
0
Argenti Colomb Indonesi South
China Russia Brazil India OECD
na ia a Africa
Series1 11.22 14.04 19.96 20.3 20.62 23.24 30.83 36.65 14.56
Source: OECD Economic Survey: India 2017.

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Promoting Youth Employment & Entrepreneurship:

A Study with Special Focus on ‘Startups’

NLI Research Studies Series No. 141/2020

V.V. Giri National Labour Institute

No. of Copies : 300

Year of Publication : 2020

This document can be downloaded from the Institute’s website at www.vvgnli.gov.in

List of Figures & Tables

Figure 1.2 Unemployment rate among the youth 2

Figure 1.4 Formal vocational/technical education across age groups 3

Figure 2.1 Emergence of Start-ups in India 9

Figure 3.1 Geographical spread of the start-up policies of different states 14

Figure 5.1 Gender Distribution of entrepreneur in the sample (Percent) 24

Table 3.1 Major policy initiatives of the states 13

Table 4.1 Role of selected universities/institutes in nurturing future entrepreneurs 19

Table 4.2 List of Startup Centres 22

Table 4.3 List of Technology Business Incubators 22

Table 5.2 Disaggregation of sample startups and the employment generation 26

Youth Employment and Entrepreneurship: Situational Analysis

15-19 20-24 25-29 Total

Source: PLFS-2017-18,(in percent)

2004-2005 2011-12 2017-18

Figure 1.4: Formal vocational/technical education across age groups

Male Female Person

2) Examine role of universities in creating a new ecosystem to flourish entrepreneurship &

Ideation validation Early Scaling Total

1.8 Limitations of the Study

Theoretical Perspectives on Entrepreneurship/Startups

Figure: 2.1 Emergence of Start-ups in India

known as policy-induced entrepreneurship. In the modernization era, startup

2.3 Funding Sources for Startups

Finding Sources of Funds as a Constraint to Growth:- As far as the constraints in the

Procedure, Policies and Regulatory Process of Startups in

Fig 3.1: Geographical spread of the start-up policies of different states

Source: India Venture Capital and Private Equity Report 2017

Table 4.1: Role of selected universities/institutes in nurturing future entrepreneurs

4.2) Startups associated with incubation centres:

Art for Social Change India

Shillong Allahabad Agartala Kancheepuram Jabalpur Gwalior

IIT Ropar IIM Kozhikode

IISER Thiruvananthapuram IIM Raipur

1 Source: Government of India (2016), Startup India Action Plan, p. 27

the overall entrepreneurial activity in an emerging country like India.

This research study envisaged investigation among

Figure 5.1: Gender Distribution of entrepreneur in the sample (Percent)

Source: Field survey data

There is an enormous debate regarding the

No.of Employees at Establishment Time No. of Employees at Present Time

Government Initiatives to Restore Labour/Monetary Market

examples of labour reform. Governance reforms such as ease of compliance to maintain

8 Short term effect of liquidity crunch, loss of growth momentum etc

7.2 Recommendations and interventions:

Startup Landscape of India

2. In a competition-driven economy, for start-ups to flourish, the major thrust needs to be

4. Regarding the functioning of the incubators, in an interview with an executive director,

institutions follow a different kind of practices appropriate to their requirements. Also,

• Streamlining of incubators particularly, on seed funding

• The term ‘social enterprise’ required to be definedmore