August 22, 2022
Startup India is a flagship initiative of the Government of India with the agenda to actively support startups and entrepreneurs. The primary objective of the program is to create a strong ecosystem that nurtures and protects innovation and startups in India, ultimately generating large-scale employment opportunities and leading to the sustainable economic growth of the country. Subsequently, the Indian government also launched the Aatmanirbhar Bharat mission and the ‘Make in India’ program, with the aim of transforming India into a global manufacturing and design export hub.
Today, India boasts of being the third-largest startup ecosystem across the globe. The country has over 100 unicorns and more than 60,000 startups operating within the territory. This success can be partly attributed to the active support provided by the Indian government to startups and entrepreneurs through its various schemes and programs. All of the aforementioned programs were accompanied by various government schemes and resources to provide financial assistance and working capital to startups. For instance, startups are eligible for a variety of benefits under the Startup India Action Plan, including tax incentives and exemptions, loans at reduced interest rates, skill development programs, prioritization of startups in public procurement, etc. This article aims to cover a few of the numerous schemes launched by the Indian government.
This scheme was introduced to set up a network of technology centers and incubation centers across India with the objective of accelerating entrepreneurship and encouraging innovations for unmet social needs in the agro-business industry. It provides financial aid for setting up livelihood business incubators and/or technology business incubators, by way of a one-time grant of 100% (hundred percent) cost of plant & machinery (apart from land and infrastructure) or a sum up to INR 100 (Indian rupee hundred) lakhs, whichever is less.
In India, a large portion of the population is still dependent on agriculture for their livelihood and a substantial number of Indians live in rural areas. As such, this scheme was launched with the purpose of generating employment and establishing enterprises in the agriculture industry. It provides knowledge to entrepreneurs for establishing their own businesses, to emerge as employers, and to ensure their self-sustainability. This program intends to foster district-level economic growth from the ground up.
Under this scheme, Micro Units Development and Refinance Agency Ltd. (“MUDRA”) is a non-banking financial company that supports the development of the micro-enterprise sector in India. MUDRA provided refinance support to banks and/or microfinance institutions for lending to micro units that have loan requirements up to INR 10 (Indian rupee ten) lakhs. The loans have been divided into categories of Tarun, Kishore, and Shishu, depending on the stage of development, funding needs and age of the business, and the amount of loan that can be availed by these businesses. There is no collateral security for these assets and loans up to INR 10 (Indian rupee ten) lakhs can be provided to small businesses which are non-corporate and non-farm micro or small enterprises. This loan is granted for a variety of activities that provide income generation and employment creation. It is mostly offered to street vendors, store owners, traders, and other service providers. Additionally, working capital, travel vehicles, and working capital loans are offered. Thus, it is a unique scheme that is devised to empower Indian entrepreneurs.
The SIP-EIT scheme was launched by the Department of Electronics and Information Technology (“DeiTY”) with the aim of providing government funding to technology startups and Micro Small and Medium Enterprises (“MSME”) in India for filing international patents. This encourages innovation, builds brand recognition, and recognizes the importance and potential of having global intellectual property protection. Financial assistance is provided to the information communication technologies and electronics sector. The eligible entities can apply for this scheme at any stage of the international patent filing process. The reimbursement limit is set at either 50% (fifty percent) of the total expenses incurred during the filing and processing of the application or INR 15 (Indian rupee fifteen) lakh for every invention, whichever is lesser.
This scheme was again launched by DeitY with the objective of encouraging industries to collaborate with premier academic and government R&D institutions for the development of packages and products. This would strengthen the link between industries and institutes, accelerate the development of indigenous products and packages, and bridge the gap between proof-of-concept and globalization. Under this scheme, if an industry supports the R&D of products that are capable of commercialization, the government would provide funding up to twice the amount provided by that industry. The grant amount for an individual industry is restricted to 2 (two) crores per project and the preferred duration of each project is less than 2 (two) years. For a consortium of industries, the granted limit is 4 (four) crores with a duration of 3 (three) years.
To implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises (“MSE”), the Ministry of MSME, the Government of India, and the Small Industries Development Bank of India (“SIDBI”), established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This scheme strengthens the credit delivery system and facilitates the flow of credit in the MSE sector. It provides loans at highly subsidized rates and with zero collateral to startups, small-scale industries, and micro-level businesses. The scheme covers fund and non-fund-based credit facilities up to Rs. 200 lakhs for every eligible borrower and the funds are dispersed by the SIDBI. The scheme is primarily for service or manufacturing businesses and the loan can be availed in the form of a term loan or working capital.
SPRS is a developmental scheme managed by the National Small Industries Corporation (NSIC) for supporting MSE. Undoubtedly, the Indian government is the single largest purchaser of a large array of goods. The objective behind this scheme was to increase the number of purchases from the small-scale sector. By opting for this scheme, NSIC registers the eligible MSEs for participation in government purchases without any Earnest Money Deposit (EMD), which is the money taken from bidders before they place any bid, as a security deposit for ensuring their seriousness in the project. Thus, under SPRS, MSEs having an NSIC registration will be exempt from paying the EMD. Further benefits include advantages in tender participation, free-of-cost tender, and procurement from MSEs. As an additional benefit, 358 (three hundred and fifty-eight) categories of goods are reserved for being purchased exclusively from the MSEs and the government has also prescribed a minimum limit of 25% of the total yearly purchases made by central ministries, departments, and public sector undertakings from MSEs only.
CRG was originally named the Extramural Research Funding Scheme. It was launched more than four decades ago, after the establishment of the Science and Engineering Research Board (“SERB”) but continues to be one of the most relevant and useful schemes. The objective of CRG is to help research labs, academic institutions, and other R&D organizations carry out research in all frontier fields of science and engineering. Thus, it encourages upcoming and eminent scientists for an individual-centric competitive method of research funding.
This scheme aims to support and invite new ideas and proposals which carry the potential to have a broad impact in the domains of science and technology. It lays emphasis on proposals that are new and risky, but if successful, can be highly rewarding for the field of science. Such proposals may include theoretical and experimental advances, challenges to existing hypotheses, scientific breakthroughs, an ‘out of the box’ solution for an important problem, or the formulation of a new hypothesis that brings about new technologies. There is no prescribed budget limitation for these projects and the research grant shall cover consumables, contingencies, equipment, and traveling costs apart from the overhead grants. The funding is provided for 3 (three) years which may be extended to 5 (five) years in exceptional cases.
The Indian government has recognized the importance of innovation and design in the growth of any brand and decided that every MSME and startup should build a design-centric approach to fueling their startup. In order to encourage small businesses to experiment with new and innovative designs for their goods, the Ministry of MSME established the Design Clinic scheme to create a sustainable design ecosystem through ongoing training and skill development. Under this scheme, the government shall extend up to INR 60,000 (Indian rupee sixty thousand) for attending seminars on design and up to INR 3.75 lakhs or 75% (seventy-five percent) of the seminar’s cost, where the seminar is conducted by the startup or MSME. By virtue of this program, it is expected that entrepreneurs and leaders would get an opportunity to learn about the latest practices and trends pertaining to designs, network with other innovators and designers, learn design theories, and increase the local competitiveness of their products using designs.
This mission seeks to motivate manufacturers to create better products, that have zero defects and high quality, as the name suggests. It is a handholding scheme that provides an opportunity for MSMEs to embrace world-class manufacturing processes, use new technology, and consistently improve their products. The scheme provides tools, technology as well and financial assistance to startups and MSMEs to ensure zero defects in their goods. ZED also offers a holistic certification, assesses enterprises for ZED, and supports startups in climbing up the maturity assessment model of the scheme.
The schemes discussed in this article serve a twofold purpose: they support and benefit the existing startups and businesses while also inspiring and encouraging budding entrepreneurs, students, and leaders from every domain to launch their own businesses and take another step towards an Aatmanirbhar Bharat. The vision is to enable the talent of India to dream of new ideas, implement them, and ultimately, convert them into a successful and thriving business. These initiatives have proved to be quite successful in their objective, with India ranking number 3 (three) in the list of the world’s highest number of startups.
While the few schemes listed above are suitable for most industries, there remain many other such government initiatives that are designed for specific industries. The ‘Startup India’ initiative itself comprises 124 (one hundred and twenty-four) such schemes which can make it cumbersome for entrepreneurs to break through at the initial stage of establishing their business and can be perplexing to understand. Our team of professionals can assist you in understanding the government laws and regulations, applicable schemes for your business, and the process of registration in each scheme. We additionally provide strategic support adapted to the needs of every business and help every entrepreneur establish a successful startup.
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