Background
The startup ecosystem in India has seen significant growth and unwavering support through initiatives like the Startup India Programme. Launched by the Government of India on January 16, 2016, this flagship initiative is a testament to the government’s commitment to fostering innovation, nurturing startups, driving economic growth, and creating employment opportunities. The Standup India scheme, a part of this initiative, facilitates bank loans for setting up enterprises in trading, services, or manufacturing sectors, benefiting Scheduled Castes, Scheduled Tribes, and women entrepreneurs. Critical features of Startup India include simplification of compliance, funding support, incentives like tax exemptions, industry-academia partnerships, and incubation programs.
As part of the Startup India Initiative, the Department for Promotion of Industry and Internal Trade (DPIIT) plays a pivotal role in coordinating the implementation with other government departments, demonstrating the government’s dedication to driving sustainable economic growth and generating employment opportunities. Since its inception, the initiative has made significant strides, with a focus on simplification, funding support, and industry-academia partnerships. The Startup India Showcase platform is another testament to the initiative’s success, as it showcases promising startups in sectors like Fintech, HealthTech, and EdTech, highlighting their innovations and success stories.
The Startup India Scheme offers a host of benefits to startups, aimed at reducing regulatory burden, providing tax exemptions, and supporting patent applications to foster innovation and growth. Eligible startups can avail benefits such as income tax exemptions for three consecutive financial years within their first ten years of incorporation, allowing them to concentrate on innovation and growth. The overarching goal of the Startup India Programme is to create an enabling environment for startups to flourish, innovate, and contribute to the country’s economic development.
As a result of the Startup India Initiative, from 2016 to 2023, India recognized over 1 lakh startups, generating 12.42 lakh employment opportunities. On average, 80 startups were recognized daily, reflecting a 128% compounded annual growth rate (CAGR) of recognized startups and a 32% year-on-year growth from 2021 to 2022. Notably, 50% of these startups emerged from tier 2 and tier 3 cities, with at least one recognized startup in over 670 districts. Each recognized startup generated an average of 11 jobs. Additionally, 48% of recognized startups have at least one woman director, amounting to over 7,800 startups. Startups with at least one woman director saw an 82% CAGR, and 49% of recognized startups in tier 2 and tier 3 cities had at least one woman director.
Regional disparity in India’s startup ecosystem
Despite the significant overall growth of the startup ecosystem in India, researchers have repeatedly raised concerns about regional disparities. This article provides a data-driven snapshot of the regional gaps in India’s startup ecosystem, covering various domains such as the number of recognized startups, employment generation, gender disparity, and city-wise disparities.
Fig: 1
Between 2016 and 2023, North India led with the highest number of recognized startups, totalling 37.5K, followed by South India with 33.2K and the West Region with 30.8K. In contrast, other regions displayed significant disparities, with the East Region at 9.2K, the Central Region at 4.9K, and the Northeast Region at 1.4 K. From 2018 to 2023, the number of recognized startups in India grew markedly across various regions. The Northeast Region saw the most substantial increase with a 12.7-fold rise, followed by the East Region with an 11.5-fold increase, the West Region with a 9.9-fold increase, the Central Region with a 9.8-fold increase, and the North Region with a 9.6-fold increase. The South Indian states observed the lowest growth, with a 9.0-fold increase in recognized startups during this period (fig: 1).
Regional disparity in India’s startup ecosystem across top-performing industries
Fig: 2
From 2016 to 2023, the regional analysis of top-performing industries in India, based on the percentage of recognized startups, reveals distinct trends. This analysis is crucial as it provides a snapshot of the economic landscape and the sectors driving growth in different regions. In North India, IT Services lead with 29%, Healthcare & Lifesciences at 24%, while Construction lags at 14%. South India mirrors this with IT Services at 36%, and Healthcare & Lifesciences at 23%, but Food and Beverages perform the worst at 12%. Contrastingly, in Northeast India, Construction tops at 26%, Agriculture at 23%, and IT Services at 12%. West India sees Healthcare & Lifesciences at the forefront with 28%, closely followed by IT Services at 27%, and Professional & Commercial Services trailing at 14%. East India highlights IT Services at 26%, Healthcare & Lifesciences at 21%, and Education at 16% as the least-performing sector. Central India also favours IT Services at 26%, Agriculture at 22%, and Construction at 16%. These findings underscore the robust performance of IT Services and Healthcare & Lifesciences, which dominate as top-performing sectors in most regions except Northeast India. This dominance should instil confidence in stakeholders, reaffirming the potential of these sectors for future growth (fig: 2).
West India, specifically Maharashtra generated the highest employment in India by startups
Fig: 3
Employment generation by startups during this period is led by Maharashtra, with approx 2.28 lakh jobs, followed by Karnataka (1.42 lakh) and Delhi (1.37 lakh). Remarkably, Maharashtra, Karnataka, Delhi, and Gujarat contribute to 50% of the total employment generated by recognized startups in India, with Maharashtra alone accounting for 18%. However, despite their potential, the Northeastern states lag significantly in employment generation by startups, indicating the need for targeted interventions to boost the startup ecosystem in these regions (fig: 3).
Key statistics associated with India’s regional startup story
Fig: 4
A regional analysis of recognized startups in India from 2016 to 2023 reveals significant insights. North India leads with 32% of the total startups, followed by South India (28%) and West India (26%). In contrast, East India, Central India, and Northeast India each account for less than 8% of the total startups, a concerning trend. Regarding women-led startups, East India tops the list with approximately 48.9%, closely followed by North India (48.5%) and West India (47.4%). However, Central India shows a stark disparity, with women-led startups constituting only 4.5%, nearly ten times lower than in other regions. This underlines the need for initiatives promoting gender diversity in the startup ecosystem in Central India. Central India (85.7%) and Northeast India (83.7%) have the highest percentages of startups originating from tier 2 and tier 3 cities, whereas West India has the lowest at 29.2%. Regarding employment, startups in West India generate the highest average employment per startup, around 12 jobs, while Northeast India has the lowest, at 9. Overall, the average employment per startup across India remains approximately 10 (fig: 4).
Strategies to address the regional disparities in India’s startup ecosystem
In conclusion, while all regions in India have shown positive growth in their startup ecosystems over the years, the Northeast region still lags compared to other regions. The Indian government must focus on this region to reduce the disparity. Additionally, Central India faces significant gender disparity within the startup ecosystem, and West India struggles with the development of startups in tier 2 and tier 3 cities. Addressing these core issues is essential to reducing regional disparities and fostering a more balanced startup ecosystem across India.
To address the regional disparities in India’s startup ecosystem, targeted strategies are necessary. For the Northeast region, the Indian government should focus on enhancing infrastructure, providing financial incentives, and fostering local entrepreneurship through education and mentorship programs. Establishing incubators and accelerators specifically for this region can also play a critical role. In Central India, tackling gender disparity requires creating women-centric policies, promoting female entrepreneurship, and providing easier access to funding for women-led startups. Mentorship programs that connect successful female entrepreneurs with budding ones can further inspire and support women in the startup space. Improving digital infrastructure, offering localized support programs, and creating regional innovation hubs to nurture local talent can accelerate the development of startups in tier 2 and tier 3 cities in Western India. It is through the collaborative efforts between government, private sector, and educational institutions that these initiatives can be successfully implemented, ensuring a more inclusive and balanced growth of India’s startup ecosystem.
About Author: Pankaj Chowdhury is a former Research Assistant at the International Economic Association. He holds a Master’s degree in Demography & Biostatistics from the International Institute for Population Sciences and a Bachelor’s degree in Statistics from Visva-Bharati University. His primary research interests focus on exploring new dimensions of in computational social science and digital demography.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of 360 Analytika.
Acknowledgement: The author extends his gratitude to the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry for providing data support.
This article is posted by Sahil Shekh, Editor at 360 Analytika.
