Relevance: GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Relevance: GS-3: Changes in industrial policy and their effects on industrial growth.

Key Phrases: entrepreneurial disparities, marginalised caste groups, Startup India’s Report, Union Territories, subsistence entrepreneurship, Small Industries Development Bank of India, MSMEs.

Why in News?

• A research paper from Dublin City University in Ireland, reviewing India’s entrepreneurial policy Startup India, affirmed its positive impact in reducing regional entrepreneurial disparities.
• However, it cited shortcomings in addressing the under-representation of women and marginalised caste groups in the national startup ecosystem.

Background

• Startup India was introduced in 2016 as a clarion call to innovators, entrepreneurs, and thinkers of the nation to lead from the front in driving India’s sustainable growth and create large scale employment opportunities.
• The action plan of this initiative is focussing on three areas:
  1. Simplification and Handholding.
  2. Funding Support and Incentives.
  3. Industry-Academia Partnership and Incubation.

Addressing Regional Entrepreneurial Disparities

• Training and mentoring facilities provided by Startup India alongside entrepreneurship outreach campaigns in tier-2 and tier-3 cities, helped address regional entrepreneurial disparities in India.
• The program was aimed at scouting entrepreneurs from these cities and integrate them into the portal.
• It would then facilitate a network between venture capital funds, angel networks, banks, incubators, accelerators, universities, legal partners, consultants and research & development institutions.
• The paper states the initiative helped redirect many State govts’ policymaking in favour of startups.
• Quoting from Startup India’s Report (2018), the researchers mention, only four States had dedicated startup policies prior to its launch. After its launch and as of December 2019, 23 States and 2 Union Territories had formulated a dedicated startup policy.

Heavy Concentration in Megacities

• Despite the initiative, the researchers pointed out that entrepreneurship continued to be “highly concentrated” in three megacities, namely, Mumbai, Bengaluru and Delhi NCR.
• The three cities accounted for 93% of all funding raised between 2014 and 2019. The paper pointed out that India’s venture capital industry is also clustered in and around these three cities.
• The same notion was established by the Reserve Bank of India (RBI) in its Pilot Survey on the Indian Startup Sector (2019).
• The research involving 1,246 participants stated nearly three-fourths of the participants were from Karnataka, Maharashtra, Telangana, Delhi and Tamil Nadu.
• Quoting from recent studies, the researchers stated that such concentration can lead to increased economic inequality and hinder emergence of entrepreneurs from industries other than those belonging to the clusters.

Ensuring Representation

• The under-representation could be due to multiple factors, the paper states, such as caste-based economic exclusion, the urban and rural divide, lack of access to quality education and limited social networks.
• Additionally, the policy’s reliance on technology does not take into consideration India’s digital divide, especially with respect to urban and rural areas.
• With reference to government data from 2013, the paper concluded that SC and ST share in ownership of agricultural establishments including farming, livestock, fishery and forestry were higher in comparison to non-agricultural establishments.
• They were based majorly in rural areas in comparison to urban areas.
• Most of them operated without any hired workers, indicating that a significant number of these enterprises were necessity-based undertakings not creating any significant job opportunities.

Women in the Industry

• The Minister of State for Commerce & Industry in response to a question on women entrepreneurship under Startup India, had informed that of 62,000 startups registered with the DPIIT, 46% of them had at least one woman director.
• RBI’s pilot survey had earlier stated that 5.9% of participating startups in its survey had a female founder in comparison to 55.5% of the opposite gender, the remaining 38.6% had both male and female co-founders.
• 10% of the fund in the Fund of Funds operated by Small Industries Development Bank of India (SIDBI) has been reserved for women-led startups.
• Further, all the Alternate Investment Funds where the SIDBI takes equity have been mandated to contribute 20% in business which are women led, women influenced and women employment or women consumption centric.

Conclusion

• The spurt of industries (in this case, startups) create employment opportunities, this furthers a demand for leisure and essential amenities among the populace. In turn, this furthers employment, economic activity and efficiency.
• The evidence suggests the need for targeted measures to promote technology-and innovation-driven entrepreneurship among SC and ST communities. However, the Startup India policy document in its present form does not address this issue.

Source: The Hindu 

Mains Question:

Q. How lack of representation for marginalized groups as well as the heavy clustering of start-ups in certain regions have led to entrepreneurial disparities? (Words 250).