India has witnessed a positive trend of rising numbers of start-ups in recent years. While analyzing the factors responsible for the same, highlight the challenges that remain. Also, suggest some remedial measures.

A Start up is defined as a newly incorporated business entity (less than five years old) which operates in a niche/unique market segment, often with the use of technology.

The Ministry of corporate affairs has reported a four-fold increase in the number of registered start-ups in recent years.

Factors responsible:

  • Proliferation of high speed low-cost internet connectivity.
  • Reduction in cost of mobile handsets – wider market reach in tier 2 and tier 3 cities for start-ups.
  • Rising disposable incomes – allowing greater leisure spending (e.g. food ordering apps, entertainment apps, etc).
  • Preference for convenience among consumers (e.g. cab aggregators, household service apps, etc).
  • Large pool of IT trained human resources engaging in development.

Challenges in existing ecosystem:

  • Regulatory compliance burden (e.g. labour, taxation, permissions, etc).
  • Data storage threats – European GDPR mandates stringent data storage norms.
  • Taxation issues – recent concerns about Angel tax.
  • Rapid development in technology is unable to keep up.
  • Cut-throat competition from foreign start-ups.

Measures to resolve:

  • Simplifying regulatory requirements, permissions.
  • Higher capital access through initiatives like startup India.
  • Provision of incubators in colleges to have early age start-ups.
  • Development of robust data protection policy.

Start-ups have the potential to create high value and employment in the current economic scenario. It should be ensured that their growth is encouraged.


Leave a Reply

Your email address will not be published. Required fields are marked *