Gist of Kurukshetra January 2024 Issue: Startups Redefining Rural India

Kurukshetra Magazine is a vital source of study material for the UPSC IAS exam. It is a monthly magazine that gives information about important government schemes and programmes in various sectors. Kurukshetra is an authentic source of information for the UPSC Exam. Here, we provide the Gist of Kurukshetra, exclusively for the IAS Exam.

TABLE OF CONTENTS

1. Redefining Rural Landscapes: Startups Paving the Way for Inclusive Development
2. Reform, Perform & Transform through Agri-Startups
3. Redefining the Food Processing Sector through Startups
4. Startups as the Engine of Growth for North-East India
5. Supporting Women-led Startups

1. Redefining Rural Landscapes: Startups Paving the Way for Inclusive Development

• India is the 3rd largest startup ecosystem globally with over 1 lakh registered startups (DPIIT data).
• Startup culture is expanding beyond urban hubs, contributing to decentralisation and inclusivity where startups are leveraging technology to bridge the rural-urban divide.

Government Schemes for Rural Startups:

• Atal Community Innovation Centres (ACIC): Launched under the Atal Innovation Mission (AIM) in 2020, it aims to create community innovation centres for rural entrepreneurs. 14 ACICs established till now, supporting 200+ community-based startups.
• Startup Village Entrepreneurship Programme (SVEP): Implemented by the Ministry of Rural Development, it is a sub-scheme under DAY-NRLM to support the rural people to set up enterprises at the village level in non-agricultural sectors.
• Skill India Mission: Implemented by the Ministry of Skill Development and Entrepreneurship, it aims to skill development through various schemes like Pradhan Mantri Kaushal Vikas Yojana (PMKVY) and National Apprenticeship Promotion Scheme (NAPS). 70.5% of PMKVY 2.0 beneficiaries have received placement after the programme.
• ASPIRE (Scheme by Ministry of MSME): It aims to provide training and incubation support to agro-rural entrepreneurs through Livelihood Business Incubators (LBIs). 61 Livelihood Business Incubators (LBIs) are functional in the country training more than 50,000 people.

Rural Startup Landscape:

• Over 65% of the total population in India resides in rural areas, presenting a significant market. 
• Role of Digitization: India has one of the cheapest data rates globally. Internet penetration and data accessibility are driving growth in startups catering to rural needs.
• Rural India presents a large market for startups, especially in sectors like agritech, food processing, ed-tech, skill development, e-commerce, health tech, renewable energy, handicrafts and traditional arts, and fintech.

Types of Rural Startups:

• Urban-based founders with rural solutions: Entrepreneurs from urban areas addressing unique challenges faced by rural communities. It involves bridging the gap between urban and rural lifestyles by introducing technology-driven initiatives in agriculture, healthcare, education, etc. 
• Rural-based founders with rural solutions: Develop solutions based on their firsthand knowledge of local needs and traditions, like agricultural innovations or craft preservation.
• Self-Help Groups (SHGs): Collective community enterprises focused on income generation and development through activities like handicrafts or micro-enterprises.
• Micro, Small, and Medium Enterprises (MSMEs): Local enterprises catering to specific demands of rural markets and contributing to employment and economic growth.

Challenges for Rural Startups:

• Connectivity Issues: Limited connectivity with urban suppliers impacting operational efficiency due to delays, increased costs, and logistical complexities.
• Access to Financing: Difficulty in securing reliable and affordable financing for rural startups.
• Lack of Support System: Absence of mentorship, networking opportunities, and incubation centres hindering growth.
• Difficulty in Finding Early Adopters: Limited communication channels, lower income and lower digital penetration pose challenges in identifying early adopters.
• Limited Funding Mechanism: Funding for startups is concentrated mainly in major urban centres, leaving rural startups with limited access to capital.

Conclusion:

• The migration of startups from rural to urban areas is inevitable but establishing an enabling innovation ecosystem in rural areas is crucial.
• Fostering an environment supporting the growth of startups, particularly in rural areas, is imperative for achieving the USD 10 Trillion milestone by 2030.

2. Reform, Perform & Transform through Agri-Startups

• India has been ranked the third-largest unicorn hub globally, with a total of 90 unicorns, behind the United States of America and China.
• Agriculture contributes around 18% to India’s GDP and 55% of the population relies directly on agriculture for their livelihood.
• The agricultural sector has witnessed steady growth in recent years, and the rise of startups has prompted young entrepreneurs to leave traditional roles to establish their own ventures.
• Technologies like hybrid seeds, Artificial Intelligence, geo-tagging, big data analytics, mobile apps, and farm management can be applied at every stage of the agricultural process to enhance productivity and increase farm incomes.

Government Reforms Facilitating Startups:

• Make in India (2014): It aims to position India as a global design and manufacturing hub. Know more about Make in India in the link.
• Startup India (2016): 19-point action plan to boost innovation, funding support, and industry-academia partnerships. It has led to a notable increase in the establishment of new companies showcasing innovative ideas across various sectors.
• Atal Innovation Mission (AIM): It has been catalysing the development of innovation hubs, addressing grand challenges, nurturing startups, and promoting self-employment in technology-driven sectors.
• NewGen Innovation and Entrepreneurship Development Centre (NewGen IEDC): It promotes knowledge-based and technology-driven startups by supporting up to 20 new projects annually within educational institutions by providing one-time financial aid of Rs. 25 lakh.
• Innovation & Agri-Entrepreneurship Program (2018-19): It aims to increase farmers’ income by promoting innovation.

Rising Proliferation of Agri-Startups

• Over the past few years, a wave of agritech startups has surfaced in India, aiming to resolve issues such as marketing linkage, supply chain, use of outdated equipment, insufficient infrastructure, and limited access to diverse markets for farmers.

Ecosystem Supporting Agri-Tech Startups:

• Incubators/Accelerators: a-IDEA, AGRI UDAAN, Centre for Innovation, Incubation and Entrepreneurship (CIIE), International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) and Agri-Tech Startup Accelerator are a few important accelerators and incubators supporting the agri-tech sector in India.
• Government Support in Union Budget 2023: Increased allocations for rural infrastructure, development of agriculture, and allied sectors. Integration of rural markets with e-Nam and broadening Minimum Support Price for comprehensive coverage of agricultural commodities.
• Agri-Startups Impacting Supply Chain and Market Linkage: Addressing challenges in India’s supply-driven agriculture. Companies like Sabziwala, MeraKisan, and Dehaat successfully aggregated horticulture products.

Conclusion:

• The Indian Government, through initiatives like “Startup India,” actively supports the vibrant startup ecosystem, particularly in the agriculture sector. 
• Agri-tech startups are integrating technology to transform market linkages and supply chains, contributing to the overall growth and sustainability of the agricultural sector. 
• The comprehensive network of institutions is vital for converting agri-startup intentions into profitable enterprises.

3. Redefining the Food Processing Sector through Startups

• The food processing sector acts as a vital link between agriculture and industries, reducing wastage and ensuring value addition. This diversification and commercialisation of agriculture generates incremental employment and income for farmers. 
• It’s one of the fastest growing sectors in India, having grown at 10.3% from 2015–16 to 2020–21, compared to the overall manufacturing sector’s 5.1% growth.

Startups: Sunrise and Inclusive Growth

• The food processing sector is a “sunrise sector” in India with tremendous entrepreneurial potential. Startups can play a crucial role in driving innovation and revitalizing supply chains.
• Role of Women: Women entrepreneurs make up a significant portion of the food processing sector. According to the Ministry of Food Processing Industries’ Annual Report (2022–23), 25% of workers in the unincorporated non-agricultural enterprises of the sector are women.
• Initiatives like the Self-Reliant Fund for Micro, Small and Medium Enterprises (MSMEs) have provided equity support to growth-oriented startups. 

Meeting Challenges through Focused Attention:

• Startups in India face major challenges related to Availability, Accessibility, Affordability, and Awareness (the 4 “A”s).

Government initiatives:

• Make in India: Food processing is a priority sector under this initiative.
• Various schemes: Pradhan Mantri Kisan Sampada Yojana, Formalisation of Micro Processing Enterprises, Production Linked Incentive Scheme, Agri-Infra Fund, etc., all promote the food processing sector.

Image source: Kurukshetra Magazine

• Foreign Direct Investment: 100% FDI under automatic route is allowed. The sector has attracted Rs. 50,000 crore of FDI in the last nine years.

Promoting Startups:

• Fund of Funds scheme: Providing capital for early, seed, and growth stages of startups.
• Credit guarantee scheme for loans taken by startups.
• Fast-tracked patent applications and disposal for startups.
• Tax benefits and extended incorporation periods to bolster resilience.
• Agriculture Accelerator Fund: Encouraging agri-startups by young rural entrepreneurs.
• Government agencies like the Agricultural and Processed Food Products Export Development Authority (APEDA) facilitate exports and collaborations with other countries. The share of processed foods in exports has risen from 13% in 2014 to 23% in 2023.

Conclusion:

• Technological advancements and changing consumer preferences could drive the growth of startups in the food processing sector.
• Startups across the value chain have the potential and dynamism to bring transformational changes in the economy.

4. Startups as the Engine of Growth for North-East India

Overview of India’s Startup Landscape:

• India’s startup ecosystem has witnessed remarkable growth, emerging as the third-largest globally with over 1.12 lakh startups across 763 districts.
• The startup movement is crucial for capitalizing on new opportunities, creating wealth, and generating jobs, especially considering the demographic dividends.

Transformation in Entrepreneurship:

• The last decade has seen a surge in entrepreneurship in India, driven by innovative solutions and technology.
• Policy reforms have played a pivotal role, fostering a shift from a job-seeking mindset to a culture of job creators.

Startups and India’s Economic Ambitions:

• Startups are integral to India’s ambition to become the third-largest economy globally.
• The ecosystem has expanded beyond traditional hubs, with 49% of startups emerging from Tier 2 & 3 cities.

Diversity in Startups and Sectors:

• Startups in India are solving problems across 56 sectors, showcasing diversity beyond the conventional IT services.
• Cities like Hyderabad, Pune, and Chennai have become startup hubs, with entrepreneurs from smaller towns contributing scalable opportunities.

Startups in North-East India:

• The entrepreneurial ecosystem in North-East India is evolving, albeit not at the same pace as metropolitan areas.
• Each state in the region has implemented its startup policies, with Assam and Manipur leading the startup ecosystems.

Sectors Dominating North-Eastern Startups:

• Startups in North-East India primarily focus on sectors such as agriculture, handloom, textiles, tourism, IT & ITES, retail, health, education, waste management, and renewables.
• Agriculture and allied activities hold the majority, followed by ITES, handloom & textiles, and education.

Challenges Faced by North-Eastern Startups:

• Common challenges include limited access to funding, lack of skilled manpower, limited mentorship support, and the need for professional services.
• The region faces unique challenges compared to more mature startup ecosystems in metropolitan areas.

Incubators and Funding Initiatives:

• The North-East region has around thirty incubators, with 80% hosted in academic institutions.
• While there are funds like the North-East Venture Fund (NEVF), a small percentage of startups are fit for accessing venture capital funding.

Challenges in Scalability and Innovation:

• A significant number of startups in North-East India are ‘me-too’ ventures, posing challenges for scalability.
• Mentorship and technical guidance are identified gaps in the ecosystem, hindering the growth of innovative startups.

Possible Way Ahead for North-East Startups:

• Emphasis on integrating design thinking, creative capacity building, and collaborative problem-solving for startups.
• Structured support needed for funding, documentation, and creating a vibrant and inclusive community of entrepreneurs.

Empowering North-East Startups:

• Building a wide pipeline of innovative, entrepreneurially skilled youth is crucial.
• Evolving outcome-oriented sustainable incubation modes that support competitive businesses, even without venture funding.

Integration and Collaboration:

• Building leaders of incubators, expert mentors, consultants, lawyers, accountants, and technical experts.
• Integrating information, infrastructure, and funding efforts across government agencies, private incubators, and funding institutions.

Leveraging ‘Aatmanirbharta’ for Growth:

• Capitalizing on the Government of India’s focus on ‘Aatmanirbharta’ (self-reliance) is essential for startups in North-East India.
• The ‘Aatmanirbhar Bharat’ initiative aligns with the spirit of innovation and entrepreneurship, offering opportunities for startups.

Global Opportunities for Indian Startups:

• India’s economic growth, technological advancements, and youthful workforce create a promising backdrop for startups.
• International collaboration and focus on sustainability align with global SDG priorities, offering opportunities for Indian startups.

North-East India as a Gateway:

• North East India’s Act East Policy positions it as a gateway to Southeast Asia, providing startups with a strategic platform for success.

Conclusion:

• The evolving startup ecosystem in North-East India holds significant potential for growth and innovation.
• Addressing challenges, fostering mentorship, and leveraging government initiatives can empower startups to contribute to the region’s economic development.

5. Supporting Women-led Startups

• The Indian startup ecosystem is growing rapidly, with increasing participation of women entrepreneurs. 
• The number of women-led startups has increased from 6,000 in 2017 to 80,000 in 2022 (a 1233% increase).
•  The share of VC funding to women-led startups increased from 11% in 2017 to 20% in 2022. 
• Women-led companies have performed 63% better than male-led companies in terms of Return On Investment in the last decade. 
• Out of 105 startups turned unicorns in 2022, 17% were women-led startups.

Government Initiatives to Promote Women Entrepreneurship:

• Fund of Funds for Startups scheme: 10% of the funds in the Fund of Funds for Startups scheme is reserved for women-led startups.
• Virtual Incubation Programme for Women Entrepreneurs: Supported 20 women-led tech startups with pro-bono acceleration.
• Webpage Dedicated to Women Entrepreneurs: Provides policy measures by Central and State Governments.
• Awareness and Capacity-Building Workshops: Various workshops focusing on women entrepreneurs’ needs.
• WING (Women in India’s Startup Ecosystem): Aims to support 7,500 women entrepreneurs annually through capacity development.

Challenges to Women-led startups

• Women-owned startups face challenges in accessing credit due to collateral, creditworthiness, and perceptional biases.

Government Schemes for Supporting Women-led Startups:

• Mudra Yojana for Women/Mahila Udhyami Yojana: Offers loans up to Rs 10 lakh without collateral for women entrepreneurs in non-corporate, non-farming, and non-agriculture-based businesses headed by women entrepreneurs.
• Stand-Up India (SUI) Scheme: Facilitates bank loans between Rs. 10 lakh and Rs. 1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for greenfield enterprises.
• Special Schemes for Rural/Disadvantaged Women: This includes Skill Upgradation and Mahila Coir Yojana training programs aimed at the skill development of women artisans engaged in the coir industry.
• Mahila Samridhi Yojana: A microfinance scheme for women from backward classes by the National Scheduled Castes Finance and Development Corporation (NSFDC) under the Ministry of Social Justice.
• Women Entrepreneurship Platform (WEP): Hosts information, workshops, and campaigns for women entrepreneurs.
• Nai Roshni Scheme: A leadership development program for women belonging to minority communities. Read more on the Nai Roshni scheme.
• Special Schemes of Public Sector Banks: Concessional financing options for women entrepreneurs. Examples include the State Bank of India (Stree Shakti Scheme), Punjab National Bank (PNB Mahila Udyami), and Central Bank of India (Cent Kalyani).

Way Forward:

• According to the NITI Aayog report ‘Decoding Government Support to Women Entrepreneurs in India,’ the economic contribution of women in India accounts for 17% of the GDP. 
• There is a need for more effective implementation of schemes to benefit female entrepreneurs and ensure equal access to all entrepreneurship support schemes. 
• Additionally, there is a need for non-financial support such as technology upgrades and skill training, as well as more schemes supporting entrepreneurship in the digital economy. 
• Women-owned enterprises can bring about demographic shifts and inspire future generations.