India's credit guarantee scheme for startups holds high potential

It provides much needed collateral-free loans at a time when risk capital has been slowing down

- DURGESH PANDEY & SURJITH KARTHIKEYAN

India's economy is poised to become the world's third largest and a key growth driver will be startups. Accordingly, with a view to building a strong ecosystem for nurturing innovation and encouraging investments in it, Prime Minister Narendra Modi launched the Startup India initiative in 2016.

The government unveiled a plan comprising 19 action points across areas such as "simplification and handholding", "funding support and incentives" and "industry-academia partnership and incubation." In the last 10 years, over 120,000 startups have been registered in India, making it the third largest startup ecosystem and home to the third highest number of startup unicorns (privately held ventures with valuations of over $1 billion), rising from just one in 2011.

The emerging trends in this rapidly evolving entrepreneurial ecosystem include (a) rising gender parity, (b) a mindset shift towards entrepreneurship and (c) digital public infrastructure that aids informal entrepreneurship. In terms of the broader business environment beyond technology, the gender gap between male and female entrepreneurship is narrowing. A confluence of government efforts and press coverage has helped bring about a wide mindset change from people being job seekers to job creators. Starting with school education, efforts in recent years have focused on creativity and innovation. Digital payment interfaces (QR codes) are being used to pay instead of cash by businesses in even remote locations.