Of the more than 84,000 startups recognized by the DPIIT as of 30 November 2022, 58% are from the five states of Maharashtra, Karnataka, Delhi, Uttar Pradesh, and Gujarat. The top-10 states on the other hand account for 82% of the recognized startups. Data also indicates that between 2016 & 2021, 89 startups were recognized at the national level for every 1000 companies registered in those years.
In the previous story, we looked at the eligibility criteria for companies to be recognized as startups in India and the different types of support extended by the Government of India to these startups. Startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industry are eligible to avail the benefits like as tax exemptions, self-certification, and relaxation in norms. Further, it was seen that the number of startups that gained recognition of DPIIT has increased by more than 50 times to almost 24,000 as of November 2022 from 452 in 2016 when the initiative was rolled out. In this story, we look at the trends in startups recognized across states.
5 states accounted for almost 60% of the DPIIT-recognized startups
As of 30 November 2022, a total of 84,012 startups were recognized by DPIIT since the inception of the scheme, as per a Lok Sabha response from 07 December 2022. The data also reveals that there is at least one DPIIT-recognized startup from each of the 36 States and Union Territories.
The majority of the recognized startups, about 18.5%, were in Maharashtra. While Maharashtra had more than 15,000 recognized startups, Karnataka and Delhi had more than 9,000 recognized startups each and accounted for 11.8% and 11.4%, respectively. Uttar Pradesh had the fourth highest number of startups recognized with more than 7,500 (9.2%) followed by Gujarat with more than 5,800 startups (7%). The five states together accounted for 58% of the startups recognized by DPIIT.
Together with Tamil Nadu, Haryana, Telangana, Kerala, and West Bengal, the top 10 states with the greatest number of startups recognized by DPIIT together contributed to 82% of the total startups recognized in the country. Tamil Nadu, Haryana, and Telangana had more than 4,000 recognized startups each while Kerala had more than 3,700 and West Bengal had more than 2,700 recognized startups. Not far behind West Bengal, Rajasthan had more than 2,700 recognized startups as well.
Kerala, UP, and Haryana are among states without Tier-1 cities but in the top 10
Based on the decennial Census, the cities in the country are classified into X, Y, and Z for house rent allowance purposes. These are more commonly known as Tier-1, Tier-2, and Tier-3 cities, respectively. As per the classification, the eight metro cities- Delhi, Bengaluru (Karnataka), Mumbai, Pune (Maharashtra), Chennai (Tamil Nadu), Kolkata (West Bengal), Ahmedabad (Gujarat), and Hyderabad (Telangana) are ‘X’ cities or Tier-1 cities. The state-wise number of recognized startups reveals that all the seven states where Tier-1 cities are located are in the top 10. Uttar Pradesh and Kerala which are in the top 10 have a higher number of Tier-2 or ‘Y’ cities as compared to other states.
Huge variation among states in proportion of startups recognized by DPIIT against the companies registered
In the six-year period from 2016 to 2021, DPIIT recognized 60,239 startups. During this same period, a total of 6,76,635 Indian companies were registered in the country according to the data from Ministry of Corporate Affairs. That is, for every 1,000 Indian companies registered in the country during this period, 89 startups have gained DPIIT’s recognition.
It should be noted that not all companies registered may be startups. Further, startups need not apply for or get the department’s recognition in the same year of registration. One of the criteria for recognition as a startup is that the company should not have completed ten years from the date of registration. Other factors such as paid-up capital, turnover, etc. of the company are considered to determine if the company is a startup.
Across states, the proportion of startups that gained recognition is 45 for every 1000 companies between 2016 & 2021 in Bihar to 130 in Karnataka and 149 in Chhattisgarh. Among major states, more than 100 startups gained recognition for every 1,000 companies registered in the states of Chhattisgarh, Karnataka, Gujarat, Assam, Kerala, Madhya Pradesh, and Haryana. Except for Karnataka and Gujarat, Maharashtra also has a proportion higher than the national average. The other states with Tier-1 cities such as Delhi, Tamil Nadu, Telangana, and West Bengal have fewer startups recognized per 1000 companies registered than the national average. The proportion is the least in Bihar, roughly one-third of that of the state of Chhattisgarh.
31 out of 36 States/UTs have their own startup policy
Of the 36 States and Union Territories in India, 31 of them have a dedicated Startup Policy. Arunachal Pradesh and Ladakh are among those without a dedicated policy. 27 of these Startup Policies were developed after the launch of the Startup India initiative in 2016. Such policies at the state level are crucial as support in terms of state-level incentives & ease of norms becomes critical. Many of these policies talk about the holistic development of the startup ecosystem in the country by providing incentives to key startup stakeholders such as incubators, institutions of higher education like IITs, etc.
Ranking of States on Support to Startup Ecosystems is an exercise conducted by the NITI Aayog on an annual basis. It is a performance-based index aimed to facilitate the ease of setting up a business start-up and the creation of a conducive environment to create a facilitative ecosystem. It was initiated in 2018, consisting of 26 action points and a total score of 100. Out of these 26 action points, 8 points were based on the feedback received.
States are ranked into five categories – Best Performers, Top Performers, Leaders, Aspiring Leaders, and Emerging Start-up Ecosystems. The State Start-up Ranking Exercise aims to support states and union territories in developing their start-up ecosystem and learn from the best practices in each state and union territory.
The exercise carried out in 2021 identified Gujarat and Karnataka as the Best Performers in the category of States which included the NCT of Delhi while Meghalaya was the best performer among UTs and Northeastern states. While Kerala, Maharashtra, Odisha, and Telangana were identified as the Top Performers award among states, Jammu & Kashmir emerged as the Top Performer among UTs and NE states. Andhra Pradesh and Bihar from the States category and Mizoram and Ladakh from the UTs/NE States were clubbed under the Emerging Start-up Ecosystem.
Featured Image: Startup India