PM, Narendra Modi, on 15th August 2015, motivated the nation by declaring “StartUp India, StandUp India”. This turned into a national movement 5 months down the line in form of StartUp India Initiative when Modi Govt. rolled out a national action plan on January 16, 2016 to lend a strong impetus to the 3rd largest StartUp sector in the world. This ambitious and well-intention government program aims to fill gaps in the economy and job creation by focusing on growth and development of startups and to boost digital entrepreneurship at the grassroots by earmarking around Rs 2,000 crore for the initiative. Nurturing young entrepreneurs to bring their disruptive ideas to the marketplace through innovative business models, providing financial support to small businesses and startups, creating an unregulated and flexible environment for entrepreneurs to build, launch and grow their business form the core focus areas of Modi’s Startup India Initiative.
Challenges for the Indian Social Enterprise Sector
Last 10 years have seen emergence of enterprises with a dual mission of profit creation along with positive social impact. Many young entrepreneurs with stellar academic credentials having given up lucrative jobs to pursue their passion for social good are changing the landscape of social sector and how it’s perceived. While improving the lives of people at the Bottom-of-Pyramid (it forms 37% of the total Indian Population) either by employing them gainfully or by making products & services targeted at them, these entrepreneurs seek sustained profitability by applying business principles. Clearly, future governmental policies will have to take them seriously and create a conducive atmosphere for such entrepreneurs.
However there are major challenges that this new age social enterprise (socent) sector faces.
- Limited access to early stage capital due to difficulties faced by domestic and foreign investors when investing in social enterprises is probably one of the biggest challenges. This potentially inhibits product development, scaling up and hiring top talent.
- Indian regulations still don’t formally recognize for-profit social enterprise as a sector thus depriving them of special benefits like tax breaks etc. (for e.g. India education policy deems every educational institution to operate as a non-profit restricting equity investment and entry of private players)
- Limited supporting ground-level ecosystem comprising micro finance, low cost manufacturing and distribution partners required for socents to scale
What’s in Modi’s StartUp India Initiative for Social Enterprises?
PM Modi announced an all-inclusive action plan with an aim to boost entrepreneurship, employment opportunities and overall economic development. Here’s a roundup of some key policy decisions that will matter to socents:
- Rs 10,000 crore fund
Social startups require an initial influx of finances to set up their operations, hire talented individuals and ensure optimum market penetration for the first few years till break-even.
The government will develop a fund with an initial corpus of Rs 2,500 crore and a total corpus of Rs 10,000 crore over four years, to support upcoming start-up enterprises. A National Credit Guarantee Trust Company (NCGTC) is being conceptualized with a budget of Rs 500 crore per year for the next four years to support the flow of funds which will be managed by a committee of private professionals selected from the start-up industry. This move will address the numero uno issue of lack of sufficient funds which impact enterprises face in their building up period.
- Atal Innovation Mission and impact entrepreneurship focused education
The Atal Innovation Mission will be launched to boost innovation and encourage talented youths. The Human Resource Development Ministry and the Department of Science and Technology have agreed to partner in an initiative to set up over 75 such startup support hubs in the NITs, the IIITs, the IISERs and NIPERs or National Institutes of Pharmaceutical Education and Research.
As most of the upcoming social startups are being led by young minds, the PM has announced innovation-related study plans for students in over 5 lakh schools to imbibe impact inclusive entrepreneurial qualities in students from ground up.
- Boost to private investors and startup incubators
Incubators and private investment hubs have sprung rapidly across the country in the last 5 years to help social startups in finding a firm footing. According to a study conducted by German Society for International Cooperation in 2012, 70% of impact investors and 56% of incubators were formed within the first 5 years of their operations in India.
An IIIF (India Inclusive Innovation Fund) was launched which seeks to provide investment to innovative ventures that are scalable, sustainable and therefore profitable, but address social needs of the less privileged citizens. As an extension to this, private-public partnership model is being considered for 35 new incubators and 31 innovation centres at national institutes through StartUp India Initiative to mentor social entrepreneurs in creating and sustaining a winning business model.
As the Modi government rolls out policies and regulations to support startups, it is a welcome change that will motivate young entrepreneurs to package social good in their profit making business models. This is not just an initiative but a revolution in new age business landscape paving way to monetization of passion and impact driven business ideas thus ultimately placing our country on a faster economic growth path along with sustainable development.