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As India marks ten years of the Startup India initiative, the milestone invites both celebration and scrutiny. Launched in 2016 as a corrective to a risk-averse economic culture, Startup India sought to legitimise entrepreneurship as a national priority. A decade later, with over two lakh DPIIT recognised startups and one of the world’s largest innovation ecosystems, the initiative has unquestionably altered India’s economic imagination. Yet scale alone cannot be the final measure of success. The more demanding question is whether India’s startup boom is translating into durable growth, productive employment, and structural economic transformation.
The most visible achievement of Startup India has been narrative change. Entrepreneurship has moved from the margins of policy thinking to the centre of national development discourse. Startups are now framed not merely as private ventures but as instruments of innovation, inclusion, and global competitiveness, aligned with the long-term vision of Viksit Bharat 2047. This shift has reduced stigma around failure, encouraged risk-taking among young Indians, and nudged public institutions to engage with innovation rather than resist it. Such cultural change, while intangible, is often a precondition for economic reform.
The ecosystem’s quantitative expansion is equally striking. India’s startup count has grown exponentially, unicorns have multiplied, and collaboration between startups, large corporates, and multinational firms has deepened. The diffusion of entrepreneurial activity beyond metropolitan centres, with roughly half of recognised startups emerging from Tier II and Tier III cities, reflects a broader base of participation. On paper, this suggests the democratisation of opportunity. In practice, however, geography continues to shape outcomes in less visible ways.
While startups may be registered across the country, capital, mentorship, and market access remain heavily concentrated in a few urban hubs. Bengaluru, Delhi NCR, Mumbai, and Hyderabad continue to dominate venture funding, exits, and global linkages. Startups in smaller cities often operate at the margins of the ecosystem, with limited access to patient capital and fewer pathways to scale. The risk is that decentralisation becomes symbolic rather than substantive, expanding entry without ensuring endurance.
Public funding mechanisms such as the Fund of Funds for Startups have played a stabilising role in expanding domestic risk capital. By backing alternative investment funds rather than startups directly, the state has avoided the pitfalls of direct selection while catalysing private investment. Yet this structure also reproduces market biases. Venture capital naturally favours asset-light, fast-scaling models, leaving deep technology, hardware, climate innovation, and manufacturing oriented startups relatively underfunded. Despite repeated policy emphasis on these sectors, capital allocation continues to lag ambition.
This imbalance has implications for employment. Startups are frequently cited as major job creators, and they do generate employment across technology, services, and supply chains. However, much of this employment is indirect, informal, or gig-based. While such work offers flexibility and entry points into the labour market, it often lacks stability, social security, and wage growth. Labour-intensive sectors with higher employment multipliers, such as manufacturing and local services, remain underrepresented in the venture-backed startup universe. If startups are to meaningfully address India’s employment challenge, policy must look beyond enterprise counts to job quality and durability.
The Atal Innovation Mission has attempted to correct long-standing weaknesses in India’s innovation pipeline by intervening early. Atal Tinkering Labs have reshaped school-level engagement with science and problem-solving, moving education away from rote learning towards experimentation. Millions of students exposed to emerging technologies represent a significant long-term investment in human capital. Yet the transition from tinkering to enterprise remains fragile. Many promising ideas fail to progress beyond prototypes due to gaps in funding, mentorship, and market access.
AIM 2.0 reflects an awareness of these shortcomings. Its focus on deep technology commercialisation, human capital development, and sectoral launchpads addresses critical ecosystem gaps. Programs aimed at frontier regions and vernacular innovation acknowledge that language and geography can be barriers to participation. However, these interventions will succeed only if they are integrated into broader economic systems. Innovation centres without procurement linkages, credit access, and regulatory clarity risk becoming islands of experimentation rather than engines of growth.
Rural and grassroots entrepreneurship programs such as SVEP, ASPIRE, and PMEGP reveal a parallel and often overlooked truth. India’s most significant entrepreneurial activity occurs outside the venture capital framework. Micro and small enterprises continue to absorb the bulk of the workforce, particularly among women and marginalised communities. These schemes have supported millions of livelihoods and strengthened local economies. Yet they operate largely in isolation from the startup ecosystem’s networks, platforms, and technological tools.
The separation between startups and micro enterprises reflects a deeper policy divide. Startups are framed as innovation vehicles, while grassroots enterprises are treated primarily as welfare or livelihood interventions. Bridging this divide is essential. Grassroots businesses need digital infrastructure, logistics access, and market integration, while startups can benefit from grounding their models in local demand and employment realities. Integration, rather than parallel expansion, should define the next phase of policy.
Startup India has also reshaped centre state relations. The States Startup Ranking Framework has encouraged competitive federalism, pushing states to simplify regulations, establish incubators, and engage with private innovators. This has improved policy visibility and administrative responsiveness in several regions. However, rankings can incentivise surface-level compliance rather than deep reform. Persistent challenges around land access, municipal approvals, contract enforcement, and dispute resolution continue to undermine ease of doing business in many states. Without institutional reform at the local level, startup friendliness risks becoming episodic and uneven.
As the ecosystem matures, the central challenge is sustainability. India does not lack startups. It lacks enough scaled firms embedded in manufacturing, research, and complex supply chains. Many startups struggle to transition from early growth to long-term viability, particularly in sectors requiring long gestation periods and regulatory coordination. Bankruptcy processes, public procurement systems, and research commercialisation frameworks remain ill-suited to innovation-driven enterprises.
