In a country where there are way more people than jobs, there is nothing more important than creating employment opportunities. In the past couple of years, the ‘startup culture’, as it is popularly called, has indeed gained momentum, as more and more people are choosing to start up their own SMEs. With over 8000 startups in the last year, NASSCOM reported that there has been a whopping 108% increase in the Startup sector in our country. India is now 3rd, after US and UK, in the global startup ecosystem.
Needless to say, the government is all for it, and has launched a variety of startup schemes and loans to encourage more and more people to start their own businesses. Startups, if successful, act as magnets to attract foreign investments and boost the economy. Also, with the ever-increasing demand of consumer products, manufacturing them within the country seems more feasible and lucrative. Take smartphones, for example. Multiple smartphone industries have come up in the past year, and India is indeed becoming a hub of mobile manufacturing units. Such units don’t just save costs but generate tons of jobs.
Government schemes for businesses in India mainly focus on providing the much needed capital for investment at subsidised interest rates, which in turn encourages people to realise their dreams with their own ventures. Although there are tons of schemes available, here’s looking at 10 of the most viable startup schemes.
1) MUDRA – The Micro Units Development and Refinance Agency or MUDRA, is a flagship program by the government of India to provide funds to micro and small enterprises. What sets MUDRA apart from other loan schemes is the fact that no collateral is required to avail this loan. It is applicable for manufacturing, trading, and even allied agricultural services. It has 3 modules, Shishu (loan up to 50,000), Kishor (Loan between 50,000 and 5 lakh) and Tarun (Loan between 5 lakh and 10 lakh).
2) NABARD – The National Bank for Agriculture And Rural Development, or NABARD, for short, is primarily aimed towards providing credit benefits to agriculture as well as other cottage and village industries. It also provides finance to lending institutions in villages. With schemes for food processing plants and integrated rural development, NABARD works in conjunction with the RBI to implement and regulate financial assistance in rural areas. Its Dairy Entrepreneurship Development scheme offers up to 90% of the project cost (minimum 10 lakhs to maximum 150 lakhs) to budding entrepreneurs.
3) Credit Guarantee Scheme – The CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) was set up by the Government of India to provide business loans to micro and small industries, with zero collateral. This means that new and upcoming startups can avail loans at highly subsidised interest rates without providing any security. Working along with SIDBI (Small Industries Development Bank of India), the government provides a maximum amount of up to 100 lakhs under this scheme, for boosting new enterprises as well as rehabilitating existing ones. Primarily for manufacturing units, this loan can be availed in the form of working capital or term loan.
4) Stand Up India Scheme – Launched in 2016, this scheme was implemented to cater to women entrepreneurs, as well as those from SC and ST communities. Ranging from 10 lakh to 100 lakh, it is available for Greenfield ventures in manufacturing, trading, and service units. Under this scheme, it is mandatory for every bank to lend money to at least one woman entrepreneur and one SC/ST unit per branch. In case of non-individual businesses, the woman entrepreneur must hold at least a 51% stake in the unit. The loan can be provided as working capital with a maximum return period of 7 years.
5) NewGen IEDC – Introduced last year, the NewGen Innovation and Entrepreneurship Development Centre is applicable to industries like healthcare services, chemicals, hardware, aeronautical/defense, IT, AR/VR, construction, design, food and beverages, textiles, nanotechnology, and renewable and non-renewable energy sources, among others. It provides a one-time non-recurring loan of up to 25 lakhs to finance startup units.
6) AIC – Headed by the Atal Innovation Mission, the Atal Incubation Centres provide grant-in-aid of Rs. 10 Cr to every AIC. The duration of the grant is a maximum of 5 years. Set up under the NITI aayog, the purpose of AICs will be to provide financial aid and infrastructure assistance to different startups in sectors like chemicals, technology hardware, healthcare & life sciences, aeronautics/aerospace & defence, agriculture, AI, AR/VR (augmented + virtual reality), automotive, telecommunication & networking, construction, design, non-renewable energy, renewable energy, green technology, fintech, Internet of Things, nanotechnology, and food & beverages, among others. Conducting training and entrepreneurship workshops, organizing inspirational programs, enabling access to necessary infrastructure, prototyping or research facilities, as well as creating a group of mentors to guide the entrepreneurs, are some of the tasks that an AIC is expected to perform.
7) CLCSS – Under MSME, the Credit Linked Capital Subsidy Scheme is a means to provide subsidy to manufacturing units who have upgraded their machinery with state-of-the-art equipment. This scheme is meant to encourage manufacturing units to buy the latest equipment, and facilitate technology upgradation. The way this works is that any SSI unit which has upgraded its machinery can apply for a 15% subsidy on a loan amount of up to 1 Cr.
8) SMILE – The SIDBI Make in India Soft Loan Fund for Micro, Small, and Medium Enterprises provides soft loans to MSME units at reasonable terms, to meet the debt-equity ratio of a unit or to help in its growth and expansion. The loan is applicable for a maximum period of 3 years. The amount disbursed varies on the category the unit falls under, with 10% or a maximum of 20 lakhs for General category, and 15% or a maximum of 30 lakhs for SC/ST, PwD, and women.
9) Loan for Rooftop Solar PV Power Projects – Headed by the Indian Renewable Energy Development Agency (IREDA), this scheme promotes renewable energy development by providing support for solar PV projects on rooftops. The IREDA will provide 70% of the project cost, while the entrepreneur will contribute the remaining 30% of the amount. In some projects, where the unit has great track record, higher benefits, and more productivity, the IREDA may extend the loan amount to 75% of the project cost. The loan has to be repaid in a maximum of 9 years.
10) M-SIPS – The Modified Special Incentive Package Scheme provides capital subsidies to manufacturing and electronic units in sectors of technology hardware, IoT, automotive, renewable and non-renewable energy sources, nanotechnology, green technology, and aerospace and defense industries. Under this scheme, there’s a provision for 20% capital subsidy in SEZ, and 25% in non-SEZ, for business units in manufacturing and electronics.
With these government schemes for startups, India is poised to see a sizeable increase in the number of startup ventures.