National Startup Day 2025: Indian startups ride on the wave of bold reforms
The government’s focus on fostering innovation in emerging areas, including artificial intelligence, Big Data, and clean energy, has further catalysed the growth of Indian startups.
Happy National Startup Day!
From a few hundred startups in 2016 to now boasting 158,000 companies, the Indian startup ecosystem—third only to the US and China—has become one of the major contributors to the Indian economy.
To celebrate this entrepreneurial spirit and passion, the Indian government established the Startup India initiative on January 16, 2016.
Over the past decade, the country’s startup ecosystem has undergone a dramatic transformation, emerging as a global hub for innovation and entrepreneurship. The ecosystem also saw many ups and downs, a harsh funding winter, and many marquee companies taking the IPO route to list on the Indian stock exchanges.
The government’s focus on fostering innovation in emerging areas, including artificial intelligence, clean green, Big Data, and space tech, has further catalysed the growth of startups. Moreover, policies to promote collaboration between academia, industry, and startups have enriched the ecosystem by nurturing talent and driving cutting-edge research.
In 2024, it was further bolstered by several forward-thinking policy changes to support startups across sectors, including streamlined regulations, enhanced access to funding, tax incentives, and sector-specific reforms designed to foster innovation and ease of doing business.
As we celebrate our startups, here are a few noteworthy policy developments that helped the startup ecosystem stakeholders push the boundaries of innovation.
Abolition of Angel Tax (July 2024)
In the Union Budget 2024-25, Finance Minister Nirmala Sitharaman announced the abolition of the 'angel tax' on investors funding startups to attract more investment into the country's burgeoning startup ecosystem.
Angel tax was introduced in 2012 to address the loophole exploited by certain unscrupulous entities that evaded tax by establishing subsidiaries. Unfortunately, this provision—under Section 56(2)(viib) of the Income Tax Act, 1961—has negatively impacted startups seeking early-stage investments, as authorities have utilised the mechanism of fair market value (FMV) of shares based on the funding received.
It levied a 30% tax burden on startups if the investment was “assessed” to be above the FMV.
Regulatory reforms for IPO-bound startups (October 2024)
The government reformed its compliance procedures by removing the requirement for approval from the National Company Law Tribunal (NCLT) for foreign-based companies merging with domestic subsidiaries.
This change shortened the process from over a year to just three to four months, encouraging Indian startups domiciled abroad to return home and access the robust IPO market in India.
Recently, quick commerce unicorn Zepto received the green light for its reverse flip to India from Singapore as it gears for a public debut later this year.
The quick commerce operator, which was earlier a subsidiary of KiranaKart Pte. Ltd. in Singapore, has also received approval from Singapore entities for its migration.
Besides Zepto, Razorpay, Flipkart, Pine Labs, and Meesho are also looking to move their base to India.
Easing of Foreign Exchange Regulations (November 2024)
The government amended the Foreign Exchange Management Regulations 2024, simplifying the process for startups to open foreign currency accounts.
This development aligned with recent changes in the definition of a startup, effectively making it easier for young businesses to manage cross-border transactions and attract international investment.
Launch of Startup Policy Forum (December 2024)
India launched the Startup Policy Forum (SPF) to drive innovation and policy reform. In its initial phase, SPF limited membership to 100 startups, with 30 prominent names already on board, including Razorpay, CRED, Pine Labs, Groww, Acko, OYO, and Swiggy.
By bridging the gap between stakeholders, SPF aims to create a thriving ecosystem for high-growth companies and advance India’s emerging sectors.
Sector-specific implementation
The Drone (Amendment) Rules, 2024 have streamlined compliance for manufacturers and operators by introducing alternative methods for drone registration and de-registration.
Reinforcing this, the government allocated Rs 57 crore under the Production-Linked Incentive (PLI) scheme for drone manufacturing in Budget 2024—a 72% increase over the previous year—signifying India's ambition to become a global leader in drone technology.
Further promoting inclusivity and innovation, the Namo Drone Didi scheme received a Rs 1,261 crore allocation for FY23-25. Focused on training women in rural areas as drone pilots and operators, the initiative integrates women into high-tech fields while empowering communities.
In the Budget 2024, the Finance Minister also announced the setting up of a Rs 1,000-crore venture capital fund to boost India’s growing space economy. “With our continued emphasis on expanding the space economy by five times in the next 10 years, a venture capital fund of Rs 1,000 crore will be set up,” she said.
Simultaneously, the IndiaAI Mission—launched in March 2024—is set to establish a world-class AI ecosystem in India. With a five-year budget exceeding Rs 10,300 crore— Rs 551.75 crore earmarked for 2024-25—it aims to create a cutting-edge computing infrastructure with over 10,000 GPUs and nurture indigenous AI technologies.
Key initiatives under this mission include the IndiaAI Compute Capacity, IndiaAI Innovation Centre, IndiaAI Datasets Platform, IndiaAI Application Development Initiative, IndiaAI FutureSkills, IndiaAI Startup Financing, and Safe & Trusted AI programmes. These efforts collectively aim to position India as a frontrunner in AI innovation and adoption.
Edited by Suman Singh
