UNIT 3

Support to MSMEs and Startups

Learning Objectives
 Discuss various sources of support for the entrepreneur.
 List policies from all over, that help entrepreneurs.
 Discuss how to evaluate these policies.
 Understand the benefits available to MSMEs in India.
 Understand the benefits under Startup India.
 Describe the benefits of a business incubator.
 Explain the intricacies of incubator management.
 Define a business cluster.
 Discuss identification and development of clusters.

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Sources of Support
 Progressive policies which help entrepreneurial ventures
 Incubators which are set up to provide support to new firms in the early stages
 Business clusters which are made up of firms in the same industry in close proximity to one
another

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Uplifting Entrepreneurs
 Entrepreneurship education
 Entrepreneurial skills
 Access to debt
 Access to equity
 Simplification of administrative burden
 Access to markets
 Encouragement for weaker sections

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MSME
 Manufacturing enterprises have been defined in terms of investment in plant and machinery
(excluding land & buildings) and further classified into:
 Micro enterprises—investment up to ₹25 lakhs
 Small enterprises—investment above ₹25 lakhs and up to ₹5 crores
 Medium enterprises—investment above ₹5 crores and up to ₹10 crores

 Service enterprises have been defined in terms of their investment in equipment (excluding
land & buildings) and further classified into:
 Micro enterprises—investment up to ₹10 lakhs
 Small enterprises—investment above ₹10 lakhs and up to ₹2 crores
 Medium enterprises—investment above ₹2 crores and up to ₹5 crores

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Policies to Help Entrepreneurs in India
 Udyog Aadhaar
 Employment Generation and Credit Support Schemes
 Development of Khadi, Village, and Coir Industries
 Technology Upgradation and Quality Certification
 Marketing Promotion Schemes
 Other Schemes

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Tax Exemptions
 80 IAC Tax exemption
 Tax Exemption under Section 56 of the Income Tax Act (Angel Tax)
 Exemption of capital gains up to ₹50 lakhs
 Exemption from tax on capital gains arising out of sale of residential house
(Section 54 GB of the Income Tax Act, 1961)

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Labour laws
Startups may self-certify compliance in respect of the following labour laws:
 Other Constructions Workers’ (Regulation of Employment & Conditions
of Service) Act, 1996
 The Inter-State Migrant Workmen (Regulation of Employment &
Conditions of Service) Act, 1979
 The Payment of Gratuity Act, 1972
 The Contract Labour (Regulation and Abolition) Act, 1970
 The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
 The Employees’ State Insurance Act, 1948

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Government Procurement
 Startups are exempted from otherwise stringent selection criteria such as Prior
Experience and Prior Turnover.
 Startups are also exempt from Earnest Money Deposit (EMD), thus making it easier
for them to apply in the tendering process.
 Startups get a chance to work on Proof of Concept (POC) or pilot projects, giving
them a chance to test out new and innovative products.
 Products and services can be listed on Government E-Procurement Marketplace
(GEM). It gives direct access to procuring departments and there are no restrictions
on categories, so innovative products can also be listed.
 The feedback mechanism on GEM will help startups fine tune products on the basis
of widespread feedback from users.
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Other Relaxations
 Relaxations by Reserve Bank of India (RBI)
 Relaxations by SEBI (Alternative Investment Funds) Regulations, 2012
 Relaxations by the Ministry of Corporate Affairs

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Big Incubators in India

Incubator Location Sq ft Number of

Incubatees
(2019)
T-Hub Hyderabad 80,000 140
Technology Innovation Zone Kochi 1,50,000 120
36Inc Raipur 30,000 106
Bhamashah Jaipur 1,30,000 45
KIIT Bhubaneswar 40,000 40

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Benefits from Incubators
 Access to shared flexible spaces
 Shared offices services
 Providing a business consulting network
 Networking
 Facilitating access to capital

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Managing an Incubator
 There should be an incubator manager and a team of professionals to manage
the entrepreneur.
 The incubator should set clear guidelines for eligibility.
 An incubator should have clear cut guidelines for an admission process.
 A contract should be signed by the incubator and the entrepreneur laying down
all the terms and conditions.
 The long-term financial viability of the incubator will depend on its business
model.
 Just like guidelines for admission, there should be clear guidelines for exit.

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Business Clusters
 Well developed and intense links with suppliers
 Formal and informal business networks
 Shared supporting infrastructure like buildings and road connections
 A certain level of cooperation in spite of a high degree of rivalry and
competition 

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Cluster Development
 Most of the cluster development activities can be grouped into the following
heads:
 Supplier buyer relationships can be forged by collecting and distributing
information about potential industry linkages.
 Common infrastructure can be supported by external agencies.
 Especially in the case of industries heavily dependent on specialized skills,
providing skills training and education is a good means of supporting a cluster.
 Industries in a cluster can be aided by providing marketing channels.

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