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DPIIT has ‘no data’ on start-ups’ contribution to GDP, effect of COVID-19 on start-ups

startups, computers

On par with the larger government, the Department for Promotion of Industry and Internal Trade (DPIIT) has “no data” on start-ups’ contribution to the GDP, Commerce and Industry Minister Piyush Goyal disclosed in a written reply in the Rajya Sabha on September 23. The DPIIT does not maintain any data on the number of start-ups affected by COVID-19 either, the minister revealed.

Start-ups add more than 1.23 lakh jobs in 2020

In response to a question by NCP MP Vandana Chavan (Maharashtra), Goyal revealed that almost three lakh jobs have been reported by recognised start-ups between 2017 and 2019. Although the figures were as on September 6, 2020, they did not include data from 2020.

Number of jobs reported by recognised start-ups:
2017: 49,648
2018: 95,338
2019: 1,54,558

In an earlier question in Lok Sabha by BJP MP Ranjeetsinha Hindurao Naik-Nimbalkar (Madha, Maharashtra), Goyal had, however, stated that as of September 6, 2020, 34,267 start-ups created a total of 4,22,986, or more than four lakh jobs, jobs. This means that in the first eight months of 2020, start-ups added 1,23,442 jobs. Goyal did not specify, either in this session or in the last, from when DPIIT started collecting this data.

From the state-wise break-up of job creation by start-ups,

  • 68.6% start-up employees are concentrated in six states/UT: Maharashtra (80,714, ~19%), Karnataka (71,533, (~16.9%)), Delhi (49,497, ~11.7%), Uttar Pradesh (33,803, ~8%), Haryana (29,770, ~7%) and Telangana (26,013, ~6.1%).
  • This is on par with distribution of maximum number of start-ups across the country as per March 2020 figures — Maharashtra (5,477), Karnataka (4,206), Delhi (3,740), Uttar Pradesh (2,342), Haryana (1,635) and Telangana (1,609).
  • The states/UTs with least number of start-up employees are also not surprising: Lakshadweep Islands (7), Ladakh (9), Sikkim (12), Arunachal Pradesh (22), Meghalaya (34) and Mizoram (52).

Goyal also revealed that as of September 6, 2020, DPIIT had recognised a total of 36,106 start-ups. This means that 1,839 start-ups had not reported their employment numbers to the DPIIT. Until March 1, as revealed by Goyal in the Budget Session, DPIIT had recognised 28,979 start-ups. This means that between March 1 and September 6, a period of five months, the DPIIT recognised another 7,127 start-ups.

Government’s start-up fund doesn’t add up

The Indian government had set up a Fund of Funds for Startups (FFS) in June 2016 with a corpus of ₹10,000 crore which will be provided over 14th and 15th Finance Commission cycles, that is, until 2025. It is monitored by DPIIT and operated by Small Industries Development Bank of India (SIDBI). FFS doesn’t invest in start-ups directly, but through SEBI-registered Alternative Investment Funds (AIFs) that invest in equity and equity-linked instruments.

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In response to Nimbalkar’s question, Goyal explained how funds worth ₹1,322.05 crore had been released to SIDBI until September 9, 2020. They were released over four financial years:

  • 2015-16: ₹500 crore
  • 2016-17: ₹100 crore
  • 2019-20: ₹431.3044 crore
  • 2020-21: ₹290.75 crore
  • Goyal did not specify why funds were not released in FY18.

It is not clear how these releases to SIDBI interact with the ₹3,123.2 crore (from the FFS) that SIDBI had committed to 47 SEBI-registered AIFs as of February 18, 2020, a fact that Goyal had revealed in Lok Sabha in March 2020. Goyal’s answer to Nimbalkar suggests that these figures are only for the funds that SIDBI got from FFS to fund start-ups. Thus, it is not clear how SIDBI committed ₹3,123.2 crore to the AIFs if only ₹1,322.05 crore had been released to it since FFS’s inception in June 2016.

The Expenditure Finance Committee (EFC) of DPIIT has also proposed a Startup India Seed Fund Scheme (SISFS) with a corpus of ₹945 crore, Goyal revealed in a response to Lok Sabha MP Jayadev Galla (TDP-Guntur, Telangana). The EFC note was circulated for inter-ministerial consultations and has now been finalised. Goyal said that the SISFS proposal need not be placed before the cabinet since its original cost estimate (OCE) is ₹945 crore, well below the ₹1,000 crore OCE threshold required for cabinet input. It will be approved by the ministers of commerce and industry (Goyal), and finance (Nirmala Sitharaman).

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