<p>The India AI Summit, 2026, in its New Delhi declaration, places the democratisation of AI resources at the centre of public policy. Two emerging essentials underpin this goal: robust digital infrastructure and affordable connectivity. In this global technology ecosystem, startups could play a major role in building affordable and robust infrastructure locally to enhance the last-mile access to AI. The participation of over 500 tech startups, including 12 indigenous firms in the AI summit, gives credence to this idea.</p>.<p>India, reportedly the world’s third-largest startup hub with nearly two lakh government-recognised entities, has built impressive scale. Yet, primary interactions with founders reveal various challenges that require a more decisive government role.</p>.<p>Launched in 2016, the Startup India mission aims to promote innovation and entrepreneurship through three pillars: simplification and handholding support, funding and incentives, and industry-academia partnerships. These seek to ease compliance, reduce regulatory burdens, expand access to funding, and strengthen incubation and knowledge exchange.</p>.<p>The Department for Promotion of Industry and Internal Trade (DPIIT) anchors implementation. India’s startup ecosystem is valued at around $350 billion and has produced more than 100 unicorns. However, there are deeper fragilities. </p>.<p>In 2024 alone around 5,000 recognised startups shut down, largely due to funding constraints and intense competition. The problem appears structural: nearly 90% of startups remain at the ideation or early traction stage, while only 4.5% have accessed funding under Startup India schemes. According to a SIDBI report, the Fund of Funds for Startups (FFS) had disbursed just Rs 2,492.24 crore by March 2022 against a sanctioned Rs 7,225.45 crore, reflecting delays and other complexities. As a result, founders often rely on personal savings or informal borrowings or shut shop. </p>.<p>Another gap is in the regulatory framework. Higher corporate tax rates, cumbersome application processes, company registration compliances, bankruptcy laws, etc., along with conditions like the disqualification of startups from availing government benefits once the revenues cross the Rs 1 billion mark, hamper their success rates. Different thresholds and exemptions highlighted in the Startup India Action Plan—such as a three-year tax exemption and labour inspections waivers—are often inadequate for early-stage startups. Such constraints leave some founders with little choice but to relocate abroad. </p>.<p>Other challenges include a lack of planning, difficulty in finding the right human resources, poor marketing and customer retention strategies, insufficient risk management practices and tougher market competition.</p>.<p>Startups also face asymmetrical competition: besides peer competition, they must contend with established firms that can use predatory pricing or restrictive practices in the absence of robust regulatory checks. Even successful startups are vulnerable to ‘killer acquisitions’. The current policy framework is ill-equipped to address these concerns, necessitating effective regulatory intervention.</p>.<p>The current ecosystem must ensure a level playing field for all startups, irrespective of their size, life-cycle stage, turnovers or sectors. This calls for selective government intervention to protect startups from the bigger sharks. </p>.<p>A responsible and vibrant startup ecosystem of any country expects proactive action from its government, more specifically in relation to maintaining a level playing field between smaller firms and the bigger corporations. The antitrust watchdog of the country, the Competition Commission of India (CCI), can play a decisive role in this regard to protect the nascent domestic startups from bigger entities, foreign giants and public sector enterprises. </p>.<p>As the Startup India programme completes a decade, it is time to reassess its outcomes and redefine the role of the government with the active involvement of its agencies and institutions in ensuring a ‘market for all’. Care should also be taken that such government interventions remain surgical and do not distort the overall market dynamics. This would be in line with the larger aspirations of the country, with a great demographic dividend. </p>.<p>(The writers are founding directors at the Centre for Competition Law and <br>Economics)</p>.<p>Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.</p>
<p>The India AI Summit, 2026, in its New Delhi declaration, places the democratisation of AI resources at the centre of public policy. Two emerging essentials underpin this goal: robust digital infrastructure and affordable connectivity. In this global technology ecosystem, startups could play a major role in building affordable and robust infrastructure locally to enhance the last-mile access to AI. The participation of over 500 tech startups, including 12 indigenous firms in the AI summit, gives credence to this idea.</p>.<p>India, reportedly the world’s third-largest startup hub with nearly two lakh government-recognised entities, has built impressive scale. Yet, primary interactions with founders reveal various challenges that require a more decisive government role.</p>.<p>Launched in 2016, the Startup India mission aims to promote innovation and entrepreneurship through three pillars: simplification and handholding support, funding and incentives, and industry-academia partnerships. These seek to ease compliance, reduce regulatory burdens, expand access to funding, and strengthen incubation and knowledge exchange.</p>.<p>The Department for Promotion of Industry and Internal Trade (DPIIT) anchors implementation. India’s startup ecosystem is valued at around $350 billion and has produced more than 100 unicorns. However, there are deeper fragilities. </p>.<p>In 2024 alone around 5,000 recognised startups shut down, largely due to funding constraints and intense competition. The problem appears structural: nearly 90% of startups remain at the ideation or early traction stage, while only 4.5% have accessed funding under Startup India schemes. According to a SIDBI report, the Fund of Funds for Startups (FFS) had disbursed just Rs 2,492.24 crore by March 2022 against a sanctioned Rs 7,225.45 crore, reflecting delays and other complexities. As a result, founders often rely on personal savings or informal borrowings or shut shop. </p>.<p>Another gap is in the regulatory framework. Higher corporate tax rates, cumbersome application processes, company registration compliances, bankruptcy laws, etc., along with conditions like the disqualification of startups from availing government benefits once the revenues cross the Rs 1 billion mark, hamper their success rates. Different thresholds and exemptions highlighted in the Startup India Action Plan—such as a three-year tax exemption and labour inspections waivers—are often inadequate for early-stage startups. Such constraints leave some founders with little choice but to relocate abroad. </p>.<p>Other challenges include a lack of planning, difficulty in finding the right human resources, poor marketing and customer retention strategies, insufficient risk management practices and tougher market competition.</p>.<p>Startups also face asymmetrical competition: besides peer competition, they must contend with established firms that can use predatory pricing or restrictive practices in the absence of robust regulatory checks. Even successful startups are vulnerable to ‘killer acquisitions’. The current policy framework is ill-equipped to address these concerns, necessitating effective regulatory intervention.</p>.<p>The current ecosystem must ensure a level playing field for all startups, irrespective of their size, life-cycle stage, turnovers or sectors. This calls for selective government intervention to protect startups from the bigger sharks. </p>.<p>A responsible and vibrant startup ecosystem of any country expects proactive action from its government, more specifically in relation to maintaining a level playing field between smaller firms and the bigger corporations. The antitrust watchdog of the country, the Competition Commission of India (CCI), can play a decisive role in this regard to protect the nascent domestic startups from bigger entities, foreign giants and public sector enterprises. </p>.<p>As the Startup India programme completes a decade, it is time to reassess its outcomes and redefine the role of the government with the active involvement of its agencies and institutions in ensuring a ‘market for all’. Care should also be taken that such government interventions remain surgical and do not distort the overall market dynamics. This would be in line with the larger aspirations of the country, with a great demographic dividend. </p>.<p>(The writers are founding directors at the Centre for Competition Law and <br>Economics)</p>.<p>Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.</p>
