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Setting Up of Business, Industrial and Labour Laws · Startups and its Registration

Startup India Initiative and Action Plan: Pillars and Incentives

Updated 11 October 2026 · Fact-checked

The Startup India initiative is a Government of India programme, launched in 2016, to build a strong startup ecosystem. Its Action Plan rests on three pillars: simplification and handholding, funding support and incentives, and industry-academia partnership and incubation. To answer an exam question, name the pillar, list its measures, then conclude.

Understand Startup India Initiative and Action Plan

A startup is a young, innovation-driven business that aims to grow fast and create jobs. Such firms struggle with heavy compliance, shortage of early money and weak links to research and markets. The Startup India initiative was launched by the Government of India in January 2016 to remove these hurdles.

The Startup India Action Plan is the roadmap of the initiative. It is built on three pillars. Remember them as: make it easy, make it funded, make it connected.

  • Pillar 1: Simplification and handholding. Cut regulatory burden and give support. Measures include self-certification under labour and environment laws, a single online portal and mobile app for registration and information, a startup helpdesk, a faster and cheaper patent route with rebate on fees, relaxed public procurement norms, and an easier exit.
  • Pillar 2: Funding support and incentives. Give startups money and tax relief. Measures include a Fund of Funds for Startups, credit guarantee support, and tax benefits such as income-tax exemption for eligible startups and capital gains relief.
  • Pillar 3: Industry-academia partnership and incubation. Link startups to research and mentors. Measures include setting up incubators, innovation centres and research parks, atal-style innovation labs in schools, and annual incubator and startup events.

The Fund of Funds for Startups (FFS) does not invest directly in startups. The Government puts money with SIDBI, which commits it to SEBI-registered Alternative Investment Funds. Those funds then invest in startups. Think of it as a fund that funds funds.

The objectives are to promote entrepreneurship, create jobs, encourage innovation and build a sustainable ecosystem. Benefits are available to entities recognised by DPIIT, so recognition is the gateway. Check the current notified details of each benefit from the ICSI study material before the exam.

Key rules to remember

Three pillars of the Action Plan
Simplification and Handholding + Funding Support and Incentives + Industry-Academia Partnership and Incubation
Write all three in this order. Examiners expect the pillar names first, then the measures under each.
Fund of Funds route
Government → SIDBI (manages the fund) → SEBI-registered AIFs → Startups
Money reaches startups only through AIFs, not directly from the Fund of Funds.
Gateway rule
DPIIT recognition → eligibility for startup benefits
Most incentives depend on recognition and the conditions set in the notification.
Launch
Startup India Action Plan: announced January 2016
Launched by the Government of India; DPIIT is the nodal department.

How to solve Startup India Initiative and Action Plan questions

Use this method for any question on the Action Plan, its pillars or the incentives.

  1. 1Read the question and mark what is asked: pillars, objectives, funding, incentives or a case-based issue.
  2. 2Define the Startup India initiative in one or two lines, with its aim and launch year.
  3. 3State the pillar or pillars that fit the question. Name each pillar exactly.
  4. 4List the measures under each pillar in short points. Do not mix measures across pillars.
  5. 5For funding questions, explain the Fund of Funds route through SIDBI and AIFs.
  6. 6For case questions, check DPIIT recognition first, then match the facts to a measure.
  7. 7End with a one-line conclusion that answers the question asked.

Quickest way: Three-pillar sweep

When to use it: Use when you have about five minutes for a short-note or 'explain the Action Plan' question.

  1. Write the one-line definition and launch year.
  2. Draw three bullet headings: Simplification, Funding, Industry-Academia.
  3. Put three or four measures under each, using key words only.
  4. Add the Fund of Funds chain in one line.
  5. Close with the objective: jobs, innovation and a strong ecosystem.

Common mistakes in Startup India Initiative and Action Plan

  • Naming the pillars wrongly, such as adding 'tax relief' as a separate fourth pillar.

    Students remember incentives as a big topic and treat them as their own pillar.

    Fix: Keep three pillars. Tax benefits sit inside the funding support and incentives pillar.

  • Saying the Fund of Funds invests directly in startups.

    The name suggests direct investment.

    Fix: Write that the money goes through SIDBI to SEBI-registered AIFs, which invest in startups.

  • Placing self-certification under the funding pillar.

    Students learn the measures as one long list.

    Fix: Self-certification, the portal and the helpdesk are simplification and handholding measures.

  • Claiming every startup gets all benefits automatically.

    The scheme is described in general terms.

    Fix: State that benefits depend on DPIIT recognition and meeting the stated conditions.

  • Writing only a list with no conclusion.

    Students treat it as a memory topic.

    Fix: ICSI style needs the provision, the analysis and a clear conclusion. Add a closing line tied to the question.

Worked examples

Example 1

Explain the three pillars of the Startup India Action Plan.

Show the solution
  1. Introduce: the Action Plan was announced in January 2016 to build a strong startup ecosystem and create jobs.
  2. Pillar 1, simplification and handholding: self-certification for compliance, a single portal and app, a startup helpdesk, faster patent examination with fee rebate, relaxed procurement norms and easier exit.
  3. Pillar 2, funding support and incentives: the Fund of Funds for Startups, credit guarantee support and tax benefits for eligible startups.
  4. Pillar 3, industry-academia partnership and incubation: incubators, innovation centres and research parks, and links between startups, academia and industry.
  5. Conclude: together the pillars reduce compliance, ease access to money and connect startups to knowledge.

Answer: The Action Plan rests on three pillars: simplification and handholding; funding support and incentives; and industry-academia partnership and incubation. Each pillar addresses a different barrier faced by startups.

Example 2

Explain how the Fund of Funds for Startups works. Does it invest directly in a startup such as a Pune-based software company?

Show the solution
  1. State the purpose: to give startups access to risk capital without the Government investing directly.
  2. Describe the chain: the Government provides the corpus, SIDBI manages it, and SIDBI commits money to SEBI-registered Alternative Investment Funds.
  3. The AIFs then invest in startups. They use their own judgment to choose which startups to back.
  4. Apply to the facts: the Pune company cannot receive money straight from the Fund of Funds. It can receive investment from an AIF that has received a commitment under the Fund of Funds.
  5. Conclude on the question asked.

Answer: No. The Fund of Funds does not invest directly. It invests through SEBI-registered AIFs, via SIDBI, and those AIFs may invest in the Pune startup.

Exam tips

  • Learn the three pillar names word for word. Marks are often given for correct headings.
  • In a short note, give each pillar three or four measures. Do not write long paragraphs.
  • For funding questions, always draw the Government to SIDBI to AIF to startup chain.
  • In case-based questions, check DPIIT recognition before applying any benefit.
  • Read the latest notified details of each benefit from the ICSI study material before the exam, as limits and conditions can change.

Practice questions from Startups and its Registration

Startup India Initiative and Action Plan: frequently asked questions

What are the pillars of the Startup India Action Plan?

There are three: simplification and handholding, funding support and incentives, and industry-academia partnership and incubation. Write them in this order in your answer.

What are the objectives of the Startup India initiative?

The aims are to promote entrepreneurship, encourage innovation, create jobs and build a strong startup ecosystem. It does this by easing compliance, improving access to funds and linking startups to research and industry.

What is the Fund of Funds for Startups?

It is a Government-backed corpus managed by SIDBI. It does not invest in startups directly. It commits money to SEBI-registered AIFs, which then invest in startups.

Do all startups get Startup India benefits?

No. Most benefits are linked to recognition by DPIIT and to the conditions in the relevant notification. A business must meet these before claiming a benefit.