How Rajasthan Government Is Fostering Startups And Digital Innovation: An Overview Of Initiatives

[Note: This article is part of The Junction Series. We are hosting our flagship conference, “The Junction” in Jaipur in January 2017. Learn more about The Junction here!]

“If Bangalore is where it all began in startups, I can assure you Rajasthan is where it will be. Rajasthan is a world-beater and will remain so in the times to come.”

This remark was made by Rajasthan Chief Minister Vasundhara Raje in October 2015. The occasion was the inauguration of the first edition of the ‘Rajasthan Startup Fest’- a national-level startup event designed to boost entrepreneurship in the state.

Today, Rajasthan is counted amongst the ‘hottest’ junctions for entrepreneurs, incubators and even other sectors such as Bollywood, artisans, craftsmen and more. However, there was a time when the majority of the initiatives of the state government were focussed only on food, security, healthcare, housing, and education, with an aim to raise the standard of living at large.

But, with more than $100 Mn infused in homegrown startups like CarDekho, CultureAlley, LogicRoots, BlueBox Media, Razor Pay and more – the government was forced to think beyond just food and education, and cater to the flourishing startup ecosystem of the state. Steps have also been taken to improvise the fragmented digital landscape of the state, to help leverage Rajasthan’s intellectual capital for the State to become the leader and create a benchmark for e-Governance.

Due to initiatives such as the state’s Startup Policy, to E-governance, to several other digitisation schemes – the Rajasthan government is currently leading in the charts to emerge as the number two state in the country in ease of doing business index after Uttarakhand, according to a World Bank report. Also, Jaipur is at present the second-most attractive investment destination in the country, as per an Ernst&Young Attractiveness Survey.

With this in mind we, at Inc42, take a deep dive into the existing mechanisms, key people, and other regulatory authorities of the Rajasthan government, working endlessly to boost the state’s startup ecosystem. (All information is based on data available publicly.)

Rajasthan Startup Policy 2015

Unveiled in October 2015, the policy has been formed with a focus on areas like social and cleantech – rural infrastructure & services, crafts, water, sanitation, renewable energy and healthcare, including asset-light models of healthcare delivery, and medical devices. Mobile and information technology, including but not limited to crowd-sourcing, crowd funding, and online financial services were also kept in focus.

The policy also takes into account sectors such as Internet of Things (IoT), electronics and hardware, along with ‘IT for X’ in the areas of garment and crafts, mining, and SME manufacturing and services.

The key targets of the policy include allocating $8.4 Mn (INR 55 Cr) to bring investments over $76 Mn (INR 500 Cr) to set up 500 startups by 2020. Also, there are plans to set up 50 incubators/incubator-like organisations. Going a step ahead, the Rajasthan government has also announced its plans to develop a 100,000 sq. ft. of incubation space, along with an innovation and problem-solving culture to be implemented across the state.

In order to attain these targets, the government has proposed to issue the following guidelines:

• Sustenance allowance of INR 10,000 per month for one year to the startups at idea/prototype stage, post-approval by the committee and nodal institution.
• Incubator will provide mentoring services, access to their labs, facilities etc., on a free-of-cost (FOC) basis.
• Selected startups to get free access to state infrastructure like university/libraries/ government, laboratories etc.
• Assistance for startups at the pilot stage, under which marketing assistance of maximum INR 10 Lakhs will be provided to launch its product.
• Scope for financial assistance wherein the startup can source venture capital from angel investors/venture capital Funds.
• Selected students entrepreneurs to be given grace marks and attendance in educational institutions. Furthermore, their project may also count towards their degree completion credits.
• Special incentives and a statewide business plan competition to invite new innovative business idea from across the state.
• Incentives, including grants, have also been extended to angel investors.
• The policy also provides for Routine Startup Festivals to be held in the State.
• A Startup Council to be setup with representatives from the industry to play an advisory role and act as a think-tank for strengthening the startup ecosystem in the state.
• Plans are being drawn to setup a Rajasthan Startup Village and e-Platform. Until the setup is done, a cloud server for startups, MOOCs and co-ordinating with various related state and central government. agencies has been proposed to further strengthen the startup ecosystem.

Rajasthan E-Governance IT ITES Policy 2015

The e-governance programme in Rajasthan began right from computerising government offices, payment of utility bills via Lok-Mitras at local level and other fragmented initiatives. These fragmented initiatives are now being unified into a common vision and strategy under the Rajasthan e-Governance Framework leveraging the Rajasthan e-Governance Architecture. There are three key challenges in stepping up e-Governance: investments in and access to ICT, capacity building to utilise e-Governance services, and promoting people’s participation in e-democracy.

The State, currently, has its own team of close to 3,000 IT professionals who have worked on the e-governance architecture and framework. In its continuing endeavour of development, the Rajasthan e-Governance, IT & ITES Policy 2015 envisages promoting citizen access to ICTs for encouraging their participation in e-Governance.

The mission of the policy is to establish complete participatory and transparent open Governance and Citizen-Centric IT and e-Governance for the residents of Rajasthan. Also, it aims to establish seven Smart Cities in Rajasthan by 2020 as well as positioning Rajasthan as the Best IT Investment Destination and Jaipur as IT, ITeS and R&D Hub in north and wIndia.

The key targets to achieve in the next 10 years (till 2025) are:

• Achievement of up to 500,000 direct employable professionals in the ICT sector.
• Sector-wide implementation of ICT/ESDM initiatives in Rajasthan with establishment of Rajasthan Skills Registry.
• Development of at least 2,000 technology startups in the State and prioritisation of IT/ITeS/ESDM sector under the Rajasthan Venture Capital Fund with specific capital for the development of IT/ITeS/ESDM startups in Rajasthan.
• Increase in the current investment in IT/ITeS sector by 10x.
• Increase in the IT turnover to INR 50,000 Cr.
• Increase in IT exports from the State to INR 5,000 Cr.
• Making two individuals (at least one female) in every household e-literate so as to bridge the digital divide.
• Automated Service Delivery with automated one-time verification of Government documents.
• Connectivity up to Panchayat level by 2016 and centralised, integrated, and unified State Datasets.
• Promotion of Robotics and open source technology.

Other Objectives Of The ITES Policy  

Apart from these, other objectives under the new policy include improvement in delivery of public services, rise in awareness regarding e-waste management, and implementation of a uniform website policy for Rajasthan Government with emphasis on user-friendliness of the interface for all inclusive percolation of the benefits of IT.

Here are a few guidelines proposed to be followed to achieve these targets, as mentioned in the policy:

• Encouraging the introduction of IT Clubs for students & faculty.
• Facilitating setting up of e-Learning centres, in rural/slum areas for the promotion of IT education, along with soft skills development, and spreading awareness about job opportunities in IT.
• The Rajasthan Skills Repository with a data bank of students who are IT literate and suitable for deployment in the IT industry will be established, maintained, and shared with the industry.
• Several VAT/CST incentives (upto 100%) provided to manufacturing, service enterprises in backward & most backward areas.
• Interest subvention on investment upto INR 50 Cr for Robotics.
• 25% subsidy on Internet bandwidth.
• 25% of Rajasthan Venture Capital Fund shall be earmarked for IT/ITeS sector.
• Exemption from zoning regulations and land conversion to IT Parks/IT campuses, IT Industry.
• Upto 5% interest subsidy on term loans.
• Reimbursement of patent filing costs upto INR 3 Lakhs, per patent awarded per year.
• 30% reimbursement of quality certification costs up to INR 5 Lakhs.
• Outstanding Performance Awards in four categories with a grant of INR 1.5 Lakhs for each awardee.
• Reimbursement on fixed capital up to INR 5 Lakhs for manpower development.

The policy also proposed to form an information security policy in order to maintain confidentiality, integrity, and availability along with safeguarding critical information and creating awareness among officers and officials.

Rajasthan SEZ Policy

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The Rajasthan Special Economic Zone (SEZ) is being set up with an objective to initiate infrastructural development with a primary focus in the fields of gems and jewelry, woolen carpets, handicrafts, and so on. The primary aim is to formulate an absolutely tax-free operation the in industrial, service, and trade sectors.

Rajasthan’s proximity to the Delhi International Airport and ports of the western coast, makes it an ideal location for export-oriented industrial development on a large scale. 40% of the proposed Delhi-Mumbai freight corridor will pass through Rajasthan, throwing up enormous possibilities for development of industrial belts such as special economic zones along the corridor. Six SEZs with an expected investment of INR 165.15 Bn have already notified. These are:

1. Mahindra World City (Jaipur) Ltd, Jaipur.

2. Somani Worsted Ltd, Khushkeda, Bhiwadi, Alwar.

3. Genpact Infrastructure (Jaipur) Pvt. Ltd, Jaipur.

4. Vatika Jaipur SEZ Developers Ltd, Jaipur.

5. Mansarovar Industrial Development Corporation, Jodhpur.

6. RNB Infrastructure Private Limited, Bikaner.

With a stable political environment, the Government is committed towards creating a progressive business environment. The approved policy regime includes:

• Exemption from stamp duty and registration fees.
• Exemption of all state and local taxes and levies for transactions with the Special Economic Zone (SEZ) and for supply from domestic tariff areas to the SEZ.
• Expediting process for land acquisition to set up SEZs.
• Grant of labour and environment-related permits and approvals through a dedicated single window mechanism.
• Permission to generate electricity for own consumption.

Apart from these, the Government is also actively working to improve education and skill development in the state. The objectives include:

• All 332 cities and towns to have at least one Technology Research Laboratory to promote agriculture and vocational education, with innovative models of financial support. These centres to be linked with reputed institutions to offer courses using technology.

• Higher education and research to be supported and offered industry status to achieve enrollment of minimum 20% students from other other states and countries.

• Promoting and investing in science and technology education (five institutions) to make Rajasthan a Centre of Excellence in S&T in north India.

• Establishing 15 high-end research institutions in 10 most promising areas of activity. To invite 2-3 international universities to Rajasthan from the top 100.

Rajasthan’s ‘First Of Its Kind’ Initiatives

Rajasthan is the first State to have one integrated, centralised, and unified service delivery platform. Also, the government recently announced to observe ‘Rajasthan IT Day’ on March 21 of every year.

A few of CM Vasundhara Raje’s flagship schemes under the objective are:

RajNET: Launched in March 2016, this network will cover all 9,894 gram panchayats, 183 municipal areas along with all district and block headquarters. This is a first-of-its-kind network in the country. Under the Digital India programme, the government of India had set the target of creating this level of connectivity across the country by December 2016. Rajasthan has achieved this goal in March 2016 itself. The network will ensure adequate connectivity across state for effective delivery of services and benefits to citizens under various State and Central initiatives such as Bhamashah Yojana, e-Mitra, MNREGA etc.

Bhamashah Yojna: This scheme, introduced with the vision of good governance – “SuRaaj”- is committed to transfer the financial and non-financial benefits of governmental schemes directly to recipients in a transparent way. The scheme was initiated way back in 2008. In fact, it was the first Direct Benefit Transfer (DBT) programme of the country. However, due to various reasons, it went into hibernation for five years. It was then revamped, reactivated, and launched on the 68th Independence Day of India in 2014. Till September 2015, the government claims to have covered more than 90 Lakh families out of a total of 95 Lakh beneficiary families. Moving of social security schemes online in Rajasthan is being done through “Bhamashah” cards which uses the Aadhar card database.

Under Bhamashah Ration Cards, Pension, NREGS, Scholarships (Higher Education, Technical Education and for differently abled) are being brought under one platform. The card leverages biometric identification and core banking under the scheme, the family is being mapped and a single unique data set is being created. A Bhamashah card holder will be able to obtain services at different service points – which include bank branches, ATMs, e-mitra kiosk. Additionally integrated service delivery shall be ensured at Rajasthan Sampark IT Centers right up to Panchayat level and Municipal areas.

Of the 6 Cr-plus population in the state eligible for social security schemes, nearly 4.5 Cr have already been linked to Bhamashah.

E-Mitra: e-Mitra is an ambitious e-governance initiative of the Rajasthan state government. This is being implemented in all 33 districts of the state using PPP model for convenience and transparency to citizens in availing various services of the government and private sectors under a single roof at their door steps using an e-platform. The services are delivered via counters known as CSC (common service centre) kiosks in rural areas and e-Mitra kiosks in urban areas and also online via www.emitra.gov.in. There are 35,000 e-Mitra points of service at the moment.

The government is also working on the following for service delivery:

• E-enablement of all public services, which would include e-submission of forms, electronic workflows, e-payments, use of DSC, online/SMS-based status tracking, and the final delivery of services electronically.
• It also includes (wherever required) cross-sharing of data amongst various departments/government agencies, and e-authentication.
• ‘One Person One Identity’ shall be achieved with unique digital profile for each resident under a common framework.
• For delivering e-services to citizens, government will promote the use of upcoming technologies like NFC, cloud computing and social media.
• Multiple channels like mobile phones, tablets, call centres, TV etc., will be used for such delivery.
• Efforts to provide all government services through mobile devices for on-the-move service delivery.
• The endeavour will be to provide services ‘anywhere, anytime, any network, any device.’
• Self-service kiosks are being installed across the State.
• An integrated platform for reality check leveraging iFacts to ensure end-to-end grievance redressal.

Startup Incubators, Co-Working Spaces And Startup Funds

According to angel.co, there are at present 367 startups  in Jaipur (and counting). As per a recent analysis by Inc42, 23 startups from Jaipur have been funded between 2014-2016, for a total amount of $142.25 Mn. The investors seem bullish towards three major sectors: ecommerce, automobile, and edtech and about $80 Mn was infused into the ecommerce sector, contributing a staggering 56% of the total funding between 2014-2016.

A few of the major funds, incubators and coworking spaces are:

Rajasthan Angel Investors Network (RAIN)

RAIN is a group of angel investors in Jaipur interested in investing in early-stage businesses, which have a potential to create scale. It is interested in any domain, preferably driven by technology or services with the potential of high scalability and could be started with minimal CapEx. It has invested in startups such as online media company Blue Box Media Pvt. Ltd, auto rickshaw finder app called Chaloge Kya, and Kidswids, a unit of 3D-printing company MakerKart. Also, in August 2016,it invested $149K in edtech startup iAugmentor Labs Pvt. Ltd and an undisclosed amount of funding in fashion retail platform Yufta in April 2016.

Rajasthan Venture Capital Fund

Rajasthan Venture Capital Fund (RVCF) has signed an agreement with Startup Oasis and Centre for Innovation, Incubation & entrepreneurship (CIIE) to dedicate 10% of its INR 500 Cr third fund (SME Tech Fund) for startups. The fund is supported by 15 investors, of which the lead investors are the Small Industries Development Bank of India (SIDBI) and Rajasthan State Industrial Development and Investment Corporation (RIICO). Its portfolio companies include Yatra, Mosambee, Soft Tech, Aujas, Leeway, Frontier Logistics, NexTenders and more.

Startup Oasis 

Startup Oasis is a joint initiative of the Rajasthan State Industrial Development and Investment Corporation Ltd. (RIICO) and CIIE at IIM Ahmedabad. It has mentored startups like SRJNA, UrbanDhobi, Razorpay amongst others and has trained more than 1,000 aspiring entrepreneurs. To date, it has incubated 39. Of these, 15 have been launched, four have received funding and five-six are dormant.

Wired Hub

Wired Hub, founded by Himanshi Goyal, was publicly opened on February 1, 2016, and has organised regular workshops, mentorship sessions, and pitching contests. It currently has over 10 members and is spread in an area of over 1,000 sq. ft. It has also introduced a unique concept of the coworking club where members can avail the facilities and attend the networking events, without taking a desk space.

enTRIPreneur

enTRIPreneur, started by Anuj Agarwal, Jahnvi Sharma, Rachna Ghiya, and Swapnil Soni is a platform that aims to change the way entrepreneurs connect with each other. The platform organises exclusive trips for entrepreneurs where they can relax, interact, connect, and learn with other like-minded and proactive entrepreneurs.

Other Government Regulatory Bodies

Rajasthan State Industrial Development and Investment Corporation (RIICO)

RIICO, a state government agency, has developed 322 industrial areas in Rajasthan. These industrial areas are provided with water, power, roads, shops and telecommunication facilities. Services provided by RIICO to investors and entrepreneurs include: site selection and acquisition of land, financial assistance to small, medium, and large scale projects, equity participation in large projects on merit, technical consultancy for project identification and tie-up escort services, facilitation of government clearances, merchant banking and financial tie-ups, extending incentives and concessions according to the policy of state government and Department of Industries.

Special Region Investment Board

The Board will be established under the Rajasthan Special Investment Region Bill, 2016. It will have 15 members, including the minister in-charge of the Delhi Mumbai Industrial Corridor (DMIC) project in the state, and parliamentarians and legislators representing areas included in the special investment region. It aims to take forward the Centre’s plans to develop ‘integrated industrial villages’ in five Rajasthan cities selected in phase-I of the DMIC project.

Economic Policy and Reforms Council

The Council acts as the think-tank on key economic and business issues. It provides strategic inputs to the state government for increasing private sector participation, creating resources, capabilities, infrastructure and systems so that economic activities could flourish in the state. The Council comprises members from the fields of business and economics –  with CEO of Shell India, Vice Chairman of HSBC in India and Chairmen of ITC, HDFC, NIIT Ltd and Gujarat Ambuja Cement.

Rajasthan Urban Infrastructure Finance Development Corporation Ltd. (RUIFDCO)

It is envisaged that the RUIFDCO can play the role of a state-level dedicated urban infrastructure financing agency that would support both the Government of India’s (GoI) and Government of Rajasthan’s (GoR) objectives and policies for the urban sector. RUIFDCO would also attempt to catalyse privately mobilised financial resources to bear on urban infrastructure investments financed by urban local bodies.

Project Development Corporation Ltd (PDCOR)

It is a partnership between the Government of Rajasthan and HDFC/ILFS. The mandate of PDCOR is to facilitate private sector investment in infrastructure-related activities in Rajasthan. It provides institutional support to the government in order to successfully structure and implement infrastructure projects on a PPP basis. It also advises the government on policy and institutional changes.

Investment Commissioner Office In Delhi

The Investment Commissioner office has been established in Delhi to facilitate a better interface with industry and business. The senior officials of the state government are available in this office so that investors need not visit the state for obtaining approvals.

Notable VCs And Angels In Rajasthan Startups

500 Startups: 500 Startups is an early-stage venture fund and seed accelerator founded by Dave McClure and Christine Tsai in 2010. It has many funds focussed on different international regions or operational verticals – which includes the $22 Mn 500 Durians fund, focussed on the Southeast Asian market, and $10 Mn 500 Mobile Collective fund, focussed on mobile app startups globally. In July 2015, it participated in the $6.5 Mn funding round of Jaipur-based language learning platform CultureAlley.

Warburg Pincus: Warburg Pincus is an American global private equity firm launched in 1939. Initially, it was incorporated as EM Warburg & Co. In 1966, it was acquired by Lionel I. Pincus & Co., forming the current version of Warburg Pincus. It manages over $40 Bn in assets. It invests in sectors such as consumer, industrial and services, energy, financial services, healthcare, technology, media and telecommunication, and real estate. As of now, it has backed Rajasthan-based non-banking finance company Au Financiers and last participated in its $21 Mn round in 2014.

Hillhouse Capital: Hillhouse Capital Group (“Hillhouse”) is an investment management firm founded by Zhang Lei in 2005 with $20 Mn in seed capital from the Yale Endowment fund. It manages over $20 Bn, as of January 2016. It has over 30 investment professionals across its offices in Beijing, Hong Kong and Singapore and invests globally, with a particular focus on Asia. This year, in March 2016, it became part of Jaipur-based Girnar Software’s latest funding round.

Mahavir Pratap Sharma: Mahavir Sharma, a serial entrepreneur, is the Chairman and Co-founder at RAIN (Rajasthan Angel Innovators Network). He has successfully co-founded startups such as Oscar Expo Design LLP, Swishin Events LLP, Jaipur Kaleen Park Ltd (JKPL) and more. Also, he is a mentor and director on investments like Organic Shop and Blue Box Media.

Yogesh Chaudhary: Yogesh is the owner and Director at Jaipur Rugs Company. Jaipur Rugs is a family business that lays importance in keeping family values alive.

In April 2016, he invested an undisclosed amount in Organic Shop.

Kamal Kothari (Blue Box Media, Organicshop), and Ajay Data (Blue Box Media, Yufta) are two other notable startup investors in the city.

Editor’s Note

States like Karnataka, Tamil Nadu, Andhra Pradesh, Kerala, Maharashtra, and West Bengal, have implemented their startup policies way before Rajasthan. In 2015, Kerala was already declared as India’s first digital state. However, one thing that various media portals and analysts find unique with Rajasthan, is the intention to work along with the startups, instead of just making the policies.

Today, Rajasthan is known as a state ‘pushing its boundaries’ to make a robust, competitive, and flourishing ecosystem for budding entrepreneurs, working from the ground up. In the last three to four years, the state’s capital city Jaipur has grabbed some serious attention from investors, transforming the city into a veritable startup hub.

The CM was not far wrong in saying what she said in the opening quote. With such initiatives and increasing government support, investors interest, and a robust ecosystem emerging from Rajasthan with some solid players like Cardekho, CultureAlley,  KhanaGaadi, Yufta, KidsWids, etc., Rajasthan has just raised its curtains and surely there lies a good show to watch in the coming years.

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