The government plans to set up the first startup district with the entire infrastructure, including incubation centres and about 20 tinkering labs in schools, in order to encourage the creation of innovative solutions across the whole spectrum of economic activities.
The first start-up ecosystem is expected to come up in Mangalore, Karnataka, commerce and industry minister Nirmala Sitaraman, who is a Rajya Sabha MP from Karnataka, said.
The government will fund the effort and ensure that roads, electricity and digital networks are provided for one of the largest upcoming incubation facilities in the country.
The government wants to encourage startups to provide innovative solutions for challenges unique to India, especially in education, health, manufacturing, agriculture and infrastructure, and not just be skewed towards developing apps, Sitharaman said.
The idea is to expand the startup drive in cities other than Bengaluru and Hyderabad, say sources.
The incubation centres will provide specialised services for sectors, including agriculture, medicine and pharma, along with information technology.
The Department of Industrial Policy and Promotion and the NITI Aayog will throw open a grand challenge in March to select the institution that will operate the incubation centres and the school-level tinkering labs.
"Innovation has to be encouraged right from the school level... It is a good budding ground for future entrepreneurs, hence there will be a significant thrust on schools," a senior government official said.
Incubators provide startups space to operate and be mentored so that they can scale up their business.
The multi-level incubation centres and the tinkering labs are proposed to have best practices exchange with Indian Institute of Technology Madras.
"Venture capital funding for startups is drying up and quality needs to be built... Any such support from government will be great for budding entrepreneurs," said Rajat Tandon, president of Indian Private Equity and Venture Capital Association.
The government plans to create sector-specific incubators under the Atal Innovation Mission along with 500 tinkering labs to promote entrepreneurship, provide pre-incubation training and a seed fund for high-growth startups as part of the Startup India action plan announced by Prime Minister Narendra Modi in January 2016.
Getting credentials from a certified incubation centre is one of the requirements for startups to get tax exemption.