Start-ups and young firms contribute to the economic development through employment, innovation and productivity.Though majority of the start-ups fail, yet they are crucial for economic competitiveness and prosperity in order to allocate resources to more productive and efficient business activities.While many economies strive to generate such business dynamism, fewer succeed. So it is highly important to analyse and draw lessons from similar initiatives across the world.India is building an entrepreneurial ecosystem that can foster start-ups and innovation. Last year, the Startup India Initiative was launched with full zeal.The initiative has simplified the process of starting up. The rolling out of a mobile app and portal, provision of legal support and fast-tracking of patent examination at lower costs have facilitated potential entrepreneurs.An amount of INR 10,000 crore has been allocated for the initiative. Start-ups have been provided some tax exemptions for the initial three years.The fiscal allocation has not only caused enthusiasm amongst the youth to compete and innovate, it has also generated trust and investments from both domestic and international investors.In order to accelerate the exchange of ideas and knowledge, the initiative has strengthened industry-academia partnership and incubation by building innovation centres at national institutes and holding an annual incubator grand challenge among others.The Indian technology start-ups landscape has seen a tremendous growth. More than 800 start-ups are being set up annually and around 11,500 start-ups, which will generate employment opportunities for over 250,000 people, are projected to emerge by year 2020.A Delhi-based tech entrepreneur said, “When the PM of the nation is directly involved in the movement as the poster person, it clearly makes an impact and builds trust across the movement. It is definitely helpful, especially in bringing more investments for us.”A recent research says the most perceived strength is the positive change the initiative has brought in the Indian psyche.“One of the positive things that the Startup India initiative has done is that our parents now acknowledge and support what we are doing …” said a Mumbai-based technology entrepreneur.The strength of the start-up programme hence also significantly lies in the positive psychological impact that it has created around the whole movement and entrepreneurship. It is also changing the mindset of consumers, who are now more willing to experiment with start-ups.Some entrepreneurs in India consider that the picture is not all rosy and there are weaknesses to be addressed. They report unfairness and lack of meritocracy in the system.It is highly necessary that the system is made transparent and processes are not hampered by inefficiency of the bureaucracy. While the initiative is encouraging more start-ups, there is lesser focus on policies supporting scaling up of young businesses.The progress of India in nurturing start-ups is appreciable. But it is far from any comparison with China’s impact on the Silicon Valley.Chinese tech sector has already left a mark on e-commerce and its recent focus on semiconductor industry is poised to take them to new heights in the technology sector. The question is; Will India be able to catch up?In August, The Nature reported that scientists and researchers marched in Bangalore “lamenting their country’s low levels of funding for research and complaining about government promotion of ‘unscientific ideas’.”They demanded an increase in research and development expenditure from 0.9% of gross domestic product (GDP) to 3%. This describes the long journey that India will have to pursue to become an innovative economy.The Indian subcontinent is similar when it comes to the psyche. In this scenario, an initiative taken and backed by the prime minister will make a huge difference in attracting and encouraging more people to be part of the movement and to ensure an environment that is conducive for innovation and growth.It can also be learned that the funding and incentives for innovation and growth matter.However, it is essential to understand that the start-ups movement cannot be created in a vacuum. The ecosystem and behavioural transformation takes a long time.The start-up drive has built on the existing momentum in the country. As per the National Association of Software and Services Companies’ annual report for year 2014-15, over 3,100 tech/digital start-ups were present in India.Edward Glaeser, in his book Triumph of the City, traced the evolution of technology cluster from the educational focus in Bangalore at the start of the 20th century.Later, the electronics industry in Bangalore provided the right ambiance for spillover towards creation of further innovation in the cluster.The key takeaway is that governments should efficiently direct their attention and funds to build a strong ecosystem for nurturing innovation and start-ups – better soon than it is too late.Pakistan has a great potential for IT start-ups. Though there are various provincial and federal agencies supporting start-ups and IT companies, the number and impact of Pakistan-based start-ups are far lower than those in India.It is appreciable that the federal government of Pakistan, just like India, has announced some tax exemptions for start-ups for the initial three years. However, there is a need to design the “Startup Pakistan” initiative.Research and development expenditures in the country are considerably low which restrict entrepreneurs from launching high-value start-ups.According to the World Bank data, public and private expenditures for research and development are 0.3% of GDP in Pakistan while these stand at 0.9% in India and over 2% in China.In order to exploit the potential of Pakistani talent and to stimulate innovation in the economy, the prime minister should steer the Startup Pakistan initiative.Naveed Iftikhar is a public policy practitioner and researcher and Swati Sharma is a PhD candidate at the Department of Humanities and Social Sciences, Indian Institute of Technology, DelhiPublished in The Express Tribune, September 11, 2017.Like Business on Facebook , follow @TribuneBiz on Twitter to stay informed and join in the conversation.