Ex-Ante Evaluation (for Japanese ODA Loan)
South Asia Division 1, South Asia Department
Japan International Cooperation Agency
1. Name of the Project（１）Country: India（２）Project: Project for Promoting Start-up and Innovation in Telangana（３）Project Site/ Target Area: Telangana State (Population: about 35.19
million)
Loan Agreement: February 20, 2024
2.

Background and Necessity of the Project（１）Current State and Issues of the Private Sector and Priority in India
India has a huge population of over 1.3 billion, with a young demographic
composition (average age is 28.7, World Fact Book, 2020) and is currently ina demographic dividend period. The Government of India estimates thatapproximately 16 million new people will enter the labor market each year
(2015-2022), the number of people who wish to work is expected to grow in
the future (Ministry of Skill Development and Entrepreneurship, 2015), and theModi administration has pledged since its inception in 2014 to create 20 million
new employment opportunities annually. On the other hand, the number of new
employment created between 2011 and 2015 averaged only about 6.6 million
per year, and some estimates suggest that the net job growth (jobs createdminus jobs lost) over the same period was about 700,000 (McKinsey Global
Institute, 2017). The first reason for this is that job creation in the manufacturing
and service sectors, which account for more than 80% of real GDP, has been
limited (consequently, more than 50% of the employed population is involvedin agriculture, which accounts for less than 20% of real GDP (Economic andSocial Research Institute, Cabinet Office, the Government of Japan, 2019).
The second reason is that only about 1.4% of all firms in the country have 10
or more employees, and the vast majority of firms remain informal
microenterprises unregistered with the government, which do not create
employment, among other factors (the Government of India, 2016).
In a situation where the creation of job opportunities could not keep up withthe annual influx of population into the labor market, the unemployment rate
was about 6.1 % in 2017-18, before the spread of the COVID-19, and wasparticularly high among young people (age 15-29: 17.8 %), highly educatedpeople (19.8 % for university graduates, 17.2 % for master's degree graduates,
14.6% for doctoral graduates), and high unemployment among women(secondary school graduates and above: 19.8% in urban areas and 17.3% in
rural areas) were severe (the Government of India, 2019). Moreover, theunemployment rate worsened to 23.5% in April 2020 largely due to the strict
urban lockdowns with the spread of COVID-19, and remains high at 7.8% asof November 2022 (Center for Monitoring Indian Economy Pvt. Ltd, 2022).
The Government of India has positioned job creation as one of its toppriorities, and since the Modi administration took office, it has been promoting
the “Make in India” policy to boost the manufacturing sector's share of real
GDP to 25% by 2022 and to create 100 million new employment opportunities
by improving systems to attract foreign investment and developing
infrastructure and other business environments. In addition, under the “Startup
India” policy for the promotion of micro, small, and medium-sized enterprises(MSMEs), the Government is promoting entrepreneurship among young
people and women, encouraging innovation, and supporting businessexpansion to promote entrepreneurship, growth of MSMEs, and creation of
employment opportunities.
The state of Telangana is one of the fastest growing states in India, with per
capita income that doubled from 2015 to 2022 (the Government of Telangana,2022), exceeding the average for all of India, due to aggressive efforts topromote industry in the state, especially in Hyderabad, the state capital where
the IT industry and other industries are concentrated. On the other hand, thestate faces various social challenges, such as disparities among regions,gender, etc. In particular, unemployment is a serious problem: before thespread of COVID-19, the unemployment rate reached about 7.6% for the entire
state (about 6.1% for India as a whole), 9.4% for urban areas, and 6.5% forrural areas. In particular, the unemployment rate among the young population(age 15-29) reached 23.3%, the high unemployment rate among the highly
educated (13.0% for university graduates, 27.9% for master's degree
graduates, and 22.4% for doctoral graduates), the high unemployment rate
among women (secondary school graduates and above: 25.6% in urban areasand 24.6% in rural areas), etc. were as severe as in the whole of India. (Ministryof Statistics and Programme Implementation, 2019) After the spread of
COVID-19, the May-August 2020 unemployment rate was 9.3% statewide,
7.4% in urban areas, and 10.1% in rural areas, with a particularly highunemployment rate of 22.7% in the age group of 20s (Centre for Monitoring
Indian Economy, 2020).
With this background, the Government of Telangana has positioned thecreation of employment opportunities as one of its top priorities (theGovernment of Telangana, 2014). In the “Telangana State Industrial Policy
2014” formulated immediately after the establishment of the state, the state
government set the promotion of industry, particularly in the manufacturingsector, as an area of focus, especially the promotion of MSMEs, and set out todevelop a foundation for growth that will contribute to the sustainable
development of the industry. In addition, in the “Telangana State Innovation
Policy 2016” formulated in 2016, the state government stated its support for
identifying new startups and other growth companies and developing them into
small, medium, and large enterprises. The government's “Social Innovation
Policy 2020” and “Grassroots Innovation Policy 2016” also aim to promote
innovation that contributes to solving social problems, and to promote inclusive
initiatives so that women, rural areas, and farming villages benefit widely, in
addition to promoting the development of the above-mentioned growth
infrastructure.
Under these policies, the state government, in cooperation with universities,
research institutes, and enterprises in the state, has made concrete efforts
such as establishing India's largest incubation facility and its operating agency“T-Hub (Technology Hub),” which supports startup development as a stateagency, “T-Works,” a prototype manufacturing facility for startups in the
manufacturing industry, “We-Hub,” an institution to support women
entrepreneurs, and “Telangana State Innovation Cell (TSIC),” an institution topromote innovation policies. As a result, a “startup ecosystem” is being formed
around Hyderabad, where entrepreneurs, startup supporters, companies,
universities, research institutions, financial institutions, and publicorganizations are connected to create a series of startups, which in turn attract
excellent human resources, technology, and funds to continue developing, anda cumulative total of over 6,600 startup companies have been created(Telangana Today, 2022).
The state government intends to continue to promote entrepreneurship anddevelop the basis for corporate growth as a measure for job creation andindustrial promotion. On the other hand, the state government recognizes thefollowing issues: the lack of facilities to support the rapid increase in thenumber of startups, the lack of funding for startups especially in the earlystages of business, and the need to find entrepreneurs and create an
ecosystem for startups in rural areas outside of the capital city of Hyderabad.
Following the startup support policies of the Government of India and theGovernment of Telangana, the “Project for Promoting Start-up and Innovationin Telangana” (hereinafter referred to as “the Project”) aims to raise the qualityof human resources by widely strengthening the capacity of a diverse range of
people, including youth, women, and people living in rural areas, so that they
can start their own businesses or be employed by companies and become
innovators in the process. At the same time, for entrepreneurs with high growthpotential, the Project will provide advisory support for startup and businessexpansion, development of facilities to serve as activity centers, and othernecessary support at each stage of business growth, including the provision of
grants at each stage from startup to commercialization. This will create anenvironment in which startups can emerge and grow into small and thenmedium enterprises, creating direct and indirect employment and stimulating
industry. For these reasons, this is positioned as an important project in India's
private sector development.
（２）Japan's and JICA's Policy Cooperation and Operations in the Private Sector
Country Assistance Policy for India (March 2016), formulated by theGovernment of Japan, identifies “Strengthening Industrial Competitiveness” as
one of the priority areas and states that Japan will support the creation of newjobs for the young productive population, inrease productivity by enhancing thetechnological foundation of the economy, and contribute to strengthening
industrial human resource development in such areas as business
management and practical skills. JICA's Country Analysis Paper on India(March 2018) positions the development of highly productive industries as oneof the main development issues, and analyzes the need to improve theinvestment environment in terms of both infrastructure and human resources
development for these industries. The Project is consistent with these policies
and analysis. The JICA Global Agenda for Private Sector Development also
includes the goals of “fostering competitive entrepreneurs and businesses”
and “improving the outer environment and access to finance and markets toenable private sector companies to grow” as its objectives, with “fostering
entrepreneurs and businesses” as a key initiative to achieve these goals. As
the Cluster Strategy in the JICA’s Global Agenda, “Support for Building a Start-

up Ecosystem for Innocation Creation” is a core focus, and this Project is inline with these goals and initiatives, especially since it can contribute to thedevelopment of “talents and human resources (entrepreneurs and employees)”that make up the startup ecosystem.
In addition, this Project will contribute to “Multi-layered Connectivity,” one of
the Pillars of the Free and Open Indo-Pacific Partnership (FOIP), from theperspective of promoting multi-layered connectivity through support forstartups and other enterprises in Japan and India.
（３）Other Donors’ Activities
The World Bank (WB), in its India Country Partnership Framework (2018-2022),
has identified the need for both quantitative and qualitative expansion of
employment and investment in human capital, and is implementing the MSME
Growth Innovation and Inclusive Finance Project (2015-2019) and theTechnology Center Systems Project (2014-2020) to promote vocational training
for MSMEs across India. The WB is also providing Emergency Assistance Loans(2020-) to financially support MSMEs that have been economically impacted by
the spread of the COVID-19. The Asian Development Bank (ADB) pointed out in
its India Country Parnership Strategy (2018-2022) the need to strengthen thecapacity and increase the productivity of the growing working population. The
ADB is implementing the “Expanding Micro, Small, Medium-Sized EnterpriseLending Project” (2019-), which provides financial services to MSMEs throughout
India, the “Skills Development Project” (2022-), which provides technicalassistance in vocational education and training in some states (excluding
Telangana), and the “ADB Ventures”, a startup support program for Southeast
and South Asia. The German International Development Cooperation (GIZ) is
implementing programs to support women entrepreneurs in several states,
including Telangana.
３．Project Description（１）Project Description① Project Objective: The objective of this Project is to discover potential
entrepreneurs including women and rural ones, promote
entrepreneurship and support business expansion of MSMEs byconducting Capacity Building, Infrastructure, Finance and Market
Creation subprojects for entrepreneurs and MSMEs, thereby contributeto create inclusive employment opportunities and promote sustainableindustrial development in the Telangana State.

② Project Components: The Project will be implemented in four components(a) to (d) below under the supervision of the executing agency (Information
Technology, Electronics and Communications Department, The Government of
Telangana) for each of the three enterprise growth stages (“Finding
Entrepreneurs,” “Support for Startups and Commercialization,” and “Support for
Business Expansion”). The T-Hub, T-Works, We-Hub, TSIC, and otherorganizations under the Government of Telangana will implement subprojects
under the supervision of the executing agency to provide support toentrepreneurs and startup companies, etc. After the Project Management Unit
(PMU) selects and reviews the basic subproject plans submitted by the executing
agency, the Project Supervisory Unit (PSU), in which state government officials
and JICA participate, will approve and review the plans. In addition, consulting
services will be provided to support the overall implementation of the Project andto strengthen the startup support capacity of the executing agency.
(a) Strengthening entrepreneurial and business capacity: awarenessraising and educational programs to promote the spirit of entrepreneurshipand the foundations for innovation, programs to identify and support
entrepreneurs in local cities and for women, support for product prototyping
and service development, support for developing marketing strategies, andvarious types of support for fundraising, etc(b) Infrastructure development: Establishment of facilities to serve as bases
for innovation development for startup companies, etc., and for small andmedium-sized companies that have successfully expanded theirbusinesses.
(c) Commercialization support: Financial support for entrepreneurs andcompanies by state government agencies.
(d) Business and market creation: Present the social challenges facing thestate government, solicit solutions from startups, etc., and commission thedemonstration and implementation of the solutions, etc.
(e) Consultation services (support for supervising project implementation,
support for environmental and social considerations, and strengthening thecapacity of state government to support startups) (shortlist method)③ Project Beneficiaries (Target Groups): Entrepreneurs and small andmicro business stakeholders, including women and rural residents,
targeted by each subproject（２） Estimated Project Cost

27,902 million yen (Japanese ODA loan: 23,697 million yen)
（３）Schedule (Cooperation Period)
September/2023-September/2029 (72 months) Completion of all the activities(September 2029) will be considered as the completion of the Project. However,the detailed schedule within the same period will be finalized after each
subproject is selected (1-2 years after the start of the Project).
（４）Project Implrementation Structure1) Borrower: President of India
2) Guarantor: N/A
3) Executing Agency: Information Technology, Electronics

andCommunications Department, the Government of Telangana (hereinafterreferred to as ITE&CD)
４）Operation and maintenance system: ITE&CD and each of the subproject
executing agencies under ITE&CD have implemented similar startup support andinnovation promotion projects in the past, and any issues have not been found intheir technical and financial capacity to implement these projects. In
implementing these projects, a Project Supervisory Unit (PSU) will be establishedwithin ITE&CD to make decisions on important matters related to the projects andto supervise the entire Project. A Project Management Unit (PMU) will beestablished under the PSU to manage the subprojects on a day-to-day basis,including subproject review, bid evaluation approval, expenditure approval,
progress management, and monitoring. In addition, the ODA loans consultant will
provide operational supervision support to the PMU and PSU as needed. For thefacilities to be developed under the Project, the subproject executing agencies
will be responsible for operation and maintenance of each facility during and after
the completion of the Project. Other components will be continued by the
subproject executing agencies or transferred to the private sector, etc. The
selection of subprojects will be conducted in two stages.The first stage is basedon the following criteria: conformity with the sector strategy of the subproject,
conformity with the Project matrix, not falling under Environmental Category A of
the “JICA Guidelines for Environmental and Social Considerations” (issued in
April 2010), no possibility of diversion to military technology, etc. The second
stage is based on feasibility of the project (growth and revenue forecast, cost,schedule, etc.)（５）Collaboration and Sharing of Roles with Other Donor:
１）Japan’s Activities: With regard to Japan-India corporate collaboration, it isplanned to share information and consult with the Japan External Trade
Organization (JETRO), the Embassy of India in Tokyo, and other organizations.
２）Other Donors’ Activities: Implement projects in collaboration with startup
ecosystem related companies and organizations in and outside the state,including incubators, accelerators and other entrepreneurship support
organizations that provide support for entrepreneurship and business expansion,educational and research institutions, financial institutions, corporations, NGOs,
etc.
（６）Environmental and Social Consideration① Category: FI② Reason for Categorization: This Project cannot identify subprojects
before JICA's loan approval under the “JICA Guidelines for Environmental
and Social Considerations” (issued in January 2022), and such
subprojects are expected to have environmental impacts③ Other/Monitoring: Under this Project, ITE & CD, the executing agency,with the assistance of the Japanese ODA Loan consultant hired under the
ODA loan project, will classify subprojects into categories based on India's
domestic legal system and JICA Guidelines for Environmental and Social
Considerations, and the necessary measures will be taken for the relevant
category. Subprojects will not include Category A projects.
（７）Cross-Sectoral Issues① Climate change response: Projects contributing to climate change mitigation
may be selected for sub-projects during project implementation process.
② Poverty measures and considerations: the Government of Telangana isemphasizing the creation of employment opportunities for young people andothers who are staying in rural villages due to lack of attractive job
opportunities in rural and regional areas. In the sub-projects of this Project, it
has been agreed with the executing agency to conduct programs such as“awareness-raising and education” and “finding entrepreneurs” to foster
entrepreneurship and innovation among the residents of local cities and rural
areas.
③ Measures against AIDS/HIV and other infectious diseases：The infrastructure
support subprojects may include projects where workers are concentrated at
one construction site for long periods of time. An agreement to execute
HIV/AIDS prevention measures such as condom usage promotion and HIV
prevention education during the construction period for all relevant workers,

including drivers entering and leaving the construction site has been reachedwith the executing agency.
④ Consideration for the disabilities: In the infrastructure development subprojects, the accessibility of the office environment and the procurement ofequipment that is easy to use for the hearing/visually impaired will be
provided when supporting the growth of small and micro enterprises and thedevelopment of innovation development centers. In addition, when
implementing programs for entrepreneurs and micro and small businesses,
it has been agreed with the executing agency to provide reasonableaccommodations for entrepreneurs and/or business owners with disabilities,
such as ensuring opportunities for participation, information security, andsafety.
（８）Gender Categor:【Gender Project】 ■GI (S) Gender Informed (Significant)<Details of Activities/ Reason for Categorization>
Through discussions with the executing agency, gender-based issues wereidentified. It is because this Project includes a plan to implement human resource
development for entrepreneurs and small and micro enterprises, and to find andsupport entrepreneurs, including women and local residents who start their own
businesses. The number of women participating in human resource development
and the number of women-owned businesses participating in the subprojects are
set as indicators. For these reasons, the Project is classified as a “gender activity
integration project”.
（９）Other Important Issues: the Government of Telangana plans to utilize thestartup ecosystem that will be strengthened through this Project to support
Japanese companies entering the Indian market and to strengthen ties with
Indian companies and research institutions. Specifically, the state government is
considering seamless support from conception to commercialization of new
businesses in India through collaboration among institutions that comprisestartup ecosystem in Telangana, primarily targeting Japanese startup companies
interested in finding commercial opportunities in solving India's social issues.
4. Target Outcomes（１）Quantitative Effects
Outcomes (Operation and Effect Indicators): Targets will be set at the stage
when all subprojects are selected (assuming 1-2 years from the start of the
Project).

Indicator

Number of participants in the Project's
entrepreneurial and enterprise capacity building
subprojects (cumulative)

Baseline(Actual values in
2023)

0

of whitch, Number of female participants(cumulative)

0of which, Number of participants in the rural
areas (cumulative total)0

Number of users of facilities and otherinfrastructure developed under the Project

Target(2031)(2 years after
subprojects’
completion)
To be set when
all subprojects
are selected0(cumulative total)
Number of companies that have raised Series A(Note 1) funds from private investors, etc. after
receiving commercialization support services in thisProject (cumulative total)0

Number of participants in business and market
creation subprojects (cumulative)

0

Number of companies that participated in or usedsubprojects of this Project (cumulative total)0of which, Number of women-owned
enterprises (cumulative total) (Note 2)0of which, Number of companies that havegrown to medium size (cumulative total) (Note
3)

0(Note 1) The first stage of funding for startups is the "seed round," in which companies raise
funds during the prototyping and planning stages of their products and services. Next is the"Series A" stage, in which companies seek to raise a larger amount of money to bring theirproduct or service to market and establish a business model. The amount of Series A funding
varies from tens of millions of yen to over 1 billion yen.
(Note 2) Women-owned companies are defined as (a) a woman serves as CEO or (b) women
own 51% or more of the shares.
(Note 3) A medium-sized company is defined as one that meets two or more of the followingthree criteria: (a) 50-300 employees, (b) total assets of US$3-15 million, and (c) annual salesof US$3-15 million.

（ ２ ） Qualitative Effects: Expand and strengthen the startup ecosystem inTelangana, promote the presence of Indian and foreign companies in Telangana,promote employment of youth, the highly educated and women and reduce theunemployment rate, etc.
（３）Internal Rates of Return: Financial and economic internal rates of returnare not calculated because subprojects cannot be identified in advance.
5.

External Factors and Risk Control（１）Preconditions: None
（２）External Factors: None
6.

Lessons Learned from Past Projects

The results of the ex-post evaluation of the “Micro Enterprise Assistance
Project” (evaluation year: 2016), an ODA loan to the Arab Republic of Egypt, andothers indicate that, in addition to the financial services provided by the executing
agency and the intermediary lender, a combination of non-financial services, suchas training in marketing and accounting management, could contribute toincreasing project effectiveness. The results of the ex-post evaluation of thetechnical cooperation project “Training Program for Development of Women
Small-Scale Entrepreneurs” (evaluation year: 2001) for Malaysia showed that it
is important to obtain support not only from universities as implementing agencies,
but also from governmental agencies and NGOs involved in training activities,
and that the establishment of a feedback system for the training program isimportant to improve the quality of the training program.
Recognizing that a wide range of business management know-how, including
startup planning, business planning, financing, marketing, and organizational
management, is essential for entrepreneurs and microenterprises to grow andexpand, the Project plans to implement both financial and non-financial programs,
such as entrepreneurial and business capacity building and commercialization
support, and will secure the necessary resources for these programs. Specifically,
the Project will collaborate with a variety of stakeholders, including relevant state
government departments, entrepreneurship support organizations, educationaland research institutions, private enterprises, and NGOs, to ensure that the
program is operated effectively. In the operation of subprojects, the feedbacksystem from participants, etc. should be established to provide a framework thatencourages subproject executing agencies (the business incubation andinnovation support organizations such as T-Hub, T-Works, We-Hub, TSIC, etc.
under the umbrella of ITE&CD) to continuously improve their services.
7.

Evaluation Results

The objective of this Project is to discover potential entrepreneurs including
women and rural ones, promote entrepreneurship and support businessexpansion of MSMEs by conducting Capacity Building, Infrastructure, Financeand Market Creation subprojects for entrepreneurs and MSMEs, thereby
contribute to create inclusive employment opportunities and promote sustainableindustrial development in the Telangana State. This is in line with thedevelopment agenda and policies of India, as well as the cooperation policies
and analysis of Japan and JICA. This Project is also considered to contribute toGoal 8 of the SDGs, “Promote sustained, inclusive and sustainable economic
growth, full and productive employment and decent work for all” and Goal 9,“Build resilient infrastructure, promote inclusive and sustainable industrializationand foster innovation”; therefore, there is a strong need to support theimplementation of this Project.
8.

Plan for Future Evaluation（１）Indicators to be Used:
As described in Section 4 (1) to (3).
（２） Future Evaluation Schedule
Ex-post evaluation: 2 years after project completion
END
Appendix: Map of Project for Promoting Start-up and Innovation in Telangana

APPENDIX
Map: Project for Promoting Start-up and Innovation in Telangana

India

タミル・ナドTelangana State
Hyderabad (state capital)

Source: Created by JICA

チェンナイ（州都