The minister said the effort of the government is to "encourage startups" as they are the ones creating jobs.
"Insolvency and Bankruptcy Code, which is being planned, is going to make it easy to startup as much as to get out of startups because if you are not doing well there shouldn't be a taboo, there should not be a hitch. They should be able to get out faster," she said in New Delhi at the India Today Conclave.
She said the government has announced a comprehensive action plan for startups that includes tax holidays.
"India is the third largest startup country, only after the US and the UK... thanks to the entrepreneurial skills of Indian youngsters," Sitharaman added.
Insolvency and Bankruptcy Code, which seeks to provide an easy exit option for insolvent and sick companies, has been referred to a 30-member joint committee of Parliament.
She also said Niti Aayog will be setting up 70 incubation centres all over the country and those centres would be ranked in innovations and top 10 incubators would get Rs. 10 crores incentive award.
Further talking about 'jugaad' and innovation, she said people think that India is known for jugaad and the country cannot do anything in terms of innovation.
"But no. It is jugaad, which in other parts of the world is recognised as disruptive technology using skills which really became innovation and today India's jugaad is the innovation that we are talking about," she added.
Sitharaman said Indian youngsters are now proving that where technology or skill could not reach, they have achieved it themselves and "as a result, today jugaad is the innovation that the government is also recognising".
Talking about ease of doing business, the minister said with the government taking several steps in this direction, it is now far easy to begin a startup in India.
"Today India is far better in ease of doing business," she said.