The year 2023 is special for India. We celebrated 75 years of independence last year. But what’s also special is that we marked more than 75,000 startups and created more than 750,000 jobs in startups, becoming the third largest startup ecosystem in the world. We are slated to leave behind countries like Germany, UK, Japan and become the third largest economy by 2030, by most estimates. Despite India's economy being significantly impacted by the COVID-19 pandemic in 2020, where our GDP contracted by 7.7%, India regained its position as the fastest growing economies of the world. In this article, Compliance Calendar traces how startups are powering India’s growth story.
The advent of 5G in India - The coming of the 5G wave has led to an abundance of startups in data processing, data visualisations, space, weather and other data-predictive services.
Existence of a large, growing middle class with a spending appetite - A booming middle class population is one of the reasons for massive increases in sales in FMCG businesses like ready to eat foods, cosmetics, apparel, footwear, and personal care products.
New age financial services startups - These include online credit companies, helping small and medium startups with micro loans and entrepreneurs with capital support. With a low-cost operating model, technology and Fintech partnerships are advantageous to both - the market as well as startup loan takers.
Digital acceleration of businesses - With the onset of the pandemic, MSMEs were forced to operate digitally. Many firms used this as an opportunity in a crisis and recorded massive sales due to multiple gains from social media, marketing and low-cost digital operations via e-commerce. The government also introduced the Open Network for Digital Commerce, to encourage businesses to adopt e-commerce.
India has seen a significant growth in the number of startups over the past decade, with the country emerging as one of the leading startup ecosystems in the world. We received venture capital investment worth over $36 billion in the financial year 2021.
The Indian government has launched several sectoral and broad initiatives to support the growth of startups, such as the Startup India program, the Production Linked Incentive Scheme for various sectors, the Atmanirbhar Bharat initiative, and the recently launched Self Reliant India Fund, worth INR 10,000 crores. The government has also introduced policies to simplify regulations and make it easier for startups to do business in India.
Unicorns and Soonicorns
The Indian startup ecosystem is diverse, with companies operating in a range of sectors including e-commerce, fintech, healthcare, education, and more. Some revolutionary unicorn Indian startups such as Flipkart, Ola, Paytm, Byju's, Nykaa, Zomato, and Swiggy are well-known. But newer players such as Acko (digital insurance), Cult.Fit, Zepto, Urban Company, Vedantu, Quikr and other new age startups raised a record $8.4 billion last year. These companies have attracted significant investment from both domestic and international investors, and have helped put India on the global startup map.
Challenges ahead
With the current high inflationary trends, both in India as well as globally, the latest Economic Survey (2022-23) notes a global slump in external demand for goods and its consequent impact on trade. This is largely due to international crises such as - Russia-Ukraine war, conflict in Europe, slow recovery from the pandemic and USA’s federal bank rate hikes that led to capital outflow from India.
Inflation is also affecting economic fundamentals such as higher interest rates, and volatility in financial and commodity markets. This can be directly traced to underperformance in many equity and mutual fund baskets in India last year.
Early stage startups are seeing inflow of capital. This is slated to be India’s century. With startups showcasing their entrepreneurial strength, Compliance Calendar is here to support your startup in every compliance procedure, from filing for IPR protection to helping you evaluate term-sheets for your VC. Connect with our experts for solutions to all your funding, financial and legal needs - all at one place.