The Startup Ecosystem of India

India is a country of great potential considering its population size and cost effectiveness in business operations. The country has established itself as a world leader in technology services and enjoyed a boom in unicorns over the past few years. India’s growth trajectory in the startup scene is truly impressive and can be attributed mainly to its domestic market size and huge IT industry. The country’s startup ecosystems are a growth engine for its economy and have the capacity to improve India’s productivity and transform the country beyond recognition.
The talent of Indian entrepreneurs can be seen in the prominence of CEOs running companies like Alphabet, Adobe, and Microsoft. However, this also shows the massive cost of brain drain, as some of India’s top talent is relocating to the West. The scarcity of high-paying jobs, coupled with India’s infrastructural problems, are contributing to entrepreneurial talent relocating overseas. As higher education in India grew over the past decade, the government recognized the potential of this valuable resource for its economy. In 2019, the government launched the National INNOVATION and STARTUP Policy 2019 for Students and Faculty, providing a regulatory framework for innovation and entrepreneurship in universities.

Apart from brain drain, India faces challenges with its digital infrastructure. Internet speed is low compared to most other countries, and power outages are frequent. The Indian government could take additional steps to improve this critical infrastructure and strengthen its startup ecosystem, as other countries in the region are growing fast.

India’s successful startups and unicorns are focusing on the massive potential of the local market. However, for India to achieve a status of a global tech hub, its startups will have to focus more on regional and global markets.

In recent years, the Indian startup scene has shifted the focus towards digital solutions and fintech, setting aside the previous ecommerce successes of unicorns like Flipkart and BigBasket. The US remains the biggest source of FDI for Indian startups, and investment is mainly flowing into fintech startups working on new banking models, like neobanking.

The ecosystem is backed up by multiple support organizations, including the Alliance of Digital India Foundation. In addition, Startup India, the Government’s flagship startup initiative, as well as Make in India, signal the public sector’s commitment to building regulatory frameworks for the ecosystem. But concerns have been raised about the impact of new policies on the ease of doing business in the country. An example of a strange policy that is sure to do damage to the local ecosystem and chase entrepreneurs away, the recently introduced angel investor tax potentially taxes companies when receiving investments. Considering that India enjoys good ties with most of the world, we are optimistic about its chance to continue to grow and assume a bigger role in the global startup ecosystem. When considering India’s core advantage of an educated, young, English-speaking population, the country’s potential is immense.