Shreyas Ernest Isaac
Research Intern, Jindal Centre for the Global South,
O.P Jindal Global University, India.
Joseph Schumpeter in his theory of innovation argues that it is innovation done by entrepreneurs that generate profits (Schumpeter, 1934). India has had a long history of enterprise and innovation. In recent years, the startup ecosystem in the country has seen a massive expansion, with 2021 alone witnessing a 15 percent increase in the number of start-ups launched in India! (Singh, 2021). The pièce de resistances of India’s start-up ecosystem have been the creation of ‘Unicorns’-A. ‘Unicorn’ is a term which is given to a privately owned startup company which is valued at 1 billion USD or more. Some of India’s prominent unicorns include UpGrad, Mama Earth, Blink It, Cred, Swiggy to name a few. These companies are from diverse sectors, ranging from food and beverage delivery services, cosmetics, finance, ed-tech etc. India is currently the third largest Unicorn hub, trailing only behind China and the US. As of January 2022, India is home to 85 such companies, 44 of which were created in 2021 alone (Singh, 2021). The total amount of money raised by Indian start-ups reached a staggering 42 billion USD in 2021 (Singh, 2021).
What explains the ‘start-up’ boom in India?
Firstly, India undoubtedly has a huge consumer base which is increasingly tech-savvy. It could be engendered by the fact that India is adding around 25 million smartphone users per quarter (Abbas, 2021). This explains why many of the startups are increasingly technology based, catering to a large population which uses smartphones, e-retail firms which deal in delivering groceries to your doorstep, financial technology apps to invest in stock markets, education technology apps for learners, e-pharmacy, e-commerce apps etc. All are catering to young and dynamic demography which is not just tech savvy but is also keen on exploring the possibilities that come with technology.
It also helps that India has one of the cheapest prices in the world when it comes to mobile data (McCarthy, 2019). This affordability has ensured that an increasing number of Indians have access to online applications. The Indian market also offers startups a competitive and dynamic set up, where they are forced to constantly innovate and market themselves in new ways. In the online food delivery sector for example, the competition among start-ups is cut-throat with two major players. The firms in this sector are constantly forced to come up with new marketing strategies, offers, discounts etc. The major players in such an environment have to be on their toes at all times in order to succeed, this forces them to innovate- not just innovation in the product or service which they offer but also innovation in the production process, marketing etc.
Secondly, there has been a wave of young entrepreneurs who have taken centre stage in recent years, a study found that the median age of start-up founders in India was just 31 (Louis, 2019). The advantage these younger entrepreneurs have is that they recognize and understand the needs of the younger consumers which helps them in creating products which truly see success. The success or failure of a firm is closely linked with how it is able to model its product or services according to the tastes and preferences of consumers. Many of the start-ups have not just done this but have also used a wide range of digital marketing tools to increase their market share. A wide range of new services and products, targeting younger consumers have been launched by start-ups, ranging from fitness centres, ride sharing applications, applications to book budget hotel rooms etc.
Third, and an important reason, is India’s success with digital payments. Digital payments literally changed the way the Indian economy works. Transactions done in the famed ‘UPI’ reached an all-time high of 4.56 billion in December 2021(Shetty, 2022) and this number is only going to rise in the years to come. There are currently 305 million users who are doing internet transactions in India (Singh, 2021). Many startups have made excellent use of digital payments in order to boost their sales. A digital economy is undoubtedly the way ahead, India’s startups have not just realized this but have also embraced it. It comes as no surprise that the Financial Technology sector in India saw the maximum funding deals in 2021 (Singh, 2021). A consumer can now pay for a whole range of products and services using digital payments- from booking cabs to ordering groceries, digital payments are fast becoming the norm. India’s startups have also gone further- platforms like CoinDCX and CoinSwitch Kuber even allow consumers to directly participate in the global crypto currency markets!
It is evident that India’s start-up ecosystem has very carefully blended technology and entrepreneurship in order to leverage its business potential. India’s economic growth in the 21st century will not just be boosted by the success of our startups and unicorns, but they also have the ability to solve one of India’s prominent issues like unemployment. Startups in India are expected to provide jobs to approximately 3.25 million people by 2025 (Iyer, 2021), a number which is extremely crucial for the Indian economy. On the political front, startups have the ability to become variables of India’s soft power. These start-ups have the ability to become the face of a global 21st century India.
The road ahead
There is no doubt that India has been able to create and sustain a successful startup eco-system. The next step for many of our start-ups is to go International, to truly become global brands. While it may be hard for Indian start-ups to successfully penetrate the markets of developed countries, it would be much easier for them to penetrate developing economies like Asia, Africa and Latin America. India’s success with start-ups also offers a very valuable suggestion to other countries in the Global South- with correct and strategic investments in technology and digitalization, it is very much possible to create a new wave of start-ups which will not only aid the economic growth of the country but will also provide employment.
The 21st century is a time where environmental and climate challenges will have to be addressed, it is in this context that India’s start-up ecosystem has a lot of opportunity. The creation of an economy that is sustainable requires that our start-ups come up with innovative and new products and services which have a positive impact on our environment- electronic vehicles, solar and other forms of renewable energy, sustainable fashion, etc. are some areas where there is a lot of potential. Both the Union and State governments in India have given importance to start-ups and have come up with a number of schemes and policies to aid and help start-ups, notable among them being the flagship ‘Startup India’ scheme of the Union Government. India’s start-up boom has been concentrated in cities like Bangalore, New Delhi and Mumbai, with most of the major start-ups being founded in these cities. Therefore, it will now be interesting to see if the next wave of Indian start-ups can emerge from our tier two and tier three cities, specially catering to the tastes, needs and preferences of those who stay in these cities. The argument has never been that India’s start-ups can solve all social and economic problems that a developing country like ours faces. Instead, the argument has been that start-ups can play a vital role in boosting the economic performance of a country and can provide employment to a large number of people, two key aspects which are crucial in any developing economy.
Abbas, M. (2021, October 26). India’s growing data usage, smartphone adoption to boost Digital India initiatives. Economic Times. Retrieved February 8, 2022, from https://economictimes.indiatimes.com/news/india/indias-growing-data-usage-smartphone-adoption-to-boost-digital-india-initiatives-top-bureaucrat/articleshow/87275402.cms
Iyer, P. (2021, August 21). India to have over 150 unicorns by 2025, startups to employ 3.25 million people: Report. Money Control .Retrieved February 08, 2022, from https://www.moneycontrol.com/news/business/india-to-have-over-150-unicorns-by-2025-startups-to-employ-3-25-million-people-report-7295851.html
Louis, A. (2019, April 10). Median Age of Indian start-up founders only 31. Live Mint. Retrieved February 9, 2022, from https://www.livemint.com/companies/start-ups/median-age-of-founders-of-indian-start-ups-only-31-1554873908968.html
McCarthy, N. (2019, March 5). The Cost of Mobile Internet Around the World. Forbes. Retrieved February 8, 2022, from https://www.forbes.com/sites/niallmccarthy/2019/03/05/the-cost-of-mobile-internet-around-the-world-infographic/?sh=1557a593226e
Schumpeter, J. A., & Opie, R. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Cambridge, Mass: Harvard University Press.
Shetty, M. (2022, January 1). UPI transactions hit a new record in December 2021 – Times of India. Retrieved February 08, 2022, from https://m-timesofindia-com.cdn.ampproject.org/v/s/m.timesofindia.com/business/india-business/upi-transactions-hit-a-new-record-in-december-2021/amp_articleshow/88637487.cms?amp_js_v=a6&_gsa=1&usqp=mq331AQKKAFQArABIIACAw%3D%3D#aoh=16434668635926&referrer=https%3A%2F%2Fwww.google.com&_tf=From%20%251%24s
Singh, S. (2021). Indian Tech Startup Funding Report. New Delhi: Inc42 Plus.
The opinions expressed in this article are those of the author (s). They do not purport to reflect the opinions or views of the Jindal Centre for the Global South or its members.