The current situation has made it important to answer the question that is there a need to rejig the Indian economy and identify the sector where the next wave of growth will come from?
- By Apoorv Ranjan Sharma
Past few months have been months to forget for the Indian economy. The rupee became the worst-performing currency in Asia this month, and Q1 GDP at 5 per cent fell to a 6 year low. The collapse of the automobile sector, trade wars between US and China, rising number of NPAs and sluggish consumer demand along with a failing manufacturing sector have attacked together, staying true to the adage ‘misfortunes never come alone.’ This growth recession was compounded further by the previous Union Budget’s decision to put heavy taxation charges on FPIs, which led them to withdraw their investments from the market. The current situation has made it important to answer the question that is there a need to rejig the Indian economy and identify the sector where the next wave of growth will come from?
The obvious destination of this search for growth is the startup ecosystem. In a span of less than 10 years, India has emerged as the 3rd largest startup nation in the world. Home to more than 24,000 startups, Indian startups have acted as the ‘perfect adrenaline’ injection for the Indian economy, infusing it with capital, employment opportunities and a culture to develop and innovate. However, according to a recent CB insight report, the startup ecosystem’s nature is going to experience a transformation, from being a short-term, fringe element of the economy to becoming a mainstay of the future. How? By riding on the back of the 27 unicorns and 216 soonicorns (soon to be unicorns) in the next two-three years.
When compared to the numbers of its other two competitors, the US (157 unicorns, 2,181 soonicorns) and China (93 unicorns, 192 soonicorns), the numbers might seem less. However, considering the Indian startup ecosystem has achieved such numbers within just 10 years, the growth indicators are extremely high. With more than 50 per cent growth predicted for e-commerce in India within 5 years, a young 112-million strong workforce in the most fruitful age bracket of 20-24 years and more than 2.5 lakh jobs expected in Indian tech startups segment alone, India is well-poised to be the most powerful economy of tomorrow, led by an unprecedented startup movement.
Empowering the Bharat
A major reason behind the startup sector still being a beacon of success is the phenomenal contribution by startups from tier-II and III cities. One glance at the data for the last three years shows there has been 300 per cent growth in the number of startups across tier-II and III cities across India since 2016. This new breed is called Angel Investors from tier-II and III cities, who are helping local startups from small towns across the nation develop cutting-edge technologies but most importantly, new ideas. India’s startup ecosystem recorded 450 per cent growth in last three-four years through a sustained, integrated and dedicated effort of networking platforms and VC funds.
Some of the unicorns have actually surpassed general numbers and have shown growth which is almost deemed unimaginable. Companies such as Flipkart, OYO, Paytm has given over 200 per cent return on investment in less than 10 Years as per data available by ROC Filings for February 2019. Paytm now at $18 billion, Flipkart at $16 billion, and OYO at $ 5.7 billion are growing every day with the new round of funds pouring in.
As per the recent government report, startups under the Department for Promotion of Industry and Internal Trade has created more than 5.6 lakh jobs since 2016. Considering the current unemployment rate is at a 45 year high of 6.1 per cent, startups assume greater importance as the country’s foremost generator of jobs. Startups have contributed to reverse urban migration of sorts as emerging enterprises in tier-II and III cities have offered jobs to people at or near their home towns. Furthermore, it has given rise to a culture of developing ‘employpreneurs’, that is, employees who can be prospective entrepreneurs. This has happened because startups inherently have a culture of multi-tasking that informs every employee about several aspects of running a business. Furthermore, conventional hierarchies are not followed extremely in startups and even new employees have regular, direct conversations with the founders and team leaders. This helps to develop a sense of ownership resulting in greater involvement and efficiency.
Most importantly, startups are being born after analyzing what the country needs today. Across industries, new enterprises are solving critical issues by utilizing technology and a desire to find long term solutions rather than just execute a short-term, knee-jerk solution. Armed with new perspectives, curiosity, a fearless and rational approach to modern-day business, startup ecosystems are where young India is thriving, charting the course of the future Indian economy in their agile, vivid minds.
(Apoorv Ranjan Sharma is the Co-Founder & President at Venture Catalysts. Views expressed are the author’s own.)