Homegrown Startups: A Prime Choice For Long-term Investment

Shruti Kharbanda Aug 21, 2024

The Indian government has introduced various reforms to simplify regulations, attract foreign investment, improve the ease of doing business, and stimulate economic growth; policies like Make in India, Digital India, and Production Linked Incentive (PLI) schemes have bolstered manufacturing

India is rapidly emerging as a vibrant hub for startups and innovation across various sectors, driven by a unique combination of favourable factors that make the country fertile ground for entrepreneurial ventures.

Here's a closer look at why India stands out as a ‘golden bet’ for investors and emerging hub for startups and innovation:

Massive and Diverse Market Opportunities: With over 1.4 billion people, India provides a vast domestic market of consumers. India is one of the fastest-growing economies in the world, averaging 8.3 per cent annual growth over the past three years (Deloitte, 2024). India has a large young population with median age of 28 years (Worldometer), increasing disposable income, and rapid urbanization is driving consumer demand for goods and services, forecasted to be USD 2.43 Trillian in 2024 (Statista, 2024).

In addition, vast urban and rural markets create a fertile ground for innovative solutions addressing diverse and different consumer needs across sectors like agriculture, healthcare, logistics, e-commerce, fintech, infrastructure, renewable energy, education etc. This demographic dividend is seen as a major driver of future economic growth.

Booming Startup Ecosystem: India has the third largest startup ecosystems in the world (Startup India), with 127,000 startups across various industries (Statista, 2024). In addition, India is ranked third with 67 unicorns (startups valued at over $1 billion) (Business Today, 2024). The rapid emergence of these unicorns highlights the country's innovation potential.

Regulatory Reforms and Policies: The Indian government has introduced various reforms to simplify regulations, attract foreign investment, improve the ease of doing business, and stimulate economic growth; policies like Make in India, Digital India, and Production Linked Incentive (PLI) schemes have bolstered manufacturing.

Substantial investments (3.3% of GDP) for infrastructure improvement and market accessibility for sustaining long-term economic growth, which is making vast underserved markets accessible. Focus on sustainability and net-zero emissions presents significant opportunities in renewable energy sector and technology particularly in solar power.

Startup India Initiative, launched in 2016, provides a supportive framework for startups including tax benefits, incubation, easier access to grants/funding and policy support creating a more favourable environment for startups. The government's focus on fostering entrepreneurship has been pivotal in driving the startup culture.

Digital Transformation, AI & Robotics: The country is undergoing rapid digitalization, with increasing internet penetration to 52% (Statista, 2024) and smartphone usage (1.12billion mobile connections (Data Reportal, 2024)), is creating an enabling environment for startups, especially in tech-driven sectors. This digital revolution in India is enabling startups to scale rapidly in sectors like quick-service industry, eCommerce, Payments and online services. Indian startups are also applying emerging and cutting-edge technologies like AI, IoT, big data, blockchain, and robotics, to create disruptive solutions and solve real-world problems.

Access to Capital: India has seen a surge in venture capital and private equity investments, with a growing number of unicorns. Global and domestic investors are increasingly backing Indian startups, attracted by the country's growth potential and innovative solutions. A rise in angel investors, seed funding networks, and startup incubators/accelerators has provided early-stage funding, crucial support and mentorship to budding entrepreneurs, further nurturing the ecosystem.

Cultural Shift Towards Entrepreneurship: A cultural shift towards entrepreneurship, particularly among the younger generation, has created a vibrant startup culture. The rise of startup success stories has inspired more young Indians to pursue entrepreneurial ventures. There is increasing collaboration between academia, corporates, and startups, leading to knowledge exchange, research partnerships, and innovation hubs that further bolster the ecosystem.

Impact on Employment and Economy: The startup ecosystem has become a significant source of employment with 1.2 million jobs (Economic Times, 2024), especially for skilled professionals in technology and management. Startups are contributing towards GDP growth, innovation, and overall economic resilience, making India a global innovation leader, amounting to 10-15 per cent of GDP (Business Standard, 2024).

Given these factors, there is growing optimism around India's economic potential and is emerging as a ‘golden bet’ for long-term investment, offering substantial growth potential with a robust, dynamic, and evolving economy.

India's dynamic startup ecosystem, supported by a conducive environment for innovation, a large and diverse market, and a growing pool of talent, positions the country as a global hub for startups and innovation across sectors. With continued government support, increased access to capital, and a strong focus on technology, India's role in the global startup landscape is set to expand even further.