India has always been a land of paradoxes with a unique ability to balance contrasting social, economic and cultural dimensions. Here, ancient traditions coexist alongside technology, and we remain rooted in heritage while straddling modernisation. Our investment landscape reflects this paradox, too. India's economy, now the fifth largest in the world, is projected to grow at a pace that outstrips most other major economies. We are a vast country with immense resources, yet they are often underutilised and undercapitalised.
There are several reasons for India’s undercapitalisation, ranging from economic policy and regulations to infrastructure and risk perception. India’s undercapitalisation presents a huge opportunity for venture capitalists and investors since it indicates substantial growth potential, unlike mature and saturated markets like the United States or Europe. Recent policy reforms that improve the ease of doing business and a young, skilled population have created a fertile ground for growth.
The government has taken significant strides in promoting the country’s startup ecosystem through funds and schemes like Fund of Funds for Startups (FFS) and Startup India Seed Fund (SISFS), implemented under the Startup India initiative to provide capital at various stages of a startup's business cycle.
However, these three factors have contributed significantly to India’s image as a land of potential, and a golden bet by the global investment community.
The Acceleration of Digital Infrastructure: Ecommerce, fintech, and healthtech have seen unprecedented growth, creating new opportunities for entrepreneurs to address the unique challenges and demands of the Indian market. Companies like Paytm and PhonePe have revolutionised digital payments, while Zepto and Zomato have changed Indian shopping habits. For investors, their success opens opportunities for entry and growth into other emerging markets with similar needs. The government's initiatives, such as Digital India and Startup India, have further fueled this entrepreneurial boom, providing the necessary support and frameworks for startups to thrive.
The Recipe for Innovation: India now has over 100 unicorns, establishing itself as one of the most dynamic startup ecosystems in the world. Indian startups have innovated to solve various challenges, from improving remote healthcare access and addressing agrarian needs amidst global climate change. The convergence of a youthful demographic, increased internet penetration, and rising disposable incomes have created a fertile ground for innovation. Indian entrepreneurs are no longer merely emulating global models but are developing solutions tailored to local needs, which often have international applicability. For early and growth-stage investors, this market dynamic is an extremely attractive opportunity.
India's geopolitical position: The growing interest and investment in India aligns with the country’s increasing importance in the global economy, particularly in the context of the "China Plus One" strategy post-COVID. Long-term investments in India have become a strategic necessity for corporations to enhance resilience and mitigate risks. As global supply chains diversify away from China, India is emerging as a critical player in manufacturing and technology. The government's push towards self-reliance, through initiatives like Atmanirbhar Bharat, is also encouraging the growth of local enterprises, further enhancing India's appeal as an investment destination.
The recent GDP growth numbers put out by the IMF are 6.8 per cent, which puts India squarely in the top quartile in the world. India also has a stable and safe democracy, which is an important point to consider when thinking about investing geographically. This political stability means that policies, vision documents, and overall governance have continuity.
With this context, we can say that the fundamentals are strong, and even a pandemic was not able to dim the growth trajectory. Given that the startups are the growth engine of India's economy, investors are looking to book handsome returns in both the medium and long term.
-By Archana Jahagirdar, Founder and Managing Partner of Rukam Capital
