Outlook And Major Trends: India's Startup Resurgence In 2024
The year 2023 seemed a bit challenging for the startups; be it in terms of funding, profits, tax or layoffs. Overall, 2023 was not a ‘Golden Year’ for the startup industry. But as the new year is knocking on the doorstep, the anticipated regulations in 2024 are expected to strike a fine balance between nurturing the growth of startups and introducing oversight to mitigate governance challenges. With all the hope we still cannot deny the fact that the startup industry took big hits in 2023.
Navigating the highs and lows
The startup space has witnessed a paradigm shift in regulations in 2023, triggered by recent instances of governance lapses in prominent startups. The notable closures of this fleeting year included ZestMoney, facing regulatory scrutiny, online real money gaming platforms succumbing to GST levies and regulatory challenges, Anar and FrontRow, shuttering due to business model changes and overestimation of growth potential; GoMechanic, grappling with overestimated revenues and fund diversion; and Mojocare, found overstating revenues. Byju's is also a big name which is still facing big setbacks and making all efforts to bounce back.
With this array of fall, a bigger concern of India is that startup funding has declined to a five-year low figure in 2023 — USD 7 billion as compared to USD 25 billion received in the previous year, a nearly 73 per cent decline from funding recorded in 2022 amid a worsening global macroeconomic environment tossed by geopolitical tensions.
Stepping Into New Year
The year ahead is expected to witness the government's exploration of regulatory measures in response to compliance lapses. This proactive approach is a testament to India's commitment to building a startup ecosystem that thrives on innovation, ethical business practices and responsible government policies.
Despite the challenges faced in 2023, the Indian startup ecosystem remains resilient as the third-largest globally, showcasing significant potential with over USD 8 billion raised in 2023 and an impressive USD 140 billion since 2015.
In the ever-evolving narrative of India's startup ecosystem, 2024 is expected to be a watershed year, marked by pivotal shifts in regulatory frameworks and policies. Also, the Indian footprints are expected to create a global impact.
Alok Kumar, Founder & CEO, StockDaddy, talking about creating the conducive environment for the startups to scale globally said, “Fostering international collaborations and trade partnerships in global markets can amplify the global presence of Indian businesses. Encouraging cross-border investments, providing tax incentives for overseas expansion and fostering a startup-friendly ecosystem will significantly contribute to India's global business growth.”
Government's Stance
The market is hoping for the government's positive stance, articulated by Union Minister of Commerce & Industry Piyush Goyal, initially favoured a hands-off approach, advocating for self-regulation within the startup community. The Company Law Committee (CLC), led by the corporate affairs secretary, is now actively exploring the formulation of regulatory measures for startups.
The Ministry of Corporate Affairs (MCA) has extended the Company Law Committee's (CLC) tenure for an additional year, maintaining its role in enhancing ease of doing business for promoting corporate compliance. Originally established in September 2019, the CLC's term is now extended until September 16, 2024, marking its fourth consecutive extension. With CLC in function, the startup policy making process is expected to receive the focus needed and ideas from the industry experts and entrepreneurs as well.
The Founder & CEO of Smart Joules, Arjun Gupta stressing on the policy certainty and expanding sector of electric vehicles said, “Policy certainty is the most important requirement for startups focussed on solving long term challenges. Similar moves are required in other sectors such as energy efficiency, waste management, water management and beyond.”
Talking on taxation and GST on fitness startups, FITPASS Co-founder, Akshay Verma shared, “ The current taxation policy, particularly GST on fitness services, presents challenges by increasing the cost for consumers. We advocate for a more supportive taxation framework that reduces the financial burden on end-users, thereby making fitness services more accessible and aiding the industry's expansion. Such policy reforms will be instrumental in shaping a fitter and more productive India.”
Further on global expansion, climate and indigenous market of the Indian startups Gupta added, “ Government is a big demand centre. Make In India requirements have boosted demand for the products of Indian startups. Continuing this will help, along with multilateral and bilateral treaties that focus on specific areas of collaboration such as climate change.”
Artificial Intelligence And Startups
In parallel, the government's focus on artificial intelligence (AI) is garnering attention. The IT Secretary, S. Krishnan, has indicated that the government is actively preparing regulations for AI, recognising its pivotal role in the global landscape. So, the coming year is also hoping to see the regulations forming for the AI to make sure its safe utilisation to have a stable market in the future .
As India charts its course into 2024, the industry expects to see major regulatory reforms. Although times are tough due to decline in funds and decline of trust of investors in the new businesses, the increasing hand of AI, Gen I in the Healthtech, Edtech, Agritech and others, is giving a ray of hope of market expansion to the entrepreneurs and founders.
The government's stance on this subject will hold much weight and give direction, security and stability to the industry. The coming year is also coming with dreadful expections of faliures of more startups. But going into the new year we expect more towards vigilance and governance in startups.Founders are expecting more opportunities and ways to profitability and we are expecting a brighter year ahead.
