Entrepreneurship Development

Startups in India: Opportunities and

Growth Drivers

Pankaj Bhatt June 13, 2022 1

Startups, in India as in many other parts of the world, have received
increased attention in recent years. Their numbers are on the rise and
they are now being widely recognized as important engines for growth
and jobs generation. Through innovation and scalable technology,
startups can generate impactful solutions, and thereby act as vehicles
for socio-economic development and transformation.

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 The Indian startup ecosystem has evolved dynamically over the
last two decades.
Some startups were founded in the 2000s, but the ecosystem was
still immature as only a few investors were active and the number
of support organizations such as incubators and accelerators was
limited.
Some successful exits occurred in the late 2000s and in the last
ten years, the number of startups increased fast and more
support has become available in all dimensions.
Bangalore has emerged as India’s primary startup hub, but
significant founding activity is also taking place in Mumbai and
the National Capital Region (NCR), as well as some smaller cities.

•“Indian Tech Startup Funding Report”, 2018.

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Pankaj Bhatt June 13, 2022
 Along with this, the demographics of the population are another
advantage. Half of the country’s population are below the age of 25
years and the youth is aspirational. The nearly 700 million people
born through the late 1980s to the 2000s carry material ambitions
and have the ability to spend and make those goals a reality.

1. Vidisha Mishra, Terri Chapman, Rakesh Sinha, Suchi Kedia, and Sriram Gutta, “Young India and Work:
A Survey of Youth Aspirations,” Observer Research Foundation and World Economic Forum, 2018.
2. World Economic Forum, “Future of Consumption in Fast-growth Consumer Markets: India,”2019.

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 1.1: Scope and Characteristics of the Indian Market
India is often described as “the poster child of emerging markets” for its
vast commercial potential for startups.
Since this liberalization, the overall economic development has been
dynamic and as of 2021, the Indian economy had a GDP of US$ 3.05
trillion (est.)
As the Indian economy continues to grow, incomes and purchasing
power are increasing steadily. Rising consumption is driven by the
growth of upper-middle income and high-income segments of the
population, which will grow from being one in four households today, to
one in two households by 2030.

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 1.2: Technological Change
As India improved its digital connectivity, market access barriers have
been brought down. The broadband penetration is increasing fast and
the number of wire line subscribers in 2018 is expected to increase by
44 percent over the next four years.

The number of internet users was pegged at 483 million in 2018 and
is projected to reach 666.4 million in 2025

In addition, the government initiative, “Digital Saksharta Abhiyaan”,

was started to promote digital literacy and help people become more
knowledgeable about the digital world.

•Number of Internet Users in India From 2015 to 2023 (in Millions),” Statista, accessed August 27, 2019.
•Pradhan Mantri Gramin Digital Saksharta Abhiyaan”, accessed September 4, 2019.

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 Successive Indian governments have also actively promoted both the
opening of bank accounts and the expansion of digital payments to
promote financial inclusion.

Moreover, Aadhaar and the payments systems are part of the “India
Stack”, which is envisioned as a new social infrastructure that will “help
propel India into the 21 -century digital economy”.

Increased financial inclusion, as well as the banknote & demonetization

in 2016, led to a boom of fintech startups, which was 13 the top funded
sector in 2018.

1. “India’s Digital Platforms: Stack’em High,” Economist, May 4, 2018,.

2. Inc42, “Indian Tech Startup Funding Report”, 2018
3. Arvind Gupta and Philip Auerswald, “How India is Moving Toward a Digital-first Economy,” Harvard
Business Review, November 8, 2017
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 1.3: Increased Political Will and Government Support
The federal as well as some state governments increasingly recognize
startups as important engines for economic growth. Moreover, startups
are expected to create jobs that will narrow the high unemployment rate
in the country.
In 2018, startups accounted for 2.64 percent of the total jobs created in
India that year; they are projected to create approx 2,50,0000 jobs in
2019.
“Startup India”, was initiated by the prime minister in 2016 “to build a
strong ecosystem that is conducive for the growth of startup businesses,
to drive sustainable economic growth and generate large scale
employment opportunities.”

1. Inc42, “Indian Tech Startup Funding Report”, 2018.

2. “Startup India,” Government of India, accessed April 17, 2019,.
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 So far, 14,036 startups have been recognized according to the
definition of the Department of Industrial Policy and Promotion
(DIPP); 660 startups have received business support; and 132
startups have been funded.

startupindia: The Status Report”, Startup India, accessed August 27,2019

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 1.4: Companies Increasingly Seek to Engage in Open
Innovation
In an increasingly uncertain and fast-moving business environment, large
companies face pressures to innovate ever more rapidly. Their challenge
is twofold: to innovate incrementally to grow their existing business,
while understanding ongoing changes in their industry and making
provisions for more radical innovations.
The latter is proving to be difficult, and more large companies realize that
they cannot simply rely on internally generated knowledge and on
building everything themselves. As this ‘closed innovation’ paradigm
loses its relevance, more companies turn towards open innovation
approaches.

June 13, 2022 Pankaj Bhatt 10

 Thus, companies in India are increasingly reaching out to startups to
increase their own innovativeness. They enter into exchange and
strategic partnerships with startups, while supporting them with
various corporate-specific resources. These engagements can be
mutually beneficial.

1. Tobias Weiblen and Henry Chesbrough, “Engaging with Startups to Enhance Corporate Innovation,”
California Management Review 57 (2015): 66-90;
2. Thomas Kohler, “Corporate Accelerators: Building Bridges between Corporations and Startups,”
Business Horizons 59 (2016): 347-357.
3. NASSCOM, “Co-Innovation: Enterprise Startup Collaboration”, 2019.

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 1.5: Changing Perceptions towards Entrepreneurship

A change in perceptions among the broader society is noticeable. The

success stories of remarkable exits and India’s first unicorns have
received much media attention. Subsequently, some founders have
become India’s “startup heroes”, contributing to a current image of
entrepreneurship as “cool” and “glamorous”. Despite some hype, the
social acceptability of entrepreneurial careers is indeed increasing

“70% Indians Live in Rural Areas: Census,” Business Standard, January 20, 2013,
https://www.business-standard.com/article/economypolicy/ 70-indians-live-in-rural-areas-census-
111071500171_1.html.

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