National Startup Day: Indian Startup Ecosystem-Key Drivers of Economic Growth
| Prof. HIMACHALAM DASARAJU, CWF (UK) - 16 Jan 2024

Jan 16, 2024: The Indian economy is booming with the vibrant startups and contributions at large. The government of India launched a ‘Startup India’ flagship initiative on 16th January 2016 to form a vibrant ecosystem for nurturing and promoting innovation and entrepreneurship across the sectors. The startup initiatives in India are expected to drive economic growth and generate huge employment opportunities.

The Standup India scheme was launched on 5th April 2016 to facilitate bank loans between Rs. 10 lakhs to Rs. 1 crore. Under the Startup India initiative eligible companies can get recognition as startups by the Department for Promotion of Industry and Internal Trade (DPIIT) for getting access to a host of tax heavens, easier compliance, IPR fast-tracking and many more. 

National Startup Day, January 16, 2024:  Every year 16th January, the founding day of Startup India, is commemorated as the National Startup Day. The PM Shri. Narendra Modi declared officially January 16th as National Startup Day in 2021. It aims to observe annually to recognize, appreciate, and encourage the spirit of entrepreneurship and promote a robust startup ecosystem.  It provides a platform for entrepreneurs to share their views, and experiences, to connect, plan of action, problems and solutions for their problems encountered.

Startup status in India: Indian entrepreneurial ecosystems are transforming rapidly. The Government of India encourages the startup culture with schemes like Atma Nirbhar Bharat. India is a leading country for Startups, 3rd largest in the world today, with more than 100 Unicorns ($ 1 billion or more investment), worth $ 30 billion after the US and China. In 2022  alone, around 42 technology-led startups have joined the coveted unicorn club. With government support and initiatives, the Indian entrepreneurs' success journey is making waves globally.

India has ranked 3rd place in startups in the world after the USA and China, with 1,12,718 DPIIT-recognized startups across 763 districts of the country as of October 2023, and ranks 2nd in innovation quality as well, (as per the ‘State of the Indian startup ecosystem report 2023’).

The remarkable development of the Indian startup ecosystem has emerged as a key player in the global startup ecosystem. As per Economic Survey Report 2022-23, the startups have raised to 84,012 in 2022 from 452 in 2016. All these 84,012 startups in India were recognized by DPIIT, and generated more than 9 lakhs direct jobs, accounting for an increase of 64% in 2022.  In 2022, Maharashtra (4801 registrations), Uttar Pradesh (2572) and Delhi (2567) stood as the top 3 startup hubs followed by Karnataka, Gujarat etc. Artificial Intelligence (AI) and Machine Learning (ML) are gaining importance and 91.5% of leading investors invest in AI & ML. It is projected that the global AI market is expected to grow at a CAGR of 23% from 2023 to 2028.

As reported by SkyQuest report, global e-commerce sales are expected to touch $58.74 trillion by 2028. Since the Covid-19 pandemic e-commerce sector got a boost in the market and is expected to build innovative e-commerce platforms.  As stated by the Commerce Minister (25, September 2023), India has achieved significant growth this year surpassing 100, 000 registered startups through the Startup India initiative from 450 startups in 2016.  As per The Kredible Annual Report 2023, it was a tough time for Indian startups as the funding crunch continued and crippled the startups and continue the same trend in 2024.

Emerging Challenges: Startups in recent times encountered critical challenges, which limit their longevity and contributions. Covid19 created an entrepreneurial setback and led to the closure of many startups, a dilemma in confidence levels of success among newborn startups. Accelerated digitalization, disruptions in supply-chain mechanisms, cash flow management, access to finance, retaining employees, hiring suitable knowledge-based employees, marketing strategies, adaptability to disruptive technologies, and cumbersome regulatory frameworks, are some of the critical challenges.

Unfortunately, the new startup failure rate is around 90%, the reasons being lack of product-marketability, low profitability, and cash flow crunch. Indian startup funding has declined to $7 billion in 2023, a 5-year low accounting for a 73% decline, compared to $25 billion funding in 2022, according to data from Tracxn. It is due to the collapse in late-stage funding with only $4.2 billion in 2023, a 73% drop from $15.6 billion in 2022. Despite the overall slowdown in funding, we have seen sectors such as AI, Deeptech, environment, climate, and space tech, attract investor attention. 

The basic factor to start a startup is to get funding in different forms like bootstrapping, crowdfunding, angel investors, venture capitalists and loans. The global venture funding reached $445 billion in 2022. Indian startups raised to $42 billion in 2021, increased from $11.5 billion in 2020. According to Inc42, LetsVenture, AngelList India, Stride Ventures, Sequoia Capital and the like are the most active investors. Further, the startup boom is poised to drive a 5 – 10% surge in GDP in India by the end of 2030.

The Tech Startup ecosystem in India continues to face the problem of a slowdown in funding throughout 2023 with $7 billion in total funding (December 6, 2023), recording a 72% drop over $25 billion in 2022, which is the lowest funded year in the last 5 years. The slowdown is due to the biggest drop in late-stage funding by over 73% to $4.2 billion in 2023 from $15.6 billion in 2022 (Source: Annual Report: India Tech 2023 by Tracxn, as reported in Forbes India, India Tech startup funding in 2023, December 19, 2023). Inc42 observed that only 1140 new startups come up in 2022 and 2023 together, which is lower than 1400 new startups in 2021.

Dire Need of the Day: The entrepreneurs should focus on fundraising by increasing their operational efficiency and profitability to attract more investors for funding. Technology skill updating, preparedness for the global competition, enhanced productivity and quality of products and services are imperative. User-friendly regulatory framework, Tax holidays for start-ups, Govt. support for finance, marketing, and tax exemptions are needed until their stability in the market. There is a dire need to transform India as a country of job creators, but not job seekers through a vibrant startup landscape.

Conclusion: The country, which has a sound spirit of entrepreneurship and entrepreneurial activity, can progress and flourish by adopting innovative scientific approaches. Nurturing startups with care is essential to maintain our startup status, without dropping from 3rd rank and moving ahead at the global level. Let us appreciate and salute the startup entrepreneurs for their innovations and unstinted efforts. The young and dynamic entrepreneurs who made strides in recent times in technology-based startups and unicorns are equally deserving of appreciation on this National Startup Day (16-01-2024).

By Dr. Himachalam Dasaraju,

Professor of Commerce (Retd),

Commonwealth Visiting Fellow, UK,

Sri Venkateswara University, Tirupati.



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