A few decades down the line when (and if) India becomes the largest economy in the world and a prosperous high-income country, the year 2021 will be remembered for democratizing corporate India. For the starting four decades since independence, India was a crony socialist economy with only a few politically connected business houses being allowed to manufacture goods and sell them.
In 1991, the country started reforming the political economy but instead of establishing a proper capitalistic framework, it went for crony capitalism. The excesses of crony capitalism led to the Modi government coming to power in 2014, and it took more than one term to establish a proper framework for a rule-based capitalist economy.
In the six to seven years of the Modi government, the Indian startup ecosystem started maturing and with a conducive environment for new businesses, 2021 became the year when the true prowess of India’s entrepreneurship became visible to the world.
India has emerged as the third-largest startup ecosystem in the world after the United States and China. With 43 Unicorns (companies valued over 1 billion dollars) in 2021, the Indian startup ecosystem that was in making for almost a decade started maturing. Moreover, showing another very resilient sign of maturity, around 8 startups filed for IPOs in 2021, and many more are lined up for 2022.
Among these 43 startups, most were from Software as a Service (SaaS), Fintech, EdTech, Healthtech, e-commerce and Business to Business sector.
The fintech sector, which is riding high on the IndiaStack platform (Aadhar, e-KYC, Digilocker, UPI), showed signs of maturity with the largest IPO in the country- Paytm. Similarly, SaaS, which is also an almost decade-old sector, showed the signs of maturity with the IPO of Freshworks and exponential rise in sales and profits of other companies like Zoho, Zerodha. These two sectors (fintech and SaaS) are a decade old and are slowly maturing.
The newly minted sectors like Healthtech, EdTech, which got a big boom due to the pandemic, are yet in early-stage and expected to take at least four to five years to reach maturity. E-commerce is going through a lot of churns as traditional e-commerce is now dominated by Amazon and Flipkart, but many new players are emerging which are reimaging the whole business model of the sector.
In 2021, India produced around one unicorn every week and in the coming years, the number is expected to move northwards. With the government focusing on deep-tech technologies like semiconductors and telecom products, a new wave of startups is expected to emerge in the next few years with government support and infrastructure.
In 2021 when more than 40 startups emerged, it seems like they came from nowhere but if we carefully examine, the base for these startups was prepared by the government with programs like Digital India, Startup India, and IndiaStack.
The exponential growth in the fintech sector and India’s emergence as and global leader in digital payments was made possible by United Payments Interface (UPI) and Aadhar and many other schemes launched by the government in the last few years. Many private and industry bodies also played important role in this. For example, the rapid expansion of EdTech was possible only due to dirt cheap data rates that was made possible by Mukesh Ambani. Similarly, IndiaStack and the growth of fintech would not have been possible without the iSPIRT Foundation.
The next venue for startups to emerge is drones (new drones’ policy has been much appreciated), defence tech (Defense ministry in encouraging defence startups), Healthtech (National Digital Health Mission) and deep-tech sectors like telecom and electronics. The startup ecosystem that started to emerge in the early 2010s has started maturing in the early 2020s and by the 2030s, these companies are expected to push the old leaders to edge and emerge as the face of Indian industry.