Can India's Startup and Tech Economy Survive the Effects of COVID-19?
Until COVID-19 came along, India's startup and tech economy and its potential was proving to be promising.
Having one of the largest tech ecosystems in the world, when 2019 came to a close Indian startups raised over $11 billion. From its humble days only around a decade ago, when finding capital to invest in tech was still relatively new, much has changed and India with its startup and tech scene is much more advanced. There was even a report from the US-India Strategic and Partnership Forum (USISPF) suggesting that in the next five years, India’s tech sectors can attract $21 billion in investment and create 550,000 direct jobs and 1,400,000 indirect jobs. By putting digital transformation at the center of its plans, it has cascaded to various state-level governments as well. This has included “Startup India”, whose aim is building a strong ecosystem for startups that boosts economic growth and job creation.
Then came the novel coronavirus and put a halt to our daily lives across the world. In India, this has also come into play, prominently as having the largest lockdown in the world with its 1.3 billion residents as a way to maintain social distancing and to protect the public’s health from what the World Health Organization (WHO) calls COVID-19 a pandemic.
In the case of India’s tech and startup community, will it be able to survive and continue its path to success post COVID-19?
Continued Support To Boost Homegrown Innovation and Investment
Measures prior to COVID-19 have included a simplified business setup, tax benefits, a fund of INR 10,000 crore and financial support for incubators—to name a few. Prior to the current situation those investments appeared to have come into fruition through economic successes. Startups accounted for 2.64 per cent of total jobs created in India and by the end of last year projected to create 200-250,000 jobs. And 18,000-plus startups were recognized by the department for promotion of industry and internal trade up until May of last year.
There have been examples of successful Indian startups. One of those is Flipkart, which was founded by Sachin and Binny Bansal in 2008 with a sum of $6,000 (INR 4 lakh) and is now one of the largest e-commerce startups in India with a valuation of around $20 billion. One of its biggest successes was the $16 billion investment by American retail giant Walmart, which made it the largest ecommerce deal in the world. In fact both Walmart and Flipkart made news by announcing a joint strategic partnership with another Bengaluru-based fresh produce supply chain startup Ninjacart.
Adaptability To the Changing Market
Fintech, edtech and healthtech were some emerging verticals happening in India, while e-commerce and aggregators have become mature, according to the Startup India website. India has not just attracted foreign direct investment to compliment the supply chain of tech but has also created its own homemade innovations that have contributed to the global tech ecosystem. For a post-coronavirus world these emerging verticals will need to continue. There will be a high probably that certain ones, particularly fintech, edtech, healthtech, ecommerce and agritech will be in demand globally as, at present, much of the world is working remotely and many business and personal transactions are being done on a global scale. For instance, the global fintech market is expected to grow to $309.98 billion at an annual growth rate of 24.8 per cent through 2022. Although those figures were published pre-COVID-19, there are clear indicators that certain elements of the global fintech industry such as contactless point of sale (POS) transactions will continue to grow, as people currently and in a post-coronavirus world will be more aware of hygienic practices.
Those promising verticals will need to ensure their relevant ecosystems compliment and work together hand-in-hand. This is the case, for instance, in key startup and tech clusters such as in Silicon Valley and London’s Tech City, where access to a variety of tools needed particularly for tech and startups such as finance, talent, and other needs of the supply chain are available. In the case of COVID-19, a strong information technology and other relevant infrastructure as part of a wider digital transformation is more important than ever.
In the case of India, the maturity and innovation of the country’s key startup and tech clusters needs to continue being fostered. Bengaluru, Mumbai and the National Capital Region, whom the three at the moment are regarded as the top three clusters of startups and wider tech in the country (they combined have 65 per cent of all of India’s startups and nearly half of the incubators). Bengalaru, in particular, alone has more than 25 per cent of total startups in India (such as Flipkart and Ninjacart mentioned earlier); from 2014 to September 2018, Bengaluru startups reportedly received $16.2 billion funding across 1,244 deals.
Educate, Retain Talent and Boost Brand India
There also needs to be a lure to ensure that current talent—entrepreneurs who historically might have either started their own business to greener pastures abroad such as the US, Canada or the UK, actually stay and reverse any potential country brain drain. Many of the Indian diaspora, both the non-resident Indians (NRIS) and Persons of Indian Origins (PIOs) have been successful in the tech and startup space, whether they are in Silicon Valley such as the likes of M.R. Rangaswami who launched Indiasapora. And of course on a global scale both NRIs and PIOs have achieved very successful careers such as CEOs of large tech multinationals like Google parent company Alphabet, Inc Sundar Pichai, Microsoft CEO Satya Nadella, and Adobe CEO Shantanu Narayen.
In a recent survey of young people in India, a third mentioned a career in entrepreneurship. However, it is note mentioning that India still is closing a skills gap when it comes to technological innovation. Despite ranking top 10 in terms of students graduating in science and engineering, a recent employability report on engineers showed less than 4 percent had the technical, cognitive and language skills needed for technology startups. The same report mentioned only 3 percent with new-age skills in areas like artificial intelligence (AI), machine learning, data science and mobile development. Especially now, AI, for instance, is proving to be in demand across the world as it is being used with many governments such as in Singapore and China as a way to help contain and control COVID-19.
Despite the current situation, India has plenty of opportunity to further accelerate its startup and tech economy. For many countries, India included, a diversified economy that fosters innovation and talent is the right path to future economic growth.
Richie Santosdiaz is an economic development expert with a focus on internationalization in the management consulting context. He is currently the Head of Strategy for Dubai-based Rise Group ME.