Why Start-Ups Will Be India's Economic Backbone in the Next 25 Years
Startups in India will lead to financial prosperity and progress in the next 25 years, with opportunities in key sectors
6 February 2023
India's startup ecosystem is rapidly growing, boasting over 100 unicorns valued at $340 billion, making it the third largest in the world.
Start-ups are now reaching $100 million in revenue within just five years, a significant improvement from the 18 years it took in 2000.
Young companies in rapid growth have the potential to drive both financial and societal progress, elevating India's global status.
India's start-up scene is rapidly climbing the global economic ranks, boasting over 100 unicorns valued at $340 billion, making it the third-largest start-up ecosystem in the world. This is just the start of its success.
A new report by RedSeer Strategy Consultants shows that start-ups are now reaching $100 million in revenue within just five years, a significant improvement from the 18 years it took in 2000. These rapidly growing young companies are poised to drive both financial growth and societal progress, elevating India's position on the global stage.
Bharat Takes the Spotlight
Building solutions for Bharat, the population outside India's major cities, is a massive opportunity often referred to as the "next billion" users. This segment represents a large portion of India's population and start-ups are seizing the chance to offer accessible and affordable products and services to the low-income, less tech-savvy population. The shift to remote work and learning during the pandemic boosted the adoption of digital services among consumers in Tier II and III cities, closing the digital infrastructure gap between urban and non-urban areas. Today, approximately half of India's recognized start-ups are from Tier II and III cities.
“In the next 25 years, Bharat is expected to see a significant shift towards urbanisation. This will be driven by the growth of India’s physical and IT infrastructure, which will enable more people to access modern technology and services…This will present a wide range of opportunities in various domains,” says Ramkumar Narayanan, Chair of industry body Nasscom’s Product Council and VP-Technology and MD at cloud computing major VMware.
According to him, communications software and digital payments will provide Bharat with easy access to technology. The revolution will come from agri-tech, urbanisation, healthtech, IoT, robotics, and renewable energy, which will optimize crop yields for farmers, improve healthcare access in rural areas, and provide sustainable energy solutions.
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The engine for financial inclusion
The India Stack, with its identity, payment, and data sharing capabilities, is expanding access to affordable financial services. Digital innovations like UPI, eKYC, and AA network have increased financial services for the unbanked and under-banked, and boosted the Indian economy through e-commerce and digital transactions. The next challenge is bridging the digital divide in financial inclusion, a massive untapped market for startups.
The government's JAM trinity initiative (Jan Dhan Yojana-Aadhaar-Mobile) has given nearly all households in India access to bank accounts and efficient digital payments via UPI and Aadhaar-enabled systems. The government aims to bring financial services to every corner of the country through digital technologies. Treasa Mathew, Director of Investments at Omidyar Network India, says the next decade could see unprecedented opportunities for digital financial inclusion for the next half-billion first-time internet users and MSMEs with platforms like AA, Open Credit Enablement Network, and Open Network for Digital Commerce.
The Conundrum of EdTech
Edtech, the most discussed and criticized start-up segment, faced challenges as the pandemic-driven digital boom slowed down. However, founders and investors believe the potential to make a significant impact and build successful enterprises in this field is emerging. According to Mohan Lakhamraju, founder and CEO of Great Learning, the education market in India is estimated to grow to $80 billion in 25 years, with 40-50% being tech-enabled, potentially making the edtech market opportunity worth $30-$40 billion in 2047. He admits that he may be proven wrong with a higher estimate.
Eruditus CEO and Founder, Ashwin Damera, emphasizes the need for education in India, with over 50% of the population being under 25 years old. This is nearly double the population of the US, and for these 600 million to contribute to India's demographic dividend, they must be educated through formal education or skill development. Damera believes the current educational infrastructure may not be sufficient and suggests edtech companies can provide upskilling or reskilling opportunities through technology solutions or assist traditional institutions in offering online degrees.