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Startup funding slows but strong core policies will help tide over uncertainties, say experts

Photo for representation

Will Indian startups tide over the rising challenges amid thinning funding? Even as funding into Indian startups in the April-June quarter slowed down significantly at about $7 billion compared to about $10 billion in the corresponding period in the previous year, most entrepreneurs in the country remain unfazed.

“It would be surprising if the global economic uncertainty had no impact on Indian startups,” an analyst with a research firm tracking the segment said. After all, the startup business is a high risk-high reward game.

Going by the thumb rule, nine out of 10 startups fail at any given point.

Akhil Saraf, Founder, Reloy, Mumbai based real estate loyalty and referral solution told India Narrative that the policies supporting the startup ecosystem in India are on par with global standards.

“Policy framework and core infrastructure required for the startup segment in India are fundamentally strong. At this juncture, most startups are getting more and more focused on boosting bottomlines and generating revenues rather than going in for expansions and that is one reason why capital flow into these firms is thinning,” Saraf said.

“Firms which manage to build a strong customer network and generate revenue will definitely survive,” he said.

Despite the brutal impact of the Covid 19 pandemic last year, more than 30 startups in India made it to the prestigious Unicorn list—a startup with a valuation of $1 billion or more.

Government push for startups

In 2016, Prime Minister Narendra Modi launched the Startup India programme, a government initiative to boost the startup ecosystem by creating a conducive environment for these firms to nurture.

Earlier this year, Modi referred to startups as the “ backbone “ of new India. “Our Start-ups are changing the rules of the game,” he said in a tweet. Most importantly, a large number of the startups are from tier II and tier III cities.

Finance Minister Nirmala Sitharaman in the Union Budget raised tax incentives for startups from three years to four years of incorporation.  Besides, the allocation for the Startup India programme was also increased to Rs 50 crore for 2022-23 from Rs 32.83 crore made in the revised estimate of 2021-22.

“Like the US and China, India has a much wiser and tighter policy and framework for the startup industry. The policy is transparent and based on global standards which makes funding easier,” Sudip Kr Goswami, Co-Chairman, Assocham Startup Council noted. Goswami added that startup policies are regularly revised to meet the changing domestic and global economic situation.

According to the Economic Survey 2021-22, India is home to more than 61,400 startups that are recognised by the Department for Promotion of Industry and Internal Trade (DPIIT).

Today, India’s startup ecosystem ranks third only after the US and China. But the startups now need to switch gears. The focus should be boosting core business and not expansion. 

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