Nearly 50% Investors Believe Modi Govt 3.0 Will Have A Positive Impact On Startup Ecosystem

A majority of investors believe that Prime Minister Narendra Modi-led National Democratic Alliance (NDA) forming the government for the third consecutive time will have a positive impact on the investor sentiment in the Indian startup ecosystem.

In a survey conducted by Inc42, 46% of venture capitalist (VC) and angel investor participants said they believe the results of the Lok Sabha 2024 elections will increase the overall confidence of the investors in the Indian startup ecosystem. 

While 32% participants said they believe that the elections will not have any impact on investor sentiment, 18% said they are adopting a wait-and-watch approach for investments post the elections. A meagre 4% investors said they believe that the elections will lead to sector-specific actions. 

However, it needs to be highlighted that the Indian startup ecosystem continues to grapple with the funding winter for now. According to Inc42’s ‘H1 2024 Startup Funding Report’, Indian startups cumulatively raised $5.3 Bn in the first six months (H1) of 2024, down 1.8% from H1 2023’s $5.4 Bn. In contrast, the deals secured in the half rose 7% to 540 from the 470 in the year-ago period. 

However, investors expect a funding revival in the second half of 2024. Earlier, 3one4 Capital founding partner and CFO Siddarth Pai told Inc42 that the year 2024 is expected to see political churn across the world. However, he said that the uncertainty for investors in India has withered away due to the political stability the country has got after the general elections this year.

In line with Pai’s views, about 93% of investors in the survey said that they see 2024 as a turnaround year for the Indian startup ecosystem. A mere 7% investors said they feel that funding corrections will continue this year as well. 

It is pertinent to note that finance minister Nirmala Sitharaman presented the first budget of Modi government 3.0 on July 23. In a big relief for the startup ecosystem, the finance minister fulfilled a long-standing demand by announcing the abolishment of the infamous angel tax.

She also announced an INR 1,000 Cr VC fund to boost the country’s space economy. Besides, Sitharaman said the government plans to establish ecommerce export hubs in a public-private partnership (PPP) model to empower MSMEs and traditional artisans to sell their products in international markets

As per the survey, investors are also bullish about the PPP model and believe it can help some of the sectors leap forward. About 39% of investors surveyed by Inc42 believe that startups in the healthcare sector will benefit the most from increased public-private collaboration fostered by the Indian government. 

Meanwhile, 29% investors believe that startups in the clean energy sector stand to gain the most from this partnership. Financial inclusion, waste management and education are among the other sectors which featured in investors’ answers.