This article is part of Inc42’s special year-end series — 2019 In Review — in which we will refresh your memory on the major developments in the Indian startup ecosystem from international trade collaborations to startup programmes and their impact on various stakeholders — from entrepreneurs to investors. Find more stories from this series here.
With almost every state today having a dedicated policy towards startups and innovation, the Indian startup community has emerged as a huge industry in itself.
In the last few years, most of PM Narendra Modi’s international visits have incorporated startup community collaboration as a key focus of the bilateral talks be it with Israel, Singapore, Hong Kong, EU, the US and the UK.
And, it’s not just setting up soft landing policies for startups across these countries, but also building an ecosystem around with Make in India, Skill India, Smart Cities and Digital India initiatives with more global participation.
While the government has been actively looking into strengthening the international collaborations, 2019 has been a mixed bag for India. At one end, if the international collaborations saw the launch of RuPay card in various countries including UAE, Bahrain, Singapore, Bhutan and Saudi Arabia, on the other end, India failed to crack the long-pending trade deal with the US. The L1 and H1 Visa are continued to be declined by US authorities.
However, the collaborations have not been limited with government counterparts but have been happening at various levels strengthening the ecosystem manifold. For instance, in August this year, the Africa Business Angels Network (ABAN) and the Economic Development Board of Mauritius had invited Indian angel investors for a meet where prominent investors of India and Africa discussed building an India-Africa investment corridor, which would help startups in India and Africa exchange knowledge, capital and resources to grow and flourish.
In the present article, we will take a look at India’s startup-related trade developments with the below countries.
India-Japan: Leading From The Front
I would hold that every one of the accused must be found not guilty of every one of the charges in the indictment and should be acquitted on all those charges. – Justice Radhabinod Pal
While India-Japan relations goes back to 752 AD when Indian monk Bodhisena had reportedly visited Todaiji Temple in Nara, Japan, the foundation of post World War II relation was interestingly laid by an Indian jurist Radha Binod Pal, the only judge of the International Military Tribunal for the Far East who insisted that all the Japanese leaders including their former prime minister and commander in chief were not guilty of the world war crimes and crime against humanity.
Later, the Japanese government made multiple monuments such as the Yasukuni Shrine and the Kyoto Ryozen Gokoku Shrine dedicated to Judge Pal.
It is perhaps because of Pal, Gurudev Ravindranath Tagore, Swami Vivekananda, Subhash Chandra Bose and later Nehru’s visits to Japan that the Japan India Association that was set up in Japan in 1903, survived the two World Wars and today is one of the oldest international trade bodies in Japan. And, Japan has been the largest bilateral donor for India, extending loans since 1958.
In the Modi era too, Japan is behind some of the biggest flagship projects including the Ahmedabad-Mumbai High-Speed Rail, the Western Dedicated Freight Corridor (DFC), the Delhi-Mumbai Industrial Corridor with twelve new industrial townships, the Chennai-Bengaluru Industrial Corridor (CBIC) and more.
In 2018, the value of trade from Japan to India stood at ¥1,236 Bn ($11.62 Bn) compared to ¥585 Bn ($5.50 Bn) worth of trade from India to Japan. The value of trade from Japan to India is growing at a rate of 4%, whereas in the case of India to Japan the recorded growth rate is approximately 1%.
There’s a huge disparity over the number of companies. If around 100 Indian companies have set up their offices in Japan, the number of Japanese companies that are operating in India is over 1441.
In 2018, both the countries had announced the launch of India-Japan Digital Partnership. As part of the partnership, a startup Hub in Bengaluru and NASSCOM’s IT corridor project in Hiroshima were set up to help develop IoT and AI solutions for societal benefits and attract skilled talents.
India’s investment nodal agency Invest India and Japan Innovation Network (JIN) had also signed an MoU on innovation and collaboration with a focus on sustainable development goals to connect the two startup ecosystems in June 2018.
As per DataLabs by Inc42’s latest Japanese Investors in India report, there are over 50+ active Japanese investors who have funded 105 Indian startups and 12 unicorns across 136+ funding deals. And if that feels exciting, there’s a lot more in store!
Indian startups secured 4,554 funding deals as compared to 1,301 deals in the Japanese ecosystem which is a whooping 3.5x higher. While Japanese startups raised $12 Bn overall between 2014 to H1 2019, in India, Japan’s SoftBank alone has invested $10 Bn in the Indian startup ecosystem.
In 2019, to accelerate the startup game further, Indian and Japanese VCs joined hands to set up the “Indo-Japan Emerging Technology & Innovation AIF”, a Fund of VC Funds (FoF) that aims to invest in 200 startups through its network of institutional investors, conglomerates and Japanese VCs.
The Indo-Japan Fund of Funds will raise funds from both Japanese and Indian investors, with $150 Mn (80%) is being raised from Japan and $37 Mn (20%) from India. As part of the Fund, Japan’s METI, Reliance Nippon Life Asset Management, TV Mohandas Pai, angel investor and chairman, Aarin Capital Partners and R.K. Mishra (non-resident scholar at Carnegie India) facilitate the participation from both the countries.
India-EU: The Most Balanced Trade Collaboration
With the European Union being India’s leading trading partner accounting for €92 Bn worth of trade in goods in 2018, India-EU trade relations have also been the most balanced one with export and import proposition almost 1:1.
According to Eurostat data, the Indian services exports to the EU were €16.6 Bn in 2018, while imports were €17.1 Bn. The sector has also attracted foreign direct investment from the EU, including Germany, the Netherlands, France, Italy and Belgium, as well as the UK.
In 2018, the trade surplus stood at €0.1 Bn. As Indian startups go global, the EU has also emerged as a leading market for Indian startups. However, the long-pending free trade agreement that the EU has been negotiating with India since 2007 is still a sore issue. The talks were suspended after 16 rounds wet nowhere due to issues such as tariffs on European cars and wine, on data security, and India’s desire to include services and more visas for Indian professionals in the agreement.
The dialogue was resumed in 2018 yet no progress has been seen so far.
As it was the UK who leads the India-EU trade partnership, Brexit is set to detune/tune the partnership. As a result, since the Brexit referendum in 2016, EU countries have actively started looking at the other equally big and capable markets across the world. And, thus India naturally became their key focus.
In October-November, a large German delegation led by Chancellor Angela Merkel had visited India and signed a slew of MoUs in the areas of digital India, Startup India, aerospace, agriculture, maritime technology, edtech, sports and more.
Both the countries agreed to strengthen economic cooperation in the field of startups. In a joint statement released on Nov 1, 2019, both sides underlined the importance of rapid convergence of startup ecosystems in both countries, welcoming initiatives that allow entrepreneurs to exchange ideas and share projects. A proposal has also been made to conduct boot camps for startups which will help create an ecosystem for promoting innovation and fostering entrepreneurship in the digital economy.
Besides the two countries running the German Indian Startup Exchange Programme (GINSEP) to promote the exchange between both startup ecosystems, a new German Accelerator (GA) programme “Next Step India”, which could lead to a full GA programme for German startups in India, was also set up as part of the collaboration.
Both countries will collaborate in areas of AI, ML, IoT and other emerging technologies to develop solutions that could be applicable in healthcare, agriculture and other industries.
The EU countries have also been micro focusing on the Indian market. Some of these countries such as Estonia, The Netherlands and Ireland have either signed, re-signed MoUs with India states such as Karnataka, Maharashtra, Telangana and other countries.
For instance, besides setting up Startup Link platform between the two countries, The Hague in the Netherlands has signed an MoU with Karnataka to set up an Innovation Corridor in fields of health, cybersecurity, agri-tech and peace & justice. The MoU is a renewal of an earlier MoU signed in 2016, will focus on identifying collaborations for tech innovation facilitation, startup exchanges and nurturing talent on both sides.
The Netherlands believes, there’s much to gain from Brexit as well. Speaking to Inc42 the Netherlands Ambassador to India, Marten van den Berg, had earlier commented,
“Because of Brexit, more Indian companies are now showing interest in the Netherlands rather than the UK.”
Ireland too has entered into international collaborations with various organisations. Tanaz Buhariwalla, India director, Industrial Development Authority (IDA) Ireland told Inc42, “For instance, we work with TiE network and reach out to their member startups who are interested to expand their base. We also have had a partnership with IAMAI, the Internet and Mobile Association of India. We also participate in global events to attract innovative startups into Ireland. We have even organised fam trip for selected shortlisted Growth Mechanics Startup 50 winning startups.”
Estonia meanwhile has been actively promoting its eResidency programme in India. With the idea of Make in India and Sell in Europe, Estonia is now home to nearly 286 Indian companies which have setup base in Estonia through its e-residency programme including Mukesh Ambani, India’s richest man. The majority of them were set up by startups and other freelancers working across sectors such as web designing, software programming, content writing etc.
India-UK: Strengthening Ties Amid Brexit Fiasco
While UK-India trade partnership has had its dark history in the ‘colonial era.’ Despite the Brexit announcement, the UK, which has consistently been the fifth largest economy in the world has been promoting itself as a standalone market in contrast to the European Union gateway which it used to be for Indian companies. Having created a slew of hubs, other than London, such as Manchester, Birmingham and Leeds, the country has been looking for multilevel, multilayered deep collaboration with Indian counterparts.
Total trade between the UK and India has increased by 27%, to £20.5 Bn over the period 2015-18. Over this period, goods trade increased by 29%, to £13.3 Bn and services trade increased by 24%, to £7.2 Bn.
This year, the duo has launched the Go Global programme as part of the ambitious UK-India Tech Partnership announced last year. As part of this collaboration, selected Indian tech startups will be helped improve their essential skill sets and thus the programme will eventually help startups in soft landing.
On Go Global, digital secretary Jeremy Wright had said, “Through the newly expanded Go Global programme we are giving Indian tech entrepreneurs focused on the development of tech for good the opportunity to hone their skills so they can compete on the global stage. This will also help to build connections for UK startups in new markets, highlight Britain as the place to develop new technology and pave the way for future economic partnerships.”
The successful Indian startups will be expected to act as Go Global champions and share the skills they have learned with other firms across India. The UK’s Development Finance bank, CDC Group, has made 307 investments, valued at $1.7 Bn in India.
In October, 30-member delegation led by Mayor of Greater Manchester, Andy Burnham recently visited Mumbai, Bengaluru, and Delhi and signed a host of MoUs with various Indian companies and institutions in the areas of health, cybersecurity, cleantech, etc.
MIDAS CEO Tim Newns had earlier told Inc42 that MIDAS shortlists five startups from Deloitte’s Fast 50 shortlists every year and help them in soft landing in the UK market. “So far 20 startups have visited Manchester and some are in the process of setting up their base in the city,” he had said.
Besides, the High Commission of India and Indian business organisation FICCI UK in London jointly organise TechXchange, a programme aimed to provide exposure to Indian startups at a global marketplace. This year, around 15 startups have been selected to attend the five-day familiarisation event.
The five-day programme witnesses meeting with UK Government agencies, market meeting, attendees interaction and network development, techXchange summit and meetups with startup ecosystem players including internationally renowned businessmen, investors, decision-makers, partners, venture capitalists.
India-Middle-East: Beyond The $100 Bn Infrastructure Investment
During Modi’s tenure, India’s relations with Middle East countries, notably Saudi Arabia, UAE and Israel has undoubtedly surged to greater heights through multilateral international trade collaboration deals.
India-Israel trade relations, which in the past have been limited to diamonds, defence and security, have now diversified in multiple domains including pharmaceuticals, agriculture, and startups.
According to the foreign ministry, Israeli companies have invested in India in energy, renewable energy, telecom, real estate, water technologies, and are also setting up R&D centres or production units in India.
India, Israel have also set up India Israel Global Innovation Challenge which invites entrepreneurs, startups, and research teams to submit their solutions to challenges in the areas of agriculture, water and digital health. Besides, Accenture, the Consulate General of Israel to South India, and NASSCOM have also launched an Indo-Israel ‘Scalerator,’ which intends to enhance the collaboration between the Israeli and Indian startup ecosystems.
In 2019, India has also signed an agreement on Strategic Partnership Council with Saudi Arabia. India and Saudi Arabia have constituted a Joint Committee on Defence Cooperation that holds regular meetings and that the two nations have identified a number of areas of mutual interest and cooperation in the field of defence and security.
During his visit to India in February 2019, the Saudi crown prince Mohammad Bin Salman had indicated an intent to invest in excess of $100 Bn in India across various sectors.
“We welcome greater Saudi investments in our infrastructure projects, including the Smart Cities program. We also welcome Saudi interest in investing in the National Investment and Infrastructure Fund.” – Narendra Modi
Qatar Investment Authority which had earlier invested in Flipkart, Byju’s and UAE -based VCs such as Jabbar, Vy Capital too have been quite active in the Indian startup ecosystem in terms of collaborations.
India-Russia: More Converging Grounds
From Maxim Gorky-Premchand literature widely, equally read in both the countries to Nikita Khrushchev, the Soviet President saving India in the 1971 war against Pakistan, India-Russia share a strategic, military, economic and diplomatic relationship, with decades of collaboration in international trade.
However, the trade relations between the two countries has largely dampened due to US and EU sanctions on Russia. This year, in his Russia trip, Modi launched Indo-Russian Innovation Bridge which aims to enable startups, investors, incubators, and aspiring entrepreneurs of both countries to connect with one another and provide them with resources to expand and become globalized players.
The Annual international startup conference for tech entrepreneurs ‘Startup Village’, held in Moscow on May 29-30, saw huge attendance from Indian startups and investors as well. Skolkovo Innovation Fund too has shown interest in investing in the Indian startup ecosystem.
India-US: Locked In Trade Disputes
One of the biggest failures of India’s collaboration has clearly been with the US. While Bangladesh and Srilanka have been immensely benefited from the US-China trade war, India has not only failed to encash the opportunity but has also failed to enter into the long-pending trade deal with the US. Both the countries have been locked in trade disputes for months, slapping higher tariffs on each other’s products and the US withdrawing a key concession to India.
From Kunal Bahl who was denied an H-1B Visa back in 2007 and as a result, he went on to set up ecommerce startup Snapdeal, there has been a sharp surge in the rejection rates for H1-B and L1 Visas in recent years. The refusal rate for L1 Visa which is essential for Indian startups, companies looking to enter the US market, has gone up to 80% to 90%, reported Forbes.
According to the American Immigration Lawyers Association, there have been significant delays in the agency’s processing of applications for various immigration benefits. The Association found that overall case processing times have increased by 46% over the last two fiscal years and 91% since 2014. It also found that processing times increased last year even as fewer people submitted applications.
According to a report, under the Trump administration, increasing rejection rates for H1-B visas is throwing up hurdles, especially for the IT majors. The Indian IT companies — Cognizant, Capgemini, Accenture, Wipro and Infosys — faced over 30% visa rejections
On the startup front, India Tech-Bridge has been set up to help Indian, US startups in soft landing in the markets. The main focus of the platform lies in the go-to-market process in the US and providing end to end facilitation for the shortlisted startups.
According to Startup India, Invest India along with International Accelerator has entered into a strategic alliance to help Indian startups and entrepreneurs succeed by collaborating with the best ”in-class incubation support” in India, followed by a go-to-market acceleration program in the US along with support from regional industry leaders, mentors as well as accelerators.
Startup India International Collaborations: Toothless, Except on Paper
As mentioned, India has entered into over a dozen collaborations benefitting startup communities preferably in a soft landing. However, Inc42 found many of these collaborations are merely announced on paper and are yet to be efficiently connected with the stakeholders that matter most.
For instance, in 2018, the Invest India and the Netherlands had launched StartupLink for soft landing purposes. The StartupLink at Startup India webpage simply takes us to The Netherlands Startup Delta page. There is no customisation for Indian startups. In June this year, sources close to the development, told Inc42 that not a single startup has been benefited from the initiative.
StartupLink is just one example, Startup India needs to bring in more active stakeholders to better the frequency of engagement. This year, India has also failed to deepen its trade relations with the two biggest markets in the world, US and China at a time when the latter themselves are engaged in trade wars.
At a time, when India’s GDP growth rate is grounded at 4.3% which many believe is actually as low as 2%, India clearly needs to up its game internally as well as externally.