Indian Startup Ecosystem: A Global Growth Story In The Making

India’s growth story is not just a country’s growth story but a global one. It’s a trajectory that was born at home but whose path was defined by many external factors, especially the advances in IT led by Silicon Valley in the US and China.

India’s startup ecosystem has been interacting and collaborating actively with the ecosystems of these countries and these synergies have contributed significantly to India’s economy, which currently has a GDP of $2.59 Tn.

Thus, it is imperative to look at India’s equation with some of these key global players to understand where the country stands when it comes to the global stage.

Inc42 is hosting The Ecosystem Summit — an invite-only summit curated to bring together an unparalleled group of CEOs, founders, investors, and industry experts — on November 16.

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Inc42’s The State of The Indian Startup Ecosystem 2018 report analyses India’s collaborations with countries such as the US, the UK, China, Japan, and Israel. In this article, we’re bringing you a sneak peek into the analysis to give you a sense of what to expect in the report to be revealed at The Ecosystem Summit.

India-Japan Startup Relations  

Japan GDP: $4.87 Tn (2017, World Bank)

Indian Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe share a good rapport dating back many years and have met 12 times over the past four years.

India-Japan relations have come a long way since the then Prime Minister Yoshiro Mori visited India in August 2000 with a 60-member delegation. Mori, the first Japanese PM to visit global IT behemoths such as Infosys and Wipro, addressed more than 5,000 people at the Infosys campus during his visit.

Today, relations between the nations are more intertwined than ever and embedded in each other’s startup ecosystems.

According to Inc42 Datalabs, Japanese investors channeled cumulative investments of over $8 Bn (INR 581.6 Bn) into the Indian startup ecosystem between 2014 and mid-2018 across more than 80 deals. It is fantastic to note that over 45 unique Japanese investors have contributed to this investment volume.

India-Israel Startup Relations

Israel GDP: $350.85 Bn (2017, World Bank)

Ties between India and Israel are slowly but steadily transitioning from being limited to defence deals (Israel is India’s second-biggest supplier of military equipment after Russia) towards collaborations on more tech-enabled holistic solutions.

From $200 Mn in 1992 (primarily in diamond trade), merchandise trade has diversified and reached $5.02 Bn (INR 36500 Cr)  (excluding defence) in 2016-17, with the balance of trade being in India’s favour by more than $1 Bn (INR 7271 Cr).

Earlier this year, Israeli PM Benjamin Netanyahu came to India and the visit marked the signing of nine agreements between the nations in various sectors, including cybersecurity, oil and gas, solar energy, space science, air transport, medicine, and film production. The healthcare and pharmaceuticals industry is a key focus area of the Indo-Israel trade relationship.

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India-UK Startup Relations

UK GDP: $2.62 Tn (2017, World Bank)

After Brexit, Britain finds itself on uncertain ground over how its relations with the rest of EU will pan out when it comes to immigration and free trade. According to some, Britain was the point of entry to Europe for many Indian companies.

As of 2016, EU27-India trade had more than tripled since 2000. Exports from the EU27 to India have increased from €9.8 Bn (INR 808.6 Bn) to €33.8 Bn (INR 2789.1 Bn) and imports have risen from €10.1 Bn (INR 833.4 BN) to €32 Bn (INR 2640.6 Bn).

In terms of FDI, India is the third-largest foreign investor in the UK and the UK to ranks third after the US and Japan as an investor in India.

The UK has been negotiating Free Trade Agreements (FTA) with India, but the Indian government has been reluctant to go ahead with the discussions as it will likely wait till the Brexit terms are finalised between UK and EU. The UK is due to leave the EU on March 29, 2019.

India-China Startup Relations

China GDP: $12.23 Tn (2017, World Bank)

If there is a growth story that comes even close to China’s phenomenal rise to the top since the start of this millennium, it is, without doubt, that of India — especially when we talk about the large consumer bases of both the countries and their increasing importance in the world economic order.

India-China relations have gone through a tumultuous phase in the last few years, mostly because of military tensions close to their disputed border, increasing competition in their neighbourhood, and growing strategic mistrust. However, trade and investment data suggests a growing divergence of economic decisions from political compulsions. Bilateral trade between China and India touched $89.6 Bn (INR 6514.8 Bn) in 2017-18, with the trade deficit widening to $62.9 Bn (INR 4573.4 Bn) in China’s favour.

In 2017, Chinese internet companies such as Alibaba, Fosun, Baidu, and Tencent invested a whopping $5.2 Bn (INR 378.1 Bn) in 30 Indian companies. The number is nearly a five-fold jump from the $1 Bn (INR 7271 Cr) that companies from China pumped into 41 Indian firms in 2016.

This makes China rank among the fastest-growing sources of FDI in India.

Chinese VC funds are scouting for the next big Indian internet investment. Nearly half a dozen such firms, including Qiming Ventures, Morningside Ventures, CDH Investments, 01VC, and Orchid Asia Group are looking to buy stakes in Indian startups across financial and education technology, ecommerce, content and online classifieds.

This is just an overview of the synergies between the Indian startup ecosystem with those of other countries. For deeper insights and to understand the interplay of politics and international trade, make your way to  The Ecosystem Summit where we discuss all this and more in great detail.

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