How Startups Can Fuel India’s $5 Tn Economy Target

According to the Union Ministry of External Affairs, Economic Diplomacy, and States Division, India is currently the sixth-largest global economy, with a total GDP of $2.6 Tn.

Going by the government’s aim of transforming India into a $5 Tn economy by 2025, the country has already crossed the halfway mark. The thriving startup ecosystem has made a significant contribution to this goal. 

New-age businesses will be critical in achieving India’s $5 Tn economic target. At an IIT-Madras convocation, the Prime Minister stated that India is currently ranked third among the world’s leading startup nations, with over 7,000 startups operating within this rapidly-growing ecosystem. 

Increased Investments

Startups have been the source of significant FDI inflows. Foreign investments made by leading investors such as SoftBank, Accel, Sequoia, and Goldman Sachs, among others into Indian startups have shored up the economy. Developed counterparts’ investments have steadily been deployed into a developing economy with vastly untapped segments and markets, such as India. 

Achieving the target of a $5 Tn economy by 2025 is currently difficult, given the current GDP, which should grow at a rate of 10.5% or higher (CAGR) to ensure the same. Experts believe that with a higher capital formation rate and more economic activity by startups, it is not impossible. 

EV Startups Will Play A Significant Role

EVs are huge future bets for India’s economic and environmental story with EV startups contributing massively towards the national economy in the next few years. This will be accomplished through the development of several high-quality EV products as well as pioneering R&D. Research and mass production will naturally accelerate the country’s future growth story, and startups will play a key role in this regard. 

Digital Technology Will Be A Significant Driver

Through its role as a major promoter, driver, and enabler of digitisation across the country, the startup ecosystem will naturally play a critical role in capitalising on this opportunity and achieving these figures. 

Startups will capitalise on more of the country’s advantages, such as increased technology access, improved internet connectivity, smartphone proliferation, data, and payments. Industry stakeholders and investors may also band together to support this digital revolution by funding startups with innovative or disruptive solutions and business models. 

Generate Job Opportunities, Create Wealth & Drive Innovation

Startups will also continue to play an important role in terms of attracting new employees, creating wealth, and driving higher levels of innovation. Startups will continue to generate more jobs, with reports indicating that the food and food-tech sector alone will generate 9 Mn jobs by 2024, with the travel and hospitality sector creating 52.3 Mn jobs by 2028. 

Continuous evolution and increased employment will naturally benefit the Indian economy, as will upskilling, increased consumption, and revenues. Naturally, startups play an important role in all fields. They will also concentrate on making the best use of their resources in order to increase revenues and capital flow at the consumer end. 

Startups will also continue to be centres of innovation, skill development, innovation, problem-solving, and world-leading results. Technology will be more democratised by startups (some have already done so), and this will ultimately unlock greater value and benefits for India’s economy. 

Given all of these critical factors, it is safe to predict that startups will be significant future growth drivers for the country’s economy. It will be a key driver in reaching the $5 Tn target by 2025. What the sector now needs is a collaborative approach to progress, in collaboration with the government and all other stakeholders. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.