It’s Time to Change the Status-quo !!
Dr Ashok Kumar PhD, FRSC President,Center for R&D Ipca Lab Ltd
1. India after Independence:
Tatas built an empire and launched an airline (Tata Airline) as well in the mid 1930s to set an example for going forward in establishing business houses in India even when the country was under British rule. However, akin to a tamed elephant who prefers to remain a salve even when tied with a weak rope, if conditioned to believe that it’s strong enough to hold them back, India accepted the opinion of their rulers that they are inferior in all respects, despite having a rich heritage and can live only on borrowed ideas rather than think bold and independently. And this was possibly one of the reasons, Independent India decided to keep its economic development under state control which grew at a snail’s pace until the economic reforms implemented in 1991. During 1961-1992 India’s GDP and per capita income experienced an average growth of 3.5 and 1.80% per annum, respectively.
India’s economy had a mere 3.8% share of world income at the time of independence against 22.6% in the year 1700 and as rightly put by Dr. Manmohan Singh, the former Prime Minister, “The Brightest Jewel in the British Crown was the poorest country in the world in terms of per capita income at the beginning of the 20th Century”.
The younger generation of India, including those born even in the mid-seventies may not be aware that in the 1960s, India was solely dependent on aid from the US to feed its population and in the Licence-Permit Raj one needed a license to importing or even producing anything in the country and exceeding license capacity was a punishable offense. It may sound unbelievable today but is true that buying essential things, such as cement, a wristwatch, baby food, and even a bathing soap was not at all an easy task. The telephone connection at home or a scooter or car was considered a luxury at that time and the waiting period for same was 7-9 years. “Garibi Hatao Desh Bachao” the theme used to eradicate poverty and rescue the country in the 1970s instead resulted in more than doubling the number of the poor. The exorbitantly high income tax (97.75%) and 3.5% wealth tax to maintain, the so called, socialism in the country and the non-availability of essentials in the open market were possibly few of the reasons why corruption became a part of Indian society, which still flourishes today. Independent Indians not seeing many opportunities to grow as entrepreneurs also continued with the colonial mindset to secure a public sector job, which still continues to a great extent.
The economic crisis of 1991, which forced India to sell 66.8 tonnes of gold to foreign banks to secure $640 million in loans to avoid default on overseas payment obligations was quite shameful, however, can be considered the turning point for the then Prime Minister Shri Narsimha Rao to take a tough call for liberalizing the country’s economy.
2. India after Economic Independence:
‘Old Habits Die Hard’, however, one can see a slow but steady change in the Indian mindset after economic independence. The reasonable credit goes to the emergence of Information Technology (IT), a significant contributor to the GDP (> 9%) of India, which opened up a new channel of opportunity for the aspiring young generation to perform and grow without remaining clinged to an unproductive job for lifetime, and thus participating in the country’s economic growth.
Imports substitutions to export orientation is one of the changes which is visible in many segments. IT sector, for example, exports services to the global tech. companies and is currently catering to more than 55% of global outsourcing market. This, however, has gained more popularity for the export of talent to the whole world and is still in great demand. The presence of Indians in the leadership of global organizations, such as, IBM, Google, Microsoft and world Bank is quite noteworthy.
If we look at the toy story, China still dominates Indian toy imports, but it is quite exhilarating to know that from a net importer of toys worth > $292 million in 2017-18, India has turned a net exporter of made-in-India toys of > $153 million in 2021-22 and its exports are growing at a faster pace than China (Source : Ministry of Commerce & Industry).
Indian Pharmaceuticals industry, valued at an estimated $42bn in 2021 has emerged as an important player by exporting its products to almost all the countries and is ranked third globally in terms of the dollar value of exports and is the world’s largest provider of generic medicines by volume. The development and production of COVID-19 vaccines within record times as well as supplying the same to more than 50 countries speaks for its confidence and capabilities. Indian Pharma Companies may not be able to bring novel therapies to the world market soon because of the prohibitively high costs required for their discovery and development, but nonetheless transforming themselves from a low cost synthesizers to a world-class service providers. Aragen, Syngene, TCG, Sai Life Science, etc. are few of such examples that are partnering with multinationals in drug discovery to engineering.
Indian defense sector, the world’s second largest importer of defense equipments, is now transforming itself from a net importer to an exporter. From Rs. 1940 crore in the year 2014-15 India’s export has gone up to Rs. 8434 crores in 2020-21. It is important to remember that India is the world’s 3rd largest military spender after the US & China and had spent USD 80 billion in arms deals in 15 years from 2005 to the year 2020. Two companies have recently won export orders for the Pinaka rocket firing system and Malaysia signed an MOU with HAL for the Tejas fighters, earlier this year. The recently formed Tata-Airbus joint venture for C-295 transport aircraft and L&T and Bharat Forge collabortating to make the K9 Vajra-T making howitzer are a few steps, in this direction.
Another visible change that can be seen is in its foreign policy, and more specifically in its relationships with its neighbours after the Galwan deaths of our soldiers in an unfortunate aggression from China at the LAC. From being non-assertive, it has now adopted the philosophy to putting-up resistance against continuous transgressions. The active participation in Quadrilateral Security Dialogue (QUAD) by cooperating with countries such as Japan and Australia, which are facing similar issues with China, is possibly a step in the direction to maintain peace in the Indo-Pacific region. It’s pertinent to mention here that China has not only annexed Tibet, an independent country but has also occupied more than 10000 square meters of Jammu & Kashmir and continues to make repeated claims that approximately 9000 sq. km. area of Arunachal Pradesh, a part of Himachal Pradesh, Uttarakhand and J&K also belong to the mainland
India has been quite reluctant in adopting new technologies in past but appears to have changed its stance and this is probably the reason ‘Digital India’, the flagship program of India launched in 2015 by the Indian Government to transform India to a digitally empowered society & knowledge economy. The program is supported by India stack, a set of APIs that allow governments, business, startups and developers to utilize an unique digital infrastructure to solve India’s problem.
India stack, the AI driven unified software interface that aims to bring the country’s whole population into the digital ageproviding facility for paperless and cashless transactions / services. It is supported by various digital platforms / solutions such as UPI, OCEN, ONDC, Aadhar, etc.
Just to highlight a few, linking of Jan Dhan Bank accounts with Aadhar and smart-phones which ensures direct transfers of subsidies (>Rs. 17 million) to the beneficiaries’ accounts, is a good example of the progressive digitalization in India. Currently India has more than 750 million smart phone users and is expected to reach a billion in the next 2-3 years. However, it is important to note that the digitalization of India is a progressive process, and is not limited to the number of smart-phone user.
The Open Network for Digital Commerce (ONDC), which promotes all aspects of the exchanges of goods & services over electronic networks to MSMEs has received good acceptance and many companies including Microsoft have joined it. UPI, India’s flagship digital payment platform, which recorded 7.82 billion transactions amounting to Rs. 12.8 trillion in December 2022, 7% higher than in November speaks for its user-friendliness and value. UPI, a fund transfer platform enables the real-time movement of funds electronically.
Cowin app. which helped India monitor the vaccination program and issue vaccination e-certificates within a fraction of a second after the jab, is unparalleled, even today. With the introduction of the digital rupee, the willingness of Indians to adopt new technology and obviously the continuous support from the government, it is estimated that India could create > 1 trillions in economic value using digital technology by 2025.
To remain at the forefront of protecting the global environment from further deterioration India has increased its renewable energy (RE) production by 290% in the last 7-8 years and today it ranks 4th in the wind and 5th in solar energy in the world. Additionally, the government has set a National Hydrogen Mission to help the country reach by its net zero commitment. It is quite heartening to know that apart from public sector companies such as IOL, NTPC, etc., private players like Ambani, Adani & Tatas have made big plans to reach the set target. Ambani for example, is targeting to produce green hydrogen@ $1/kg in the next 10 years to make it cheaper than fossil fuels and Adani is planning to set up the largest green hydrogen project in the world.
3. India ‘Starting-Up’!!
Most of today’s big business houses in India started in those times when the environment was not at all conducive yet reached great heights and have played a key role in building the economic foundation of India. It was indeed a long journey to reach the unicorn status, and grow further. It is, however, for the first time in Indian history to see the spurt of start-ups as well as unicorns, and that too by raising billions of US Dollars from global investors. It is elating to learn that India is now the 3rd largest ecosystem in the world with the DP-IIT recognized start-ups counting to more than 80000 in numbers with a spread of more than 650 districts, infused with energy to provide innovative solutions in more than 55 diverse sections that include IT, Healthcare & Life Sciences, Education, Professional & Commercial Services, Agriculture, Food & Beverages, etc. (Source: The Indian Unicorn Landscape & Start-up Ecosystem in India).
Till 2016-17 India was hardly seeing more than one start-up in a year time to join the Unicorn Club, however, since 2017 this transformation has shown exponential growth and in the August 2022 India had 107 listed unicorns with a total value of $ 340.79 billions USD. The emergence of 44 unicorns (more than 3.5 / month) in the year 2021, which was dominated by COVID-19, sounds unbelievable but is true. The speed appears to be a little slow, but the year 2022 has also seen a decent number (23) of start-ups joining unicorns status.
Measures taken by the Indian government and also the availability of risk capital have played an important role but a share of credit for this dramatic growth must also go to the corona pandemic which accelerated the acceptance of ‘digital against physical’, as a way of life. Filpkart, PayTM , Byju’s and Swiggy are more visible because they are now part of our lifestyle but unconventional sectors such as defense, online pharmacy, gaming, analytics, social media, human resource management, etc. are also joining this fast growing space and concept. (Investindia, govt. in / The Indian Unicorn landscape).
What is, however, more important is to see the start-ups which have plunged into the areas of forging and manufacturing with the known fact that the success rate of ideas in this segment is < 1%. A few start-ups that have made their mark in this risky space include: Noccarc Robotics: Incubated at IIT, Kanpur, this start-up delivered affordable yet high quality ICU-grade ventilators within record 6 months, starting from ideation to installation during the corona virus pandemic. This can indeed be considered a marvel in itself. Skyroot Aerospace: India on Nov. 8, 2022, experienced the Space-X moment with the successful launch of Vikram-S rocket, from the Satish Dhawan Space Centre, developed and operated by this privately owned company, under the ‘Mission Parambh’, a small step towards joining the club of biggies, namely, Space-X, One Web, Planet and Spire Global. Space-X, founded by Elon Musk, was the first private company to launch a rocket to orbit in 2008. Agnikul Cosmos: An IIT, Madras incubated start-up is the first hard-core manufacturing company in the world to test a single piece, fully 3-D printed rocket engine, named Agnilet. Agnikul is currently engaged in an ambitious project of developing India’s first private small satellite launch vehicle, Agnibaan, which is designed to carry ~100-300 Kgs of payload to low Earth Orbits, up to 700 km. “India, currently has over 100 space start-ups out of which 79 have been established between 2019-2021; the period got most affected by COVID-19. In 2022. these start-ups have received more than $108 million in funding, compared to $67 million in the previous year”. Zeus Numerix: In 2010, it was hired by Indian Air Force to integrate BrahMos missiles, with Sukoi 30 MKI, and the job was completed successfully with an expenditure of Rs. 80 crores, helping HAL to save Rs. 1250 crores. The same job, if was given to Russia, would have cost the IAF Rs. 13000 crores. BrahMos is now one of the Indian Air Force’s most potent weapon and has also given a boost to India’s defense export. In Feb. 2022, the Philippines signed a deal with India to purchase BrahMos cruise missiles for $ 375 million. Zeus Numerix, the winner of IDEX has completed 225 defense projects and is currently working on developing warships that are invisible to radar using computer simulations rather than physical testing, which is both hazardous and expensive. Ola Electric: The subsidiary of Ola, the ride-hailing company, has recently set-up a Future Factory, the largest two-wheeler factory in the world, and is working on a vision to build a New Mobility ecosystem, with a plan to cater to diverse needs through a variety of forms including drone and flying cars. Ceremorphic: This two and half year old Hyderabad and US based start-up is very likely to be the first company to bring out 5nm supercomputing chip in India, the latest chip processing technology critical for the next generation of applications. Ekka Electronics, a 3.5 year–old-company, which provides all services from design to manufacture for 1.5 lac LED TVs/month, is generating a revenue of Rs. 650 crores per year. Brands like Sansui, Oscar, Intex & Akai are among its customers. The new facility likely to be operative in the next few months will be able to deliver one million TVs per month, allowing Indian brands to compete with Chinese brands. This will also help create potential entrepreneurs, even if they do not have much capital to invest. The Indian start-ups landscape is not restricted to big metros and / or premium institutes but also includes mid-tier campuses and regions. Few of the innovative businesses and products from these regions, which have been able to make a mark in the start-up ecosystem, are highlighted below: Infivention Technologies incubated at RIIDL, a Somaiya Trust backed incubator was recognized for developing a smart chess board by raising >$1 million through crowdfunding platforms from India. Another start-up, Jio Vio Healthcare also incubated by RIIDL, was conferred with the 10th Anjani Mashekar inclusive Innovation Award in Nov. 2021 for providing end-to-end high quality maternal care for mothers in remote areas.
Since its inception RIIDL has supported more than 5400 innovators in translating their ideas into more than 100 fully functional start-ups in highly diversified fields such as biotechnology, healthcare, energy, robotics and artificial intelligence / machine learning
Similarly, Abhaya Information Tech, a product of Coimbatore based Forge Accelerator, has developed a telemedicine platform for remote health monitoring which collects vital parameters with the help of wearables to enable doctors with remote consulting services. Another start-up AI Health Highway, also from Forge has successfully launched AiSteth a smart stethoscope that uses signal processing powered by AI/ML to screen, detect and predict cardio-respiratory disorders.
4. Expectations, the Reality, and the Hope: The rosy picture of India having more than 100 Unicorns in just a few years may not have been possible without the availability of the risk capital provided by global venture capitalists. However, this is also true that no one would have invested money in the ideas which have been behind these success stories unless their potential to deliver future growth and obviously the profits, was recognized.
Some of the unicorns, have become quite valuable but expecting that all the unicorns will start delivering profits within a short span, maybe ill-founded. It’s important to remember that Facebook, Amazon, and Google, the world’s giants today, had humble beginnings and made no profits for many years after their inceptions. Being in a dynamic world it is for sure that the flow of funds and profits of companies will continue going up & down depending on the changing scenarios and instead of seeing them as set-backs it should be taken as a reminder of the fact that success and life is never a straight line. What is more important to remember is that whenever it meets a dead end, it invariably leads to the opening of new doors of opportunities, and the emergence of 145 new Made-in-India VC firms funding 2262 start-ups in the last 2 years, can surely be taken as evidence in support of the above statement (Aryman Gupta, BS, 5/5/2022).
Year 2022 has indeed witnessed a significant reduction in the funds supporting start-ups around the world, however, investors are still betting on the Indian potential, and the year 2022 has added 50% of the unicorns (23) against 46 (in 2021), which is 10% of the unicorns worldwide.
Though, there is no guarantee that all the start-ups will see the light of the day and all the unicorns will flourish but this surely gives renewed hope to aspiring entrepreneurs that their ideas, provided they have some uniqueness, may one day take the desired shape.
5. Why this Article!!: The purpose of this article is not to review the progress but to bring to the notice of the young and energetic masses that India has recently opened up a new chapter having > 84000 start-ups at the end of 2022, aiming to provide novel solutions in diverse areas and is the third largest producer of unicorns in the world after the US and China.
It’s an attempt to inspire aspiring entrepreneurs to join this bandwagon to translate their dreams into reality by aiming to be at the helm of affairs than work under subjugation for the sake of job security. Maybe, you are the one who is destined to join the club of philanthropists, such as Azim Premji and Shiv Nadar, or the start-up entrepreneurs, namely Nithin & Nikhil Kamath (Zerodha), Ronnie Zarina Screwala (Unilazer) and Nikhil Bansal (ex-Flipkart founder) who have contributed Rs. 166 crores in the year 2020 towards this novel cause.
6. Start-ups: my definition !!
The above may give a feel that start-up always means to set up a business from scratch and has no relevance to those who may not be able to do so for whatever reasons. But the fact is that it’s about developing an entrepreneurial mindset using the ‘start-up philosophy’, even if you are working as an employee in an organization. In simple terms it means to generating new / novel ideas and not leave any stone unturned, if required, to translate them into practice without having any fear of failure!! Start-up here means to change the statusquo and learn to do things differently even if you are confined to the four walls of the premises or activity. Start-ups here mean that change with time, grow with age, increase your horizon, move out of the comfort zone, think big and take the courage to learn and enjoy living with challenges. Remember, there are no ‘shortcuts’ and ‘free lunches’ in life and the only thing which differentiates success from failure is “perseverance”.
7. The Way Forward: Becoming home for 335 unicorns (listed / unlisted) in a short period of time and also earning 3rd rank in the world is a good beginning mainly because India is a late starter in this space (Neelkanth Mishra, BS,5/5/2021). However, it is important to remember that the United States of America at the number one position with approx. 3000 unicorns is the most attractive destination for start-ups. Easy availability of funds with high risk tolerance may appeared to be the key but the credit of this acclaimed status this start-up ecosystem has earned, is mainly due to the entrepreneurial and exploratory mindset / environment, which allows free flow of ideas and information and encourages talented people to take challenges, innovate and grow. It, indeed, is the right model for India to follow if wants to remain in this game. To go up in the ranks as far as the quality and value are concerned, when compared with the best 10-15 start-ups globally, it will also require finding a niche and an unique approach to remain sustainable in the long run.