The Indian startup ecosystem is facing several challenges despite recording an increase in the number of startups to 84,012 in 2022 from 452 in 2016, according to the Economic Survey Report 2022-23.
The challenges include funding, revenue generation struggles and lack of access to supportive infrastructure. The regulatory environment and tax structures have also posed hurdles for startups.
To circumvent these challenges, many Indian companies are setting up bases overseas, especially in countries with favourable legal environments and taxation policies, the report highlighted.
The process of transferring the entire ownership of an Indian company to an overseas entity, including the transfer of all Intellectual Property and data owned by the Indian company, is called ‘flipping’.
Typically, flipping happens at the early stage of the startup. However, this trend can be reversed with active collaboration with the government-related regulatory bodies and other stakeholders. Further, companies are also exploring ‘reverse flipping’, the survey document stated.
“With solution-oriented strategies, startups will continue to be the messengers of India’s entrepreneurial dynamism,” the report read.
The Department for Promotion of Industry and Internal Trade (DPIIT) recognised that startups have created more than 900,000 direct jobs, according to the report.
The country has recorded a 64 per cent increase in the average number of new jobs in 2022 relative to the last three years.
Further, tier 2 and 3 cities are emerging as hotspots, as they are home to about 48 per cent of our startups.
“Lots of startups and innovation are coming from emerging cities like Bhopal,” Arvind Kumar, director-general of Software Technology Parks of India, said at the India International Science Festival held in Bhopal between January 21-24, 2023.
“Startups are being envisioned as the spine of new India, as they encourage the youth to become job creators rather than job seekers,” the Economic Survey Report 2022-23 read.
India has some 1,000 agritech startups. The sector has seen a spike in private equity investments over the past four years, recording an increase of more than 50 per cent per year to aggregate roughly ₹6,600 crores, the report noted.