August 2023

Mohammad Anas Wahaj | 31 aug 2023

According to S&P Global Market Intelligence, in 2022 India ranked 4th most popular destination for startups and attracted 4.2% of global venture capital (USA - 41%, China - 18%, UK - 6%). Moreover, it is estimated that the global venture capital share of India will double by 2030. Sampath Sharma Nariyanuri, CFA Fintech Research Analyst at S&P Global Intelligence and Shankar Krishnamurthy, Head of Essential Tech Center of Excellence & Innovation at S&P Global, looking forward into 2030 answer 3 questions regarding Indian startups and their impact on the economy - (1) Will venture capital (VC) interest in Indian startups continue?: As India is expected to be 3rd largest economy there is huge scope of growth in startup ecosystem. In 2022, starup funding surpassed amount raised by public companies. Growth in mobile internet and government supported digital stack will give a boost to startups. India saw a record 26542 startup registrations in 2022, even amid a global funding slowdown. India had more than 92000 startups recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) as of 28 feb 2023. (2) Which startup sectors will be resilient in India?: The fintech sector has topped the funding charts in India in recent years, attracting a cumulative US$ 9.7 billion in 2021 and 2022. ndia's digital commerce and on-demand services space won more than US$ 10 billion of VC investments over the last two years. Online B2B marketplaces in manufacturing and retail raised US$ 2.76 billion in aggregate in the last two years. Government sponsored initiatives like Account Aggregator (AA) network and the Open Credit Enablement Network (OCEN), will boost and streamline online lending workflows and can be integrated with e-commerce, fintech and marketplace apps. While Open Network for Digital Commerce (ONDC) will bring interoperability across the widely fragmented digital commerce space. Other main sectors that attracted substantial VC funding include E-commerce (US$ 7.320 billion), Edtech (US$ 4.256 billion), Food and Grocery Delivery (US$ 3.462 billion), Media and Entertainment Tech (US$ 3.013 billion), Healthcare Tech (US$ 2.206 billion) etc. (3) What are the emerging sectors for startups in India?: Emerging sectors that got VC funding in 2021 and 2022 combined include AgTech (US$ 1.112 billion), Electric Vehicles (US$ 1.065 billion), Automation (US$ 0.591 billion), Clean Technology (US$ 0.193 billion). Artifical Intelligence, Space Technology and Drones are other significant emerging sectors. Electric vehicles sector will need about US$ 266 billion of investment this decade to meet government targets. In the long-term, India's open APIs and public digital stack will likely act as enablers for new startups. Read on...

S&P Global: Startups Riding Digital Infrastructure Could Transform Indian Economy
Authors: Sampath Sharma Nariyanuri, Shankar Krishnamurthy

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