Startups in India Contribute to the Growth of FDI

Recently, the Indian Prime Minister, Narendra Modi, made a global uproar as he gave the world a reason to invest in India while on his visit to the US. As per his speech, while the world economy is going slow with most of the countries seeing a -16% FDI growth, India’s average growth stands at 40%. The Indian economy no doubt has been steady though the world economy has suffered a jolt and is still recovering. It is perhaps why many foreign investors have chosen Indian as their preferred destination for investment.

The Ease of Doing Business program, a joint initiative by the Government of India and the World Bank, was also started with the agenda to encourage investments in India. On the Ease of Business scale, India was ranked 141 and it was but natural for investors to think why to invest in a country ranked so low. This made the Indian government take all the states on board and list out the problems they were facing that eventually led to an unprecedented competition among states as each one was trying to outdo each other in attracting investors.

Apart from the different states in India competing against each other for vying the attention of the investors, the fact that the cost of manufacturing in India is much lesser, is also prompting investors to choose it over other countries. The Indian government is offering low cost manufacturing, effective governance, skilled man power, raw material and one of the biggest markets for FDI. These potentials cannot be easily ignored by multinationals.

But, one of the biggest contributors to this is perhaps the startup phenomenon that has taken over the country and has been a game changer for the Indian economy. The growth of startups in India has grabbed the eyeballs of many globally and kept them hooked too. With more and more people turning entrepreneurs, the Indian government too has realized the potential of startups towards the growth of the economy and has come up with various schemes that are working towards encouraging them by making it easy for foreign investors to venture into the Indian startup ecosystem. What small scale industries were earlier to the government, startups are to it now! Different governing bodies have been making the process easier for the young entrepreneurs, including SEBI simplifying the listing norms.

The surge in FDI will also go a long way in encouraging the already booming startup scene in India. In fact, investors from across the globe have been keeping an eye on Indian startups and they feel that a lot of innovative ideas are coming out of these startups here. The Indian government has been very supportive of the growth and has come up with a lot of different strategies to provide boost to these startups. FDI can push the efforts of the government in the right way by funding the different startups. Many entrepreneurs who lose out on funding even with a great idea might be able to find assistance thanks to FDI.

Many MNCs like Google are funding startups in India  and their funds are in the forms of incubators. These incubators provide office spaces that can be shared by different startups and work under the same roof. While, there are companies like Target that have tied up with Indian companies like Kyron to provide accelerator programs to startups in India that assist with mentorship and educational components to get startups ‘pitch-perfect’.

Sam Altman, President of Y Combinator, an American seed fund, who has been instrumental in the birth of many billion-dollar babies, including the likes of Airbnb, Dropbox, Instacart and Stripe, is now looking to get more Indian ventures into its batches. He perceives India as one of the largest and fastest growing markets globally that houses some of the best startups in the world. They have been investing in Indian startups (Cleartax and Razorpay) over the last couple of years. In an interview recently, Sam said, “I think there will be multiple $10 billion-plus companies which will be started in India in the next few years and, hopefully, we will get a shot at funding some of those.” This goes on to show that India is an important alternative when it comes to investments.

Qualcomm, world leader in 3G and next-generation mobile technologies, is the latest player in the market having announced plans to invest up to $150 million in strategic investments in the country. According to another report on ET, the Foreign Investment Promotion Board (FIPB) recently cleared 18 foreign investment proposals, including that of Aegon Religare Life Insurance and Aditya Birla Nuvo, worth about Rs 5,000 crore. The board headed by Economic Affairs Secretary Shaktikanta Das, discussed a total of 31 FDI proposals. However, five proposals were deferred and eight were rejected. This goes on to show the extent of interest that foreign investors are expressing.

As per a report published by the UK-based Financial Times, India has surpassed US and China as the biggest FDI destination, attracting $31 billion investments. This is surely something to rejoice about, the global slowdown is proving to be a blessing in disguise for India and it should make the most out of it at the moment.

800 million in the country are below 35 years that has a vibrant democracy, judiciary and media. The country has a huge untapped potential and for investors, it is a brilliant opportunity. Moreover, with the government looking for deregularization, it is going to get even easier to do business here.

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2019-01-03T09:09:56+00:00By |