Commerce Minister Piyush Goyal’s latest comment on trends in India’s startup ecosystems has sparked a heated debate. Although ministerial concerns have not been completely misplaced, the lack of motivation for research and development (R&D) in most of the Indian unicorns operated by the consumer and retail sectors may also restore innovation.
one Mint Analysis of startups accredited by industry and internal trade promotion (DPIIT) shows that the space is dominated by IT services, followed by health care and life sciences. The food and beverage industry, including food delivery services, is one of the top five industries for startup operations. However, the data also suggests that the country is taking baby steps towards innovation, with 2,414 AI startups recognized by the government.
While it is true that the share of AI startups in India (1.5% of the accepted total) is in its infancy and far less than what the United States and China do, experts still feel that India still has a chance to catch up, especially if a company takes the lead – Google and Amazon are leading in the U.S.
“Once a deep tech company creates winning products and produces a considerable return, the rest will follow. We have seen pioneers in the IT services industry in India, such as the founder of Infosys, when wealth is created, it ends up flowing back to R&D and innovation,” Arun Natarajan, Founder and Innovation, Founder and Founder and Founder.
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Unicorn prejudice
However, despite the evidence that there are some breakthroughs in the AI world, the success of a few startups (those who have already achieved unicorn status) has taken over the understanding of the startup space. India has a number of unicorns (67) after the United States (687) and China (162), but dominated by consumers and retail space and financial services, Mint Analysis of the 1,270 unicorn list compiled by CB Insights shows.
In contrast, the United States leads corporate technology, including AI. Although China also has a high share in the consumer and retail sectors, it also has a similar share in the industrial sector, including drone and chip manufacturing and automated driving technology.
Even more worrying is that several unicorn-few countries have led the enterprise technology and industry sectors with leaders in India. Israel (currently there are 23 unicorns) and Canada (currently there are 21 unicorns) are dominated by these sectors. However, experts don’t feel that India missed the bus and that the country will have the opportunity to seize the next wave of technological innovation and the government’s more centralized policies.
The United States has been a pioneer in space technology and has decades of venture capital and private equity history, while China has decades of innovation in government support, funding and strategic plans.
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A clear gap
India’s economy is dominated by private consumption, accounting for about 57% of total activity. Naturally, early-stage startups took advantage of the rising income of consumer classes by providing delivery services and moving retail stores online to cater to India’s growing Internet base. But if India or the current government wants to put the country on the track of innovation, a huge shift will be needed, which is also highlighted by the 2024-25 Economic Survey.
World Bank data on GDP R&D expenditures show that countries with high enterprise technology unicorns (more than 20 unicorns) also have high R&D expenditures. Israel spent 5.6% of GDP on R&D, while the United States spent 3.5% and China was 2.4%. On the other hand, India lags behind only 0.6% of GDP. This is also highlighted by the 2024-25 Economic Survey.
Even more worrying is the trend of Indian founders producing more marine unicorns than any other country. According to Hurun’s Global Unicorn Index report for 2024, the founders of India have co-founded 109 unicorns outside India, indicating a lack of a favorable environment in India and bringing its business ideas elsewhere.
