News | December 15, 2022

'Startups To Make Up 4-5% Of India’s GDP In The Next Five Years'

With over 60,000 registered startups in India, the ecosystem has the potential to make about 4-5% contribution to the country’s gross domestic product (GDP) in the next 3-5 years, according to a report by StrideOne.

As per the Economic Survey 2021-2022, India has about 61,400 registered startups, making it the world’s third-largest startup ecosystem in the world after US and China.

“This rise of startups has made India the 3rd largest startup ecosystem in the world and has significantly impacted the Indian economy showcasing the ability to contribute approximately 4-5% to the GDP of India,” said Ishpreet Singh Gandhi, founder of StrideOne, a tech-enabled non-banking financial company (NBFC).

The report forecasts over 24,500 platforms to be registered in 2022, against about 20,000 registered in 2021. It notes that registration of new startups is projected to grow at an annualized rate of 25% from 2022-2027.

The report sees job creation by startups to grow at a rate of 24% annually in the 2022-2027 period. While the previous year saw about 1,92,000 jobs being created by startups, the report forecasts about 2,30,000 new jobs to be created in 2022.

It also noted that startup funding has been growing rapidly, with total funding raised increasing 42% annually, from 2016-2021, while deal count rose 23% in the given period. Among the funds raised, SaaS, fintech, and logistics and autotech attracted the most investment.

The report discusses how startups and players in sectors including textile industry, gig economy, and B2B logistics interact and contribute to overall growth.

As for textile industry, which contributes about 2.3% to the GDP, the report notes that over 28% of micro, small and medium enterprises (MSMEs) in India rely on startup platforms to source business opportunities, registering a 29% uptick in their revenues after joining such platforms in 2022.

Charting the country’s gig economy’s contribution, it notes that gig workers already make up for over 70% of the employee base for fast commerce startups in 2022. While about 8 million gig workers constituted 1.5% workforce in India in 2020-21, their contribution to the overall workforce expected to grow to 4% by 2024.

“Startups are limiting their hiring of permanent employees. Gig workers have begun to replace these permanent employees. The total number of enterprises who have shifted to a semi-gig workforce model has increased by 15% since Oct 2021,” it noted.

As for the B2B logistics market, which is projected to grow over five-fold by 2025, the report highlights over 90% logistics startups in the country, including Delhivery and Shadowfax, had small truck owners making up for about half of their total fleet.

It also notes that with digitization and platformization enabled by startups, fleet owners can increase utilization with tech optimization, thus reducing 40-50% of their fleet’s idle time