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Business News/ Companies / Start-ups/  Startups to contribute 4-5% to India’s GDP in next five years, says report

Startups to contribute 4-5% to India’s GDP in next five years, says report

  • India has about 61,400 registered startups, making it the world’s third-largest startup ecosystem in the world after the US and China

Funding in Indian startups dipped 35% year-on-year to $24.7 billion.

BENGALURU: With more than 60,000 registered startups in India, the ecosystem has the potential to contribute 4-5% to the country’s gross domestic product (GDP) over the next three to five years, according to a report by StrideOne.

As per Economic Survey 2021-22, India has about 61,400 registered startups, making it the world’s third-largest startup ecosystem in the world after the US and China.

“This rise of startups has made India the third-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 expects that 24,500 platforms would have registered in 2022, against an estimated 20,000 in 2021. It said that registration of new startups is projected to grow at an annualized rate of 25% during 2022-27.

The report expects job creation by startups to grow at a rate of 24% annually in the 2022-27 period. While the previous year saw about 1,92,000 jobs being created by startups, the report forecasts about 2,30,000 new job additions in 2022.

It also noted that startup funding has been growing rapidly, with total funding raised having increased 42% annually, from 2016-21, while deal count rose 23% in the given period. Among funds raised, SaaS, fintech, and logistics and autotech attracted the most investment.

However, according to a report by market intelligence platform Tracxn, funding in Indian startups dipped 35% year-on-year (up to 5 December) to $24.7 billion dragged down by a decline in late-stage funding.

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 said that gig workers made up for over 70% of 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 overall workforce is 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 noted that with digitisation and platformisation enabled by startups, fleet owners can increase utilisation with tech optimisation, thus reducing 40-50% of their fleet’s idle time.

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