Home / Economy / Economic Survey: India becomes third-largest startup ecosystem in the world

MUMBAI: India has become the third-largest startup ecosystem in the world after the US and China, the Economic Survey 2021-22 released on Monday showed.

The Survey noted that the government recognised over 14,000 new startups in 2021-22 against 733 in 2016-17. With this, the total number of recognised startups in the country surpassed 61,400. During 2021, 555 districts had at least one new startup against 121 districts in 2016-17, as per the Economic Survey.

India saw a record 44 startups turning unicorns in 2021. Unicorns are companies with over $1 billion valuation. India also overtook the UK to have the the third-highest number of unicorns after the US and China, which added 487 and 301 unicorns, respectively.

As of 14 January, India had 83 unicorns with a total valuation of $277.77 billion, according to the Survey. Most of these unicorns are in the services sector, which contributes over 50% to India’s GDP.

The outbreak of the covid-19 pandemic in early 2020, which forced governments across the world to put restrictions on businesses and movements of people to curb the spread of the contagious disease, compelled major central banks to open their liquidity taps. Consequently, the banking system was flooded with liquidity, leading to investors crowding emerging markets like India, where they typically get high return on investments.

Private market investments, just as public market investments, thus, got a boost in India since 2020. VCCircle in December, reported that all unicorns of 2021, put together, had raised over $12.7 billion.

Many startups and unicorns, especially new-age technology companies, also got listed on the stock exchanges during the year. In April-November 2021, 89,066 crore were raised via 75 initial public offerings (IPOs), much higher than in any year in last decade, the Survey showed.

"The exuberance associated with the listings manifested in huge oversubscriptions by retail, High net worth Individuals (HNIs) and institutional investors and stellar listing gains have pushed more and more companies to tap the markets. The tremendous response by all categories of investors in IPOs of companies was reflective of not only the confidence in markets, but also that in corporate sector performance and prospects of the economy in the long run," the Survey said.

It also noted that the government, to incentivise startups, has extended the deadline for claiming tax holiday till 31 March 2022 by the Finance Act 2021. The government has also extended the capital gains exemption for investment in startups for another year till 31 March 2022, the Survey added.

Union minister of commerce and industry Piyush Goyal has urged global venture capital funds to sharpen their focus on startups from smaller (tier-2 and tier-3) cities, VCCircle had reported. The minister had also said the startup fraternity should nurture 75 more unicorns in 2022.

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