India’s start-up ecosystem has become one of the most dynamic in the world, attracting attention globally. However, a recent comment by India’s Commerce Minister, Piyush Goyal, has ignited a passionate debate on the state of innovation within the country’s entrepreneurial sector.
At the second edition of the Startup Mahakumbh, a government-led start-up conclave, Goyal called for a shift in focus. His critique of India’s consumer-focused start-ups and his comparison with global technological advancements, especially in China, have drawn mixed reactions from entrepreneurs and investors.
Goyal’s Criticism: Focus on Technological Innovation
Minister Goyal made several pointed comments about India’s growing consumer start-up ecosystem. While recognizing India’s success in creating businesses, he pushed for more radical technological innovations. According to him, the country’s start-up scene had largely been dominated by lifestyle products, such as food delivery apps, artisanal food brands, and wellness products, with relatively few ventures exploring areas like deep technology and high-tech infrastructure.
Key Remarks from Goyal:
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Consumer Start-Ups: Goyal criticized the current trajectory of many start-ups, particularly those focused on consumer goods, saying that these innovations, such as gluten-free ice creams or niche food delivery services, did not go far enough to push technological boundaries.
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Comparing India and China: He pointed out that countries like China were leapfrogging India in areas like machine learning, robotics, and next-generation manufacturing technologies—fields that could give their industries a significant competitive edge.
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A Call for Greater Ambition: The minister urged Indian entrepreneurs to be bolder, stating, “Do we want to make ice creams or semiconductor chips?” His challenge was clear: aim for the moon, or risk being left behind.
Mixed Reactions from Indian Innovators
The reaction to Goyal’s statements has been a mixed bag, with some industry leaders agreeing with his call for greater ambition, while others defended the achievements of India’s start-up ecosystem. Here’s a closer look at the responses.
Entrepreneurs Defend India’s Success
While Goyal’s comments seemed to cast a shadow on the innovation happening in India, many start-up leaders pointed out the real-world impact and technological breakthroughs already being led by consumer internet companies.
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Aadit Palicha, co-founder of Zepto, a quick-commerce app, quickly responded to the minister’s remarks. In a post on X (formerly Twitter), Palicha argued that consumer internet companies like his were at the forefront of global technological innovation. He pointed to Amazon, originally a consumer-focused e-commerce platform, which later pivoted into cloud computing—an industry that now powers a significant part of the world’s digital infrastructure. Similarly, Facebook and Google began as consumer internet companies and have since revolutionized artificial intelligence (AI) and data processing.
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Mohandas Pai, a well-known angel investor, added to the conversation, emphasizing that deep-tech start-ups (focused on technologies like AI, biotech, and clean energy) face a tough road in India due to the high capital investment they require. Pai lamented the fact that investors in India are often more attracted to consumer-focused start-ups because they provide quicker returns on investments. Deep-tech innovations, by their very nature, take longer to develop and require substantial infrastructure, both of which are seen as high-risk investments.
Challenges Faced by Indian Entrepreneurs
Several issues were raised by entrepreneurs in response to Goyal’s speech, especially concerning the hurdles faced in launching deep-tech and tech-focused businesses in India. These challenges highlight the systemic issues within the country’s start-up ecosystem.
Major Challenges:
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Access to Funding: Indian entrepreneurs often find it difficult to secure long-term capital, particularly for deep-tech ventures, which require more significant initial investments and have longer timeframes for returns.
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High Import Taxes: Many tech start-ups, especially those in hardware, face high import duties on essential components and materials, making it more expensive to build products domestically. This adds to the already heavy financial burden.
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Regulatory Hurdles: A recurring complaint among entrepreneurs is the bureaucratic red tape that slows down the approval processes for starting and scaling businesses. Securing permits, licenses, and regulatory clearances often takes time, making it harder for start-ups to compete in a fast-moving global market.
Support for the Minister’s Call for Ambition
While Goyal’s comments were met with resistance, some entrepreneurs and investors agreed that his remarks reflected a harsh but necessary reality check for India’s start-up ecosystem.
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Vironika S, the founder of Proxy Gyan, an edtech app, voiced support for Goyal’s challenge. She acknowledged that India’s future economic leadership depends heavily on breakthroughs in areas like AI, semiconductors, and clean energy. However, she also pointed out that there were real barriers to achieving such innovation, such as lack of funding, infrastructure, and government support. She suggested that the government could play a more proactive role in removing these barriers to accelerate the growth of high-tech start-ups.
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Kushal Bhagia, an Indian investor, also expressed support for Goyal’s comments. He agreed that India’s start-up ecosystem lacked the kind of deep-tech innovators who could lead the country to global prominence in these critical fields. Bhagia observed that many of India’s top tech talents were choosing to work in global companies, particularly in the United States, where they found better opportunities for growth. This brain drain, coupled with a shortage of experienced deep-tech founders, has stunted the growth of truly transformative technologies in India.
India’s Struggle to Compete with Global Tech Leaders
The conversation around Goyal’s comments also prompted deeper discussions on India’s ability to compete with other countries in the deep-tech space, particularly China.
India vs. China: The Deep-Tech Gap
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Funding Disparity: A recent report revealed that in 2023, only 5% of India’s start-up funding went into deep-tech sectors, compared to a staggering 35% in China. This reflects the higher priority given to consumer-driven start-ups in India, while the Chinese government has heavily invested in high-tech innovation, including AI, space exploration, and robotics.
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Government Support for Innovation: China has actively fostered its deep-tech sector by providing substantial tax incentives. In 2024, for instance, China cut $361 billion in taxes for high-tech firms, including $80.7 billion in research and development (R&D) deductions. This level of support has made it easier for Chinese companies to compete globally in industries like AI and semiconductors.
India’s Growing Potential in Deep-Tech
Despite these challenges, India’s deep-tech ecosystem is starting to grow. According to Nasscom, the number of deep-tech start-ups in India was 4,000 in 2024, and the sector is expected to grow rapidly, with estimates suggesting 10,000 deep-tech start-ups by 2030. Additionally, funding for these companies has seen a dramatic increase, with $1.6 billion invested in deep-tech start-ups in 2024—a 78% increase compared to the previous year.
The Path Forward: A Call to Action
Goyal’s comments should be taken as a call to action for all stakeholders within India’s start-up ecosystem: government, entrepreneurs, and investors. To catch up with global players, India needs to:
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Build Stronger Government Support: The government can set up deep-tech innovation funds and offer tax breaks or other incentives for start-ups in emerging fields like AI, biotech, and clean energy.
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Encourage Academia-Start-Up Partnerships: Bridging the gap between academia and the start-up world can provide the necessary research and development to fuel deep-tech advancements.
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Invest in Infrastructure: India must invest in the infrastructure needed for deep-tech ventures, such as advanced manufacturing capabilities, to make it easier for start-ups to scale.
FAQs
1. What was Piyush Goyal’s main concern about India’s start-up ecosystem?
Goyal expressed concern that India’s start-ups were focusing too heavily on consumer products like food delivery services and artisanal goods, rather than pursuing ambitious technological innovations like AI and semiconductors, which are crucial for global competition.
2. What are some of the challenges faced by deep-tech start-ups in India?
Deep-tech start-ups in India face challenges like a lack of funding, long development timelines, expensive infrastructure, high import taxes on materials, and bureaucratic delays in regulatory processes.
3. How does India’s deep-tech sector compare to China’s?
India’s deep-tech sector is much smaller than China’s, both in terms of funding and government support. While China allocated a significant portion of its start-up funding to deep-tech (35%), India only allocated 5% in 2023. China has also provided substantial tax incentives for high-tech companies, which has helped its tech industry thrive.
4. What steps can India take to foster deeper technological innovation?
India can foster innovation by providing incentives for deep-tech start-ups, building stronger partnerships between academia and the start-up ecosystem, investing in infrastructure for emerging technologies, and offering tax breaks for research and development.
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