Startups: Pushing India towards $10 Trillion Economy

INDIA STANDS ON THE CUSP OF A PROFOUND economic transformation, a process catalysed by its flourishing startup ecosystem. Over the last decade, the country has witnessed an exponential rise in innovative startups that are not only reshaping sectors but are also driving the broader economy towards a new era of growth. The impact of this shift is far-reaching, affecting everything from employment generation and financial inclusion to digi­tal infrastructure and global competitiveness. Startups are not merely enhancing the Indian economy—they are accelerat­ing a step-function transformation that will likely redefine the country’s economic trajectory for decades.

Since the liberalisation of the Indian economy in 1991, the country has experienced remarkable economic growth, evolv­ing from agricultural reliance into a global hub for services and technology exports. It has grown from a 1991 GDP of ₹5.3 lakh crore ($275 billion) to ₹295.36 lakh crore ($3.7 trillion) in FY24. This translates to a robust compound annual growth rate (CAGR) of 13.1 per cent in nominal rupee terms and 8.2 per cent in dollar terms over 33 years.

India’s unbelievable feat is testimony to the entrepreneur­ial spirit of the Indian people. This growth provides a solid foundation for India’s goals of surpassing $5 trillion in GDP on the way to $10 trillion over the next two decades. With this, the nation will grow into the third-largest economy glob­ally from the current fifth. China pioneered a higher growth rate by liberalising its economy in 1978 with an export-first growth strategy followed by a sequential building up to high-tech sectors. However, despite all its challenges, India has grown robustly over these 33 years. Given that Rank 3, behind the US and China, is the next expected evolution for the Indian economy on the global leaderboard, its tech ecosystem has a clearly defined objective to contribute towards and tailwinds to latch upon.

Between 2014 and the first half of 2024, India’s startup ecosystem attracted over $150 billion in venture capital investments. This influx of capital has not only supported the creation of more than 1,37,000 startups but it has also elevated India to the position of the world’s third-largest startup ecosystem behind only the US and China. Indian startups are delivering productivity enhancement and value creation across various sectors, from e-commerce and fintech to health­care and manufacturing, generating new economic value and employment opportunities.

The confluence of favourable demographics, a large consumer base, rapid digital adoption, and forward-thinking policies have created fertile ground for these startups to thrive. Startups in India are growing at an unprecedented rate and making significant contributions to GDP, employment, and innovation. The startup ecosystem is the forge in which the future of the Indian economy is being forged.

ONE OF THE MOST SIGNIFICANT WAYS STARTUPS ARE accelerating economic change in India is through digital transformation. Startups have leveraged digital platforms to democratise access to services previously unavailable or unaffordable to large sections of the population. This transfor­mation is most apparent in the financial services sector, where fintech startups have revolutionised how Indians interact with banks, access credit, purchase products and services, and manage their finances.

Companies like PhonePe, Jupiter, and Pine Labs have trans­formed the payments landscape by enabling digital transactions across a vast network of merchants and consumers. The Unified Payments Interface (UPI), supported by several fintech startups, has made India the world leader in digital payments, facilitating over nine billion transactions in a single month in 2023. This shift towards cashless transactions has had a profound impact on financial inclusion, bringing millions of unbanked and underbanked individuals into the formal financial system.

Similarly, startups are bridging the gap between financial institutions and underserved populations in the insurance and credit spaces. Companies like Policybazaar and WeRize are using technology to deliver customised financial products to consumers who previously faced friction in access. By sim­plifying the application process, leveraging data analytics, and utilising digital channels, these startups enhance financial inclusion and accelerate economic empowerment.

This democratisation of access extends beyond finance. In sectors like healthcare, education, and e-commerce, startups are breaking down traditional barriers and providing services at scale. Online platforms have redefined commerce and cus­tomer servicing, allowing SMEs and cottage-scale manufactur­ers to connect with customers locally and globally. Similarly, health-tech startups such as Dozee and 1mg use technology to make healthcare more accessible and affordable for millions.

ONE OF THE MOST VISIBLE IMPACTS OF THE STARTUP ecosystem is its role in job creation. The rise of startups has created millions of new jobs in India, directly and indirect­ly. Startups are offering new avenues for employment across technology, services, logistics, and beyond and retaining the best and brightest while creating mass employment options in blue and grey-collar verticals. As startups scale, they hire directly and also create a ripple effect, driving employment across supply chains, partners, and service providers.

India’s young population, with its entrepreneurial spirit, has embraced this shift. Startups are particularly attractive to younger generations—Millennials and Gen Z—who seek dynamic work environments that offer innovation and autonomy. By providing opportunities in cutting-edge fields such as artificial intelligence (AI), machine learning, robotics, fintech, and health tech, startups are creating a workforce that is future-ready and equipped with the skills required to navigate an increasingly digital global economy.

Moreover, the rise of the gig economy, fuelled by platforms like Zomato, Swiggy, Yulu, and Ola, has provided flexible em­ployment opportunities to millions. Working on one’s own terms is particularly attractive to younger workers, and this flexibility is reshaping India’s labour market.

INDIA’S STARTUP ECOSYSTEM HAS ALSO POSITIONED the country as a global innovation hub. They are increasingly focused on solving problems that are not just local but global in nature. By doing so, they are attracting international inves­tors, who see India as a fertile ground for innovation that can be scaled globally.

Between 2021 and 2023, India produced over 60 new unicorns, and the country is home to more than 115 unicorns as of 2024. These startups are valued at over $1 billion each, signalling their potential to disrupt industries on a global scale. Sectors such as fintech, commerce, SaaS (Software as a Service), and deep tech have seen significant traction, with Indian startups leading the charge in offering innovative, cost-effective solutions that have global relevance.

Now, India is ahead of many developed countries such as the UK (60 unicorns) and Germany (<40 unicorns). The year 2021 was an inflection point in India’s startup story, reflected by the doubling of its unicorn base. Unforeseen utilitarian and lifestyle changes induced by the pandemic accelerated digital adoption in what was already a fast-growing economy. In 2021, for the first time, India also outpaced China in the absolute number of unicorns created per year.

Foreign investors are taking note. Over 2,780 global insti­tutional investors, including venture capital funds, sovereign wealth funds, and pension funds, are now active in India. The surge in venture capital investment over the past decade re­flects the growing confidence in India’s startup ecosystem. As these startups continue to scale and deliver outsized returns, India is becoming a crucial destination for global investors.

Tech-enabled startups and indigenous technologies are two pillars of India’s 21st-century growth engine. Policy is now firmly behind the ecosystem to direct its growth towards inclusive prosperity

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The total value created by the Indian startup ecosystem has crossed $550 billion, and estimates suggest it may reach $1 tril­lion by 2029. There have been 30 VC-backed IPOs completed already, with at least 22 more having filed and in the pipeline. Private equity and venture capital (PE/VC) exits in India surged 36 per cent year-on-year to reach $24.8 billion in 2023, up from $18.3 billion in the previous year. Over $60 billion has been returned via exits cumulatively across Indian PE-VC just over 2021 and 2022. Open market exits, comprising 52 per cent of the total exits, reached a record high of $12.8 billion, while buoyant capital markets enabled the second-best year for PE-backed initial public offerings (IPOs).

In addition to attracting investment and delivering on exits, Indian startups are playing a pivotal role in enhancing the coun­try’s global competitiveness. Companies like Freshworks, Zoho, Zerodha, Ather, Ola, and Flipkart have shown that Indian start­ups can not only compete with global giants but also set new benchmarks in innovation and execution. By building products and services that cater to both Indian and global markets, these startups are ensuring that India becomes a leading player in the global innovation economy. En route to global competitiveness, they also deliver benchmark-beating returns for global inves­tors, lending enduring support for reinvestments to continue into the ecosystem.

INDIA’S STARTUP ECOSYSTEM HAS BEEN SUPPORTED by a favourable policy environment that encourages in­novation and entrepreneurship. Initiatives such as Startup India, launched by the government in 2016, have provided crucial support in tax incentives, easier access to capital, and simplified regulations. Furthermore, the government’s push towards digital infrastructure—such as the creation of the India Stack, a unified platform of platforms—has provided startups with the tools they need to innovate at scale.

India has reached an important milestone in the Global Innovation Index (GII) 2024, ranking 39th among 133 econo­mies worldwide. This advancement reflects the nation’s dedication to cultivating a dynamic innovation ecosystem bolstered by targeted policies, significant investments in research and development (R&D), and a collaborative atmo­sphere that encourages startups and established industries alike. Government initiatives promoting technological progress, simplifying business operations, and fostering entrepreneurship further enhance the country’s evolving capacity for innovation.

Public-private partnerships (PPPs) have been instrumental in driving the growth of startups. Collaborations between startups, government agencies, and large corporations have enabled the rapid deployment of new technologies across sec­tors like healthcare, financial services, education, agriculture, commerce, and travel. From UPI and ONDC to Aarogya Setu and Digi Yatra, India is setting new standards and examples of how PPPs can build inarguably better quality-of-life enhance­ments at the billion population scale. Finally, having aligned leadership top-down means so much to young India, and this is one of the foundational pillars for these young innovators to deliver on their ambitions for the country.

THE STARTUP ECOSYSTEM IS NOT JUST transforming specific sectors—it is reshaping the very fabric of the Indian economy. India is well on its way to becom­ing a tech-first economy, driven by startups that are leveraging digital technologies to solve real-world problems. The trajec­tory is clear: India is moving towards becoming a $10 trillion economy, with startups playing a pivotal role in achieving this milestone. India’s startups are expected to create over $1 trillion in market cap over the next seven years, and this could fundamentally evolve the public market indices as the best of these companies go public.

Of course, as global markets correct after a series of macro and geopolitical events over FY22 and FY23, Indian startups have anticipated a continuing season of selectivity from inves­tors. Having already been through a trying set of experiences over 2020, most startups have emerged more resilient, more aware of the levers under their control, and with a firmer focus on baseline sustainability. So many of the market leaders have been through a hypergrowth phase since. Now is the time to introspect, build the connective tissue to align their leadership and organisations, and focus their aggression on becoming the most valuable and best-run companies in their sectors. The combination of high governance and a focused path towards sustainability must serve as the fundamental substrate for the ecosystem this decade.

Looking ahead, the next decade will likely see even greater integration of startups into the core of the Indian economy. Emerging technologies such as AI, renewable energy, special­ised healthcare, and advanced computing will drive further horizontal disruption across sectors. Indian startups are uniquely positioned to harness these technologies, given their agility, innovation-first DNA, and access to a large and globally networked market.

India is today the fifth-largest economy and well on its way to becoming only the third economy to transcend the $10 trillion GDP ceiling after the US and China. Tech-enabled startups and indigenous technologies are two pillars of India’s 21st-century growth engine, and policy is now firmly behind the ecosystem to direct its growth towards the inclusive prosperity of its citizens.

This is the decade where we will see a surge of Indian value creators that will realign the economy towards a tech-first future and support the country’s ascent towards becoming the third-largest economy globally.

About The Author

TV Mohandas Pai

TV Mohandas Pai is chairman, Aarin Capital

Pranav Pai

Pranav Pai is co-founder and managing partner, 3one4 Capital