India seems to be the new global hotspot for corporate unicorns. The country is home to the third-largest number of such privately-held companies with a valuation of $1 billion or more, behind the United States and China. Besides India’s entrepreneurial spirit, credit needs to be given to the government for streamlining the regulatory environment to facilitate this.
Since January, India has produced at least 30 unicorns, racing ahead of China with its 19 unicorns during the same period. Notably, this happened even as the COVID-19 pandemic was raging.
These companies operate across a wide spectrum of businesses, from ed-tech to used cars to mobile payment platforms. Investors in these companies include big names such as the Chan Zuckerberg Initiative, run by Meta/Facebook’s Mark Zuckerberg and his wife Priscilla Chan, Sequoia Capital, SoftBank, Tiger Global Management, Steadview Capital, and Toyota, to name a few, indicating the lure of Indian startups.
Cashing in on this via an initial public offering (IPO) can be lucrative. For example, Zomato and Nykaa had successful new share sales, with Paytm, Swiggy and nearly 20 others to soon follow.
A key factor to this success is the tightening of regulations on China’s tech sector, and the increasingly rocky relationship between the US and China, which is helping channel global capital flows, including from Silicon Valley investors, to Indian entities.
Apart from the Indian entrepreneurial spirit and easing of regulatory norms, what’s attracting attention is that India has a young population with a median age of 28.4 years with a highly-educated subset, lending itself to a can-do spirit. Also helping is a potential aspirational consumer base of 1.35 billion people.
The changes the Union/State governments have undertaken to make it easier to do business have played a critical too. The ease of doing business (EODB) has been a focus area of Prime Minister Narendra Modi’s vision, and it is clearly working. In the World Bank’s EODB ranking of 190 countries, measuring how easy it is to start a business, enforcing contracts, cross-border trade, employing workers, etc., India jumped from 142 in 2014 to 63 in 2020.
The government has moved on other fronts as well, including the scrapping of the controversial 2012 retrospective ‘Vodafone’ tax. Another is the tax relief package for a beleaguered telecom sector. Several other initiatives such as the production-linked incentive (PLI) scheme have attracted a flurry of new investments. On top of this is the pace of COVID-19 vaccinations in the country, having crossed the 1 billion-jab mark and boosting global confidence in India.
In a sign of ‘competitive federalism’, many States are also radically transforming their corporate ecosystems for EODB, offering incentives, reforming infrastructure, etc. As a result, the International Monetary Fund and other agencies forecast India’s gross domestic growth next year to be the fastest globally among major economies. As a result, Indian stock markets are reaching dizzying heights, with unicorn and IPO valuations soaring.
Is India perfect when it comes to doing business? Well, it’s a work in progress, and there are many more reforms in the pipeline. But the ship is clearly sailing in the right direction. The stampede of new Indian unicorns is just beginning.
Dhanendra Kumar is the first chairperson of the Competition Commission of India, and a former executive director to the World Bank. Paku Khan is executive director of Khaitan & Co’s US Desk, and its competition/antitrust team.
Views are personal and do not represent the stand of this publication.
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