7 trends creating unicorn opportunities in India

The next several decades belong to India. Of all the world’s large economies, India is the only one expected to grow at over 6% for multiple years. Also when compared to all other large economies - USA, China, Japan, Germany, UK; India is still a relatively young country that’s yet to reap its demographic dividend. With over 40% of Indians below the age of 25, India is well poised for a period of unprecedented growth and productivity. As India adds another 4-5 trillion USD to its economy over this decade, several opportunities will emerge for startups across industries to innovate and create immense value. Due to this and some phenomenal strides being made in infrastructure and reforms - as of late 2022, India is home to 105+ unicorns with the total market cap of over $340 Billion. And, I am bullish on Indian startups crossing a trillion dollars in cumulative market cap within the next 5 years and over 300 new unicorns emerging within this decade. In the coming sections, I’d like to highlight some micro and macro-economic trends being observed in India and their implications for the startups.

In the last decade, we have built more roads and highways in the country than in the previous 60 years combined. This, coupled with high-speed trains and technological innovations like FastTag, leads to a massive reduction in the working capital cycles of several sectors. The key beneficiaries of this change will be the logistics, manufacturing, tourism, agriculture, real estate, and commerce sectors. Each will see multiple unicorns emerge.

Fiber optic cables have today covered 35 lakh km of route, including 1 lakh villages, and this is growing at an incredible pace. Internet consumption has grown by 50x. And with 15 billion GB of data consumption, India consumes more mobile data than China and the USA combined. This, coupled with UPI and India Stack, has created and will continue to create multibillion-dollar opportunities for the tech, e-commerce, entertainment, education, healthcare, and financial services sectors.

Today, the urban middle/ upper middle class/ affluent, typically people like you and me who’d be reading this article constitute only about 300M of India’s 1.4B people. The remaining 1.1B people are predominantly living on less than 2000 USD. And this pyramid is inverting rapidly. By 2030, over 140 million Indian households will enter the middle income bracket, creating unprecedented domestic demand across sectors. A lot of startups catering to this demographic would achieve a "unicorn" status.

Even at the top of the pyramid, the number of millionaires is going to go up by 10x by the end of this decade, with one in every 100 adult Indians being a dollar millionaire. Forward-thinking luxury brands are taking notice, and perhaps that's why Louis Vuitton and Cartier have signed up Deepika Padukone as their global brand ambassador! Discretionary spending sectors like entertainment, dining, travel, luxury, and bridge-to-luxury fashion would see unprecedented demand. We should see several unicorns emerge from here too.

We all know that India is the world leader in global software outsourcing. But what we might not realise is that India also has the highest concentration of AI (and possibly blockchain) talent in the world. Not only that, it is one of the top destinations for setting up Global Capability Centers (GCCs), with over 1400 GCCs already established and employing over 1.2 million people. This is one of the reasons why, out of India’s 108 unicorns today, 18 are from the enterprise tech sector. We are seeing more and more of our IT veterans venturing out to build products for the world, and enterprise SAAS will continue to have its fair share of the unicorn pie.

There have been impressive reforms in the areas of banking and taxation, which have already begun reaping rich dividends. Indian banks today have the highest capital adequacy and the lowest stressed asset ratio in history. This makes credit available at competitive interest rates to SMEs, startups, and consumers alike. Combining it with the JAM stack (JanDhan bank account + Aadhaar + mobile) and UPI payments, we now have credit flowing into the informal underbanked economy too. Which sectors are going to benefit from this? All of them. But most of all the Financial Services sector - neobanks, investment apps, robo-advisory, API platforms, P2P lending, Insurtech, AI driven fraud detection/ underwriting and the list goes on.

India has implemented some major direct and indirect tax reforms in the past decade, most prominent among them being GST. And it has started paying rich dividends. Today, India is probably the only economy in the world where tax revenue is growing at twice the rate of the GDP. With more and more businesses falling under the ambit of taxation, black money is swiftly getting weeded out, and the whole economy is getting formalized. With the formalisation of the economy comes greater access to credit, which benefits all sectors and consumers. It also leads to better compliance, which aids ease of doing business and leads to a greater inflow of domestic and foreign institutional investment in the capital markets, which again impacts all sectors positively. I believe we’d see several startups emerge in areas like credit rating, lending, job marketplaces, consumer analytics, etc.

India has been setting new records for Foreign Direct Investment (FDI) for 7 years in a row, with Invest India being recognised as the world's #1 investment and trade promotion agency multiple times. India has jumped 79 positions in the global ease of doing business index, from #142 in 2014 to #63 in 2022, and continues to push forward. Capital always flows towards high returns and stability, and India promises both. The world is not bipolar any more, with China as the primary producer and the USA as the primary consumer. In this new multipolar world, the world is looking up to India as both a consumer and a producer. It is no surprise that Apple has started its manufacturing facility in India, and this trend will continue. Plenty of opportunities would emerge for supply chain, manufacturing and logistics startups to partner and prosper.

30 Indian adults are migrating from villages to cities every minute. This is due to lower income generation opportunities in the agricultural sector. This leads to massive opportunities with the consolidation of farmland production, mandi markets, procurement (of food grains and poultry) at farms, food processing, and mainstream retail. Each of these areas has multiple unicorns in the USA and China, and while India’s story could be different, there’s room for multiple unicorns to emerge in the agri/agritech sector alone. On the urban side, job marketplaces, economical housing, urban planning and development are sectors that will see a big boost.

This list is not comprehensive, and I have not touched upon several important sectors like renewables, the metaverse, blockchain, chemicals, pharmaceuticals, and more.

A very notable omission I’ve intentionally made is that of the India Stack, which is a disruptive force that has leapfrogged India into digital adoption. The transformative potential of India Stack deserves an essay of its own.

I hope this article gives you food for thought and makes you look at India as a land of opportunities, as it truly is today! As we all at Headstart say, "The time to startup is NOW"!

Authored by Amit Singh, Managing Director, Headstart Network Foundation.