Capitalism Finally Comes to India

28.11.15 Devansh Negi 0 Comments

There are more business owners per capita in the US than anywhere in this world which is, of course, expected to be one of the most capitalist countries. One of the reasons why there are so many successful business owners in the US is because they have set up well managed and regulated system and infrastructure such as easy business licensing, venture capitalist, business related community, government run consultation etc. The Big American dream transpired into their very own Silicon Valley and Detroit Automobile industry which is even popular at the global level.

On the contrary, India being a mixed economy and having hardly 65+ years of independence needed some time to allocate resources towards our basic needs, thus for a couple of decades we were promoting an agrarian kind of economy followed by a couple of decades in just developing an ecosystem for better industrialization. The IT boom came in the late 1980s which have since helped India become world's largest IT service exporter and finally we come to today which shows a commendable growth in the mobile related and e-commerce related industry. With well integrated net connectivity, growth in the number of mobile users and a rise in the number of online buyers there has been a huge boom in the start-ups both app based and e-commerce based.

Finally, it seems Capitalism has come down to India, looking at the huge amount of funding being seeded by Indian startups and Acquisition and Mergers happening in billions in Indian start-up. This could be a game changer as many more young and enthusiastic entrepreneurs may wish to join the bandwagon. What really needs to be answered now is that will Indian psyche evolve from being a career-oriented middle-class family to a risk-taking business developing individuals. There is an inherent pattern in the way Indians would take jobs from earlier preference to government jobs to doctors to engineers to corporate would it move to start-ups?

There are many taking the plunge leaving their plush jobs and experience to start something of their own. But it's still few in number and doesn't represent the real demographics. Most of these entrepreneurs are engineers and management executive who would have worked for at least half a decade or a decade, which only brings out those who are working towards the service industry and not another form of industries. India having an exceptional service industry even at a global level from IT, ITES, Advertising, Marketing, Hospitality, Healthcare to even Financial services becomes one of the most preferred industry for any start-up to enter. This has its pros and cons while Service industry blossoms and competition delivers better and quality services to its customer, having two many firms at play in the service industry would largely impact the profitability and revenue share for every other business as the size of the market remains the same.

Thus, India needs to take up extensive and rigorous initiatives to create a cohesive and cordial environment for start-ups and new businesses primarily in the manufacturing and other related industries. The recent Finance Minister's quotes on mandating laws and by-laws for 'ease of business' and having a completely new form of taxation policy for businesses like GST are while a welcome note for businesses, but what is most expected and required are creating more and more Government run Venture Capitalists who can pool in funds on start-ups to stimulate the economics at play.

As of now 7.3 billion dollars have been already invested in Indian Start-ups in the last three-quarters which while shows a positive and optimistic signs, but one has to read the line to get a clear understanding of the current situation. Firstly much of the funding is coming in the form of FDI and FII which is most welcomed but it has its implications such as equity shared by the start up with a foreign institute or entity. Secondly, much of this data revolves around those 'Start-Ups' which have been in business for past couple of years and it's their second or even third stage of raising capital. Lastly, much of these startups seem to be over funded with no accurate business value costing and India is in a stage of numerous start-ups coming out but with a very vague definition on the part of revenue model, this won't have any negative impact initially but many fear that the startup fad may fall badly like the IT bubble during the 90s when startups don't match the expectations.

Overall it seems to be exciting times for startups and business, happy business to all.