With India building a virtuous loop of rise in Ease of Doing Business, it is perhaps difficult to avoid the growth of start-ups that complement the country’s efforts in creating a conducive business environment.
Compare two sets of data. One shows that India made a big leap on the Ease of Doing Business (EoDB) rankings, jumping 14 places to the 63rd position, out of 190 countries. This comes after the country jumped 23 ranks last year to be placed at the 77th position.
The second set of data from Tracxn show that start-ups raised USD 11.3 billion this year, up from USD 10.5 billion a year ago. The number of start-ups in the country has also risen significantly, with India being the third largest ecosystem in the world for unicorns. Unicorns are start-ups that are valued at more than USD 1 billion.
Industry insiders say this has happened because the means of starting and maintaining a business in India have become simpler. The more the rankings rise, the easier it becomes to start, and then raise funds for, and as the start-up ecosystem spreads, it contributes to evidence for a further rise in the EoDB ranking. Jitendra Chaturvedi, director and founder, Batooni Mobile Advertising, said that “the environment for doing business in India has been cohesive for start-ups.”
The consistency with which India has been moving up the ranks on World Bank’s ‘Ease of Doing Business’ index is a testament to the fact that the government has been undertaking various initiatives to simplify the process of registrations, licenses and compliance requirements to help start-ups set up business operations in the country with ease.
Further, initiatives such as relaxing norms for obtaining a building permit and electronic submission of documents will go a long way in creating a favourable ecosystem for business growth of start-ups and establish India as the favoured investment destination globally, according to Shashank Dixit, chief executive officer, Deskera, a cloud-based business software provider.
Since the darkened funding environment of 2016, when tech start-ups accumulated just USD 4.3 billion - down from USD 7.9 billion the year before - the flow of capital has increased significantly in the ecosystem. In 2017, Indian start-ups raised USD 10.4 billion, according to Tracxn. Start-ups with consumer-facing offerings including financial services have attracted most of the venture capital this year - about USD 8.2 billion.
Following that is retail start-ups, which have bagged about USD 2.3 billion, and those that offer enterprise services, with USD1.5 billion. The total amount of funds raised, however, could change substantially by the end of the year, with many more start-ups preparing to close new financing rounds.
Free flow of capital to start-ups since 2016
Since 2016, when tech start-ups accumulated only USD 4.3 billion, the flow of capital has increased significantly. In 2017, Indian start-ups raised USD 10.4 billion, as per Tracxn.
Financial services firms attract most funds
Start-ups offering financial services have attracted most of the venture capital this year — about USD 8.2 billion. Retail start-ups (USD 2.3 billion), and enterprise services (USD 1.5 billion) follow suit.