India Market Watch: India Becomes Third Largest Base for Tech Startups, Digital India Helps E-commerce Go Rural

December 11, 2015 Posted by India Briefing Reading Time: 4 minutes

India is the Third Largest Base for Tech Startups

India is the third largest base for tech startups in the world, according to the National Association of Software and Services Companies (NASSCOM). There are currently more than 4,100 startup enterprises in India, and industry experts note that the number of startups are expected to rise to 11,500 by 2020.

There are over 300 million internet users in India – another 200 million are expected to come online by 2017. By 2018, around 8 million Indian companies are expected to connect and perform transactions online. However, other analysts have stated that it doesn’t matter if India has 300 million internet users, but rather, the speed at which they will need to access data should be quick.

Access to 4G , 3G or Wifi spots will need to expand if entrepreneurs can disrupt and create new markets, particularly where information can be delivered over a smartphone. Nevertheless, the rate of startup remains positives, with almost three to start-ups being formed every day.

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Digital India Helps E-commerce Go Rural

E-commerce firms are attempting to break into India’s rural market in cooperation with the government’s Digital India initiative. Firms such as Flipkart, Snapdeal, Infibeam and Paytm have signed Memorandum of Understanding (MoU) contacts with the government to reach rural areas and villages.

The Ministry of Communications and Information Technology wants to connect e-commerce companies with its common service centers (CSCs) in villages. While the government has around 100,000 CSCs, it plans to set up another 90,000 by the end of March 2016. The government believes such CSC will generate employment by developing ancillary industries such as handicrafts and textiles, amongst others.

Paytm has suggested that CSCs can be used as payment banks, and also for recruiting banking executives in villages. Snapdeal is already helping khadi (hand-spun and hand-woven cloth) product makers in Uttar Pradesh state sell their products online. Infibeam has a team to train village level entrepreneurs who are already helping with helping and dispatching of online orders.

The Digital India campaign hopes to connect villages with broadband internet. Mckinsey has reported that the country’s GDP will be boosted by U.S. $550 billion, pushing the GDP to U.S. $1 trillion by 2025, if the the campaign is successful.

RELATED: India’s Economic Initiatives: A Magnet for Investments

Singapore is India’s Top FDI Source

During the first half of the current fiscal year, Singapore emerged as India’s top source for FDI. The Department of Industrial Policy and Promotion (DIPP), which monitors India’s FDI flows, reported that India received US $6.69 billion in FDI from Singapore during April-September 2015. During the same period, FDI from Mauritius – India’s top source for FDI in 2014 – was only US $3.66 billion.

FDI from Singapore to India has more than doubled since Financial Year 2014. India’s Double Taxation Avoidance Agreement (DTAA) with Singapore is a major cause for this increase. Agreements such as the DTAA have built confidence for foreign investors. India is trying to become an FDI haven, as it needs around US $ 1 trillion by 2017 to fulfill various developmental needs.

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