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Impact Of Startups On Indian Economy

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 Our Heritage
ISSN: 0474-9030 Vol.68 No.23 (2020)
Special Issue on
“International Youth Symposium -
2020”
Special Issue Editor
Dr. Nilam Panchal

Impact Of Startups On Indian Economy

GIRNARA MONABEN RAMESHBHAI

RESERCH SCHOLAR
EMAIL -ID: [email protected]

DR. RAVI GOR

ASSOCIATE PROFESSOR
DEPARTMENT OF MATHEMATICS, GUJARAT UNIVERSITY
EMAIL-ID: [email protected]

Abstract

India needs more than a 100 million jobs a year and the jobs which are generated are mostly
from startups and not big enterprises. Startup entrepreneurship is crucial because it also brings
new innovations, new jobs and competitive dynamics into the business environment and
enterprises. The role of startups in economic prosperity is enhancing in today’s world. One of
the main advantages of startups is that it creates new jobs. Global data shows that startups are
creating more jobs in our nation than the large companies or enterprises. As of now, many of
the startups have introduced latest technology Artificial Intelligence, and Robotics etc. Most of
the technology giant companies outsource their tasks to startups now days. It will also help to
increase the cash flow of startups. Bearing in mind the significance of responsibility that the
Indian startups are allocated to play in the enlargement of Indian economy. The turnover
achieved through the startups and the vast numbers of jobs that can be created by facilitate
startups, even the market controller Securities and Exchange Board of India (SEBI), the ease of
use of startup regulation led to facilitate the flow of funds from the market to startups. This
research paper will make analysis of impact of startups , growth of startup, analysis of ecosystem
of startups and its impact on indian economy and growth of economy.

Key Words: STARTUPS, INDIAN ECONOMY

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1. Introduction

In August 2015, the Hon’ble Prime Minister, Shri Narendra Modi, announced the launch of the
national flagship initiative – Startup India, with a mandate to promote and encourage young
entrepreneurs of our country. He envisioned the aim of the initiative to transform India into a
Startup nation, “a country of job creators instead of job seekers”.

Graph:1: India is the third largest tech start-up location globally

Graph:2- Indian start-ups are going global

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 Graph:3- how start-ups contributing to Indian economy

Graph:4- major start-ups located in cities

1.1 Achievement Of Startups India Initiative

Shri Narendra Modi, launched the Startup India initiative on January 16, 2016. An Action Plan
with 19 action points, focusing on simplification and hand-holding, funding support and
industry academia partnership and incubation was outlined. The Department of Industrial Policy
and Promotion has been actively taking requisite measures to encourage entrepreneurship and
promote innovation. There are over 14,600 Startups recognized under Startup India that are
spread across 479 districts, covering all 29 States and 6 UTs. In order to provide growth stage

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funding to Startups, a Fund of Funds (FFS) of INR 10,000 Crore has been setup. This is
supporting innovators and risk takers in their path towards the creation of a New India. The
Government has already committed INR 1,611.7 Crore to 32 Venture Capital Funds through
FFS. The funds contributed by Government have enabled VC funds to raise a corpus of over
INR 7,000 Crore which is available for Startups. When these committed funds complete their
fund-raising process, then a total of INR 13,888 Crore will be available to be used by Startups.
Thus, Government contribution has catalyzed 8X funding for Startups.

1.2. Role of start ups to increase economic growth

• Startups will creates more jobs

Yes. If you are going to become an entrepreneur then you can create more jobs. Thus the rate of
unemployment in our nation also decreases. So employment creation is one of the main
advantage from startups
• Creation of wealth
Since entrepreneurs are attracting investors by investing their own resources, the people of the
nation would get benefit when startups grow. Since the money is sharing with the society, wealth
is creating within the nation.
• Better standard of living
Startups can implement innovations and technologies to improve the living of people. There are
many startups who is working for rural areas to develop the community.
• Increase in GDP
GDP(Gross Domestic Products) plays a vital role in enhancing the economic growth of a
country. World Bank says that India will become the fastest growing country as economic
growth in the world. By supporting and encouraging more startups, it is possible to generate
more revenue domestically and consumer’s capital will also flow around the Indian economy.

2. Literature review

2.1 Arihant Jain “Startups Restoring The Indian Economy?- A Study On Impact Of
Startups On The Indian Economy” A Student’s Journal Of Shri Ram College Of
Commerce, Volume-2, Issue-1, 2017-18
This paper give the fundamental points of interest to put the present startups environment in
which is innovative inside the Indian setting and feature portion of the related difficulties
confronting India today by contrasting policies of various nation and states to discover which of
t is most positive and depicts endeavors that is made by the legislature of India towards
innovation and ecosystem of startups. The main objective of research paper is established
relationship between GDP and startups registered, comparing across the states and countries,
measuring the effectiveness of various scheme. It is found that startup India program is a major
step towards development since it tends to the majority of the key difficulties building up of

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effective n ecosystem. The policy is set up but success depends on its execution. New policy
reforms reflects strong development desire and resonate with zeal and zest of the youth.
2.2. Meenakshi bindal, bhuwan gupta, sweety dubey “ role of startups on Indian economy”
international journal of engineering and management research , ISSN 9online): 2250-
0758, ISSN(print)- 2394-6962, volume-8, issue-5, October-2018
The main objective is to analyze initiative for startup India, to understand the problems faced
by the startups , to study the impact of startups on people, to study the awareness about the
startups. It is based on secondary data. It is found that the government must help startups
promote themselves, not just in india but across the global, as well as create policies that are
startups friendly so that Indian startups get a major boost and they can further create better
employment.
2.3. Hans Westlund “Economic Entrepreneurship, Startups and Their Effects on Local
Development: The Case of Sweden” ERSA conference papers ersa11p327, European
Regional Science Association, 2011
The current empirical entrepreneurship literature mainly shows a positive correlation between
entrepreneurship (measured as the number of startups) and economic growth. However, the
mechanisms by which entrepreneurship exerts its positive influence are not obvious. The net
result of startups on employment or GDP can be negative, at least in the short run, since efficient,
new companies may lead to closures of less efficient ones. Based on an assumption that
economic entrepreneurship in the form of startups creates unobserved supply side effects on the
firm level (Fritsch & Mueller 2004) and entrepreneurial social capital on community level
(Westlund & Bolton 2003) this paper studies the connections between startups and local
development at the municipal level in Sweden between 2000 and 2008. We use a unique
database including not only total startups, but data on startups divided in six branches to study
the impact of entrepreneurship on population and employment growth. Analyses are performed
on all municipalities as well as by municipality type and by growth rate.

3. Objective of study

The objective of the study is To study the impact of startups on various variables of Indian
economy, to analyze the impact of startups on GDP, GNI, balance of payment, import, export,
foreign reserve, to analyze the startups initiative.

4. Research Methodology

4.1. Problem statement

The problem statement is “what is the impact of startups on Indian economy”

4.2. Dependent and independent variables

Independent variable: startups

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Dependent variables: GDP, GNI, import, export, balance of payment, foreign reserve, per capita
GDP.

4.3. Research design

There are three types of research design:
• exploratory research design
• descriptive research design
• Causal research design
In this study, I have taken descriptive research design.

4.4. Sources of data

There are two types of data: primary data and secondary data.
In this research I have taken secondary data for the study.

4.5. Data collection tools

I have used RBI reports, research publication, newspaper, reports of DIPP etc. for the study.

4.6. Population
All year’s data of startups registered and Indian economy data.

4.7. Sample size

I have taken 4 year as sample size from 2016 to 2019. Because startup Indian initiative has been
implemented from 2016. I have used total no. of registered startups data from DIPP report and
economic variables data from RBI report. I have used recognized startups for analysis.

5. Data analysis and interpretations

5.1. Impact of startups on GDP at current price

Table: 1- No. of startups and GDP at current price:
Year No. of startups recognized GDP at current price (Rs
by DIPP in cr.)
2016 503 13771874
2017 5373 15362386
2018 8724 17095005
2019 17390 19010164
Result: correlation between no. of start-ups and GDP at current price =0.98608
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and GDP at current price. There is positive co-relation between no. of startups registered and
GDP at current price. It means that startups help to increasing GDP of Indian economy.
5.2. Impact of startups on GNI at current price

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 Table: 2 - No. of startups and GNI at current price
Year No. of startups recognized by Gross national income at
DIPP current price (in cr.)
2016 503 13612095
2017 5373 15185986
2018 8724 16910192
2019 17390 18816538
Result: correlation between no. of start-ups and GNI at current price =0.986173
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and GNI at current price. There is positive co-relation between no. of startups registered and
GNI at current price. It means that startups help to increasing GNI of Indian economy.

5.3. Impact of startups on per capita GDP (rs.)

Table: 3- No. of startups and per capita gdp (rs.)
Year No. of startups recognized Per capita GDP (RS.)
by DIPP
2016 503 107341
2017 5373 118263
2018 8724 129901
2019 17390 142719
Result: correlation between no. of start-ups And per capita GDP =0.985636
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and per capita GDP. There is positive co-relation between no. of startups registered and per
capita GDP. It means that startups help to increasing per capita GDP of Indian economy.

5.4. Impact of startups on exports

Table: 4- No. of startups and exports
Year No. of startups recognized Exports in RS. crore
by DIPP
2016 503 1716384
2017 5373 1849434
2018 8724 1956515
2019 17390 2307663
Result: correlation between no. of start-ups and exports =0.995208
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and exports. There is positive co-relation between no. of startups registered and exports. It
means that startups help to increasing exports of Indian economy

5.5. Impact of startups on GDP at current price

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 Table: 5- No. of startups and imports
Year No. of startups recognized Imports in RS. crore
by DIPP
2016 503 2490306
2017 5373 2577675
2018 8724 3001033
2019 17390 3594373
Result: correlation between no. of start-ups and imports=0.976658
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and imports. There is positive co-relation between no. of startups registered and imports. It
means that startups increasing imports of Indian economy. It is not feasible that startups
increasing the imports. Here startup is not helping to decrease import of Indian economy. There
should be negative co-relationship between startups and imports.
5.6. Impact of startups on balance of payment:
Table: 6-No. of startups and balance of payment
Year No. of startups recognized Balance of payment Rs.
by DIPP crore
2016 503 115830
2017 5373 144234
2018 8724 280816
2019 17390 -20204
Result: correlation between no. of start-ups and balance of payment = -0.46784388
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and balance of payment . There is negative co-relation between no. of startups registered and.
Balance of payment. Startups are not helpful to improve balance of payment of Indian economy.

5.7. Impact of startups on foreign exchange reserve

Table: 7- No. of Startups and foreign exchange reserve
Year No. of startups recognized Foreign exchange reserve
by DIPP in US million
2016 503 31891
2017 5373 43224
2018 8724 52401
2019 17390 30094
Result: correlation between no. of start-ups and foreign exchange reserve= -0.14246
Interpretations: I have calculated co-relation co-efficient between no. of startups registered
and foreign exchange reserve. There is negative co-relation between no. of startups registered
and foreign exchange reserve. There should be positive co-relation between startups and
foreign exchange reserve. Startups are negatively affecting to foreign exchange reserve of Indian
economy.

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6. Findings

TABLE: 8- Corelation between startups and various variable of Indian economy

VARIABLES OF CO-RELATION RESULT IMPACT
INDIAN ECONOMY
GDP AT CURRENT 0.986089 Positive co-relation Positive
PRICE
GNI AT CURRENT 0.986173 Positive co-relation Positive
PRICE
PER CAPITA GDP 0.985636 Positive co-relation Positive
EXPORT 0.995208 Positive co-relation Positive
IMPORT 0.976658 Positive co-relation Negative
FOREIGN RESERVE -0.14246 Negative co- Negative
relation
BALANCE OF -0.46784388 Negative co- Negative
PAYMENT relation
It is found that there startups are positively affecting to GDP, GNI, per capita GDP, export. But
startups are negatively affecting to import, foreign exchange reserve and balance of payment.
In short startups are positively affecting towards growth of Indian economy, but it is negatively
affecting to balance of payment wise.

7. Conclusion

Startups can change the world and in coming years more and more startups will grow with
innovation and creativity. Entrepreneurship is the only way to enhance the economic growth of
a nation. And a small idea can be termed into big innovative solution which can change your
future. So if you have an idea, don’t block your dreams because of fear of failure and taking
risk. Develop your idea into startup and contribute to the growth of our nation. Now we can
conclude that startups are important for economic growth of a nation. We can conclude that
startups are positively affecting to Indian economy. However government need to promote and
create more startups in India so that it helps to increase GDP of India. Because, currently GDP
of India is very low and foreign reserve too.
Government is encouraging people to start doing business and what steps are being taken for it
which is actually good for bright future of India startup industry. And this will certainly boost
Indian economy as well as GDP in upcoming decade

8. Suggestions

• Building state ecosystem by establishing a startup policy, startup portal for each state.

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• Government should provide more incentive for startups.
• Organizing events to promote entrepreneurial activity and create more innovation.
• Promote more awareness about startup initiative
• Real time implementations of policies and incentives announced by government.
• Promote those startups who are exporting their product to other country.
• Promote startups and give more incentives which are providing more employment
opportunity.

9. References

9.1. Journal
1. Jain arihant . (2017-18). Startups Restoring The Indian Economy?- A Study On Impact Of
Startups On The Indian Economy ,A Student’s Journal Of Shri Ram College Of
Commerce, Volume-2, Issue-1.
2. bindal meenakshi , gupta bhuwan , dubey sweety .(2018). Role of startups on Indian
economy international journal of engineering and management research , ISSN (online):
2250-0758, ISSN(print)- 2394-6962, volume-8, issue-5.
3. Wes tlund hans. (2011). Economic Entrepreneurship, Startups and Their Effects on Local
Development: The Case of Sweden. ERSA conference papers ersa11p327, European
Regional Science Association.
4. Dr Suniti Chandiok. (2016). India the world’s fastest growing startup ecosystem: A Study.
Amity Research Journal of Tourism, Aviation and Hospitality Vol. 01, issue 02.
5. D. Ghosh & D. Anshul (2016). Start-up India is work in-progress.
6. NASSCOM. (2015). NASSCOM start-up ecosystem report 2015: India ranks third globally
with more than 4,200 startups.
9.2. Website
1. https://digitaledenz.com/why-startups-are-important-for-economic-growth-of-a-nation/
2. https://www.startupindia.gov.in/content/dam/invest-
india/compendium/Startup%20India%20-
%20National%20report_Final%20Version_web.pdf
3. https://www.srcc.edu/sites/default/files/1.Vol_.%202%20Issue%201.pdf
4. https://www.weforum.org/agenda/2016/10/india-startup-boom-
5. https://medium.com/ent101/impact-of-startups-on-indian-economy-a0e0bc4478c1
6. https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=Handbook%20of%20Statist
ics%20on%20Indian%20Economy)
7. http://www.ijemr.net/DOC/RoleOfStartupsOnIndianEconomy.PDF
8. https://www.srcc.edu/sites/default/files/1.Vol_.%202%20Issue%201.pdf
9. https://ideas.repec.org/p/wiw/wiwrsa/ersa11p327.html
10. https://www.startupindia.gov.in/
11. https://dipp.gov.in/

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