How Indian Entrepreneurs and Startups Can Write the Future of $5 trillion GDP

contribution of startups to GDP in India

Covid 19 pandemic affected almost all the sectors. However, Prime Minister Shri Narendra Modi hopes to achieve the GDP goal of $5 trillion by 2025. So, why can’t we aspire? Aspire! Because aspiration won’t let us down. Together we can make a change.

If we look at India’s last five-year economy, the growth was around 7.5%, too low than the need of the hour. Currently, the challenge is to grow at a high rate. Entrepreneurs should adopt innovative measures with their startups to scale up the startup economy in India.

Mr Piyush Goyal also expressed his confidence in the Indian entrepreneurs and startups. In December 2020, he said that industry and government have to partner to achieve $5 trillion by 2025.

Role of Entrepreneurship in Economic Development of India

There is a vital role of entrepreneurs in the economic development of India. In the forefront,entrepreneurs think of ideas, perceive opportunities, and convert them into action to nurture economic growth. They usually explore the available potential resources of our nation.

contribution of startups to GDP in India

Many young entrepreneurs with their startups have paved a wave with their innovations. These innovations are essential for a thriving economy. Moreover, this defines the importance of the entrepreneur in the Indian economy.

The nation would have been dependent on multinational companies if there were no entrepreneurs in India. As a result, GDP would have collapsed or adversely affected. Therefore, the GDP of the nation depends on the Entrepreneurs.

Here is the list of the role of entrepreneurs in the economic development of India.

  1. Capital formation
  2. Improvement in per capita income
  3. Generation of employment
  4. Balanced regional development
  5. Improvement in living standards
  6. Economic independence
  7. Backward and forward linkage
  8. Inspire others towards entrepreneurship
  9. Development of new production techniques

Indeed, a promising entrepreneurship culture is developing in India, giving importance to quality and timely work delivery.

Impact of Startups on the Indian Economy

In recent years, India witnessed a considerable rise in startup culture. This startup culture amplified the revenue generation, thereby enriching the GDP. However, there’s no data on the contribution of startups to GDP in India.

According to the Economic survey 2020-21, the Indian government has recognised 41061 startups as of 23 December 2020.  With this, India has become the third-largest startup ecosystem in the world. Indeed, we can think of the role of startups in the Indian economy.

Startups in India undoubtedly play a pivotal role in boosting the economy. Here’s the contribution of startups in the Indian economy :

  • They accelerate GDP growth.
  • They enhance the creation of wealth.
  • They provide employment opportunities.
  • They create a better standard of living.

In January 2016, Shri Narendra Modi launched the National flagship initiative – Startup India. This initiative was to promote and encourage young entrepreneurs in our country.

Below are the Impact of Startups on the Indian Economy –

  • Startups simplified workload by their innovations.
  • More flow of money into the Indian market by providing jobs.
  • There are infrastructural changes in a particular location due to the demand for the startup.
  • Demand for startups related services such as human resource, registration increase.
  • Increasing the income of startups influenced the GDP of the nation.
  • With the increase in money, the standard of living improves.

How Can Startups Contribute?

Foreign Investment in India 

Startups in India should attract foreign investments. This step will not only benefit the startup but also boost India’s economic growth. Moreover, it will imply the role of startups in the Indian economy.

In recent years, the volume of foreign investments made in the startup is quite significant. Foreign names such as Sequoia, SoftBank, Goldman Sachs, AET, Accel have made investments in startups. Their investments act as a simple capital raise and technological investment for Indian startups.

Most importantly, foreign investments bolster the contribution of startups to GDP in India. Deploying better technology and investing in research is equally important. And, foreign investors mostly don’t fail.

Many countries prospered in terms of economic growth due to globalisation. Suppose you’ve got a tremendous domestic market, then you can earn 10X more than what you made by selling in the domestic market.

Capital Formation

In 2019, India’s GDP was around $2.59 trillion.  And, approximately $2.7-2.8 trillion in March 2020. But, according to Statista projection, the GDP of India can go about $3.95 trillion. Notwithstanding the assumption, with capital formation, we can achieve the $5 trillion by 2025.

First of all, startups need to increase both their economic activities and the rate of capital formation. Moreover, it’s time to invest savings for capital formation wisely. Further, this will upgrade the pace of economic growth. Soon you’ll see the Impact of Startups on the Indian Economy.

Unlocking the Power of Digital Technologies

Formerly the Indian government launched the Startup India initiative that boosted the startup economy in India. On the other hand, they also highlighted the importance of the digital economy.

Indian startup ecosystem can utilise the benefits of Startup India. But what do you need as an entrepreneur at this moment?  Support of E-commerce companies to scale your startup and together reach $5 trillion by 2025.

The sector of E-commerce helps startups focus on their product development and core value proposition. Usually, they take away their investment time and resources in distribution centres, as they deliver to the nation’s consumers.

If you are a startup founder, you must know the importance of the entrepreneur in the Indian economy. As an entrepreneur, knowing what works and what doesn’t is equally important, you can analyse and manage business data with the help of online selling.

Employment generation

Startups in India have immense potential to create jobs. One can’t deny the role of entrepreneurs in India’s economic development as they’re the fuel for the engine of job creation.

When it comes to startups, the role of its employment generator begins in a small way. But, as the startup evolves into the growth stage and finally becomes an established corporation, it contributes to the startup economy of India.

Startups create not only employment but also a skilled workforce. Tech startups came into limelight with bulk-hiring when almost all the industries were merely useful in job creation. It’s high time to create over 10 million jobs every year.

Indeed, for the role of startups in the Indian economy, the Startup India initiative is effectively working since its inception. It created over 187,000 direct jobs.

According to the TIE-Zinnov report, Indian Startups have great potential when it gets to job creation. By 2028, the Hospitality and Travel industry will create 52.3 mn jobs, and by 2024, the Foodtech industry will create 9 million jobs. These sectors can contribute to the startup economy in India.

Leveraging on Information and Communication Technology

According to the Reserve Bank of India report, leveraging ICT has to be a key element in India’s future economic development strategy. On the contrary, “Reaching the GDP target of $5 trillion by 2025 is simply out of the question,” says C Rangarajan, the former RBI governor.

Nevertheless, Indian startups should focus on reducing both transaction and communication costs. Further, this will generate an all-around productivity gain with low price and reliable supply of solutions in India and overseas.

EV Startups in India

EV Startups can boost the startup economy in India. Many EV Startups raised funds even in the economy affected by the Covid. Hence, the new normal is an opportunity for the EV sector. Government and stakeholders should prepare a reliable roadmap together.

If you remember, India pledged to contribute to reducing global climate change in the Paris Agreement 2015. Achieving $5 trillion by 2025 is difficult. But, by relaxation given in terms of regulations, availability of charging infrastructure, and battery cost reduction, there’s a chance of mass adoption.

Indeed, a booming EV market preludes automotive sectors’ economic growth and generates jobs as well. Further, it tends to boost the startup economy in India.


Boosting the economy doesn’t involve a single step. As an entrepreneur, think innovative, draw a plan, and convert them into action, keeping in mind the nation’s economic development.

On 29 January, the Indian government approved the Startup India Seed Fund Scheme (SISFS) with a corpus of Rs 945 crore. This step provides financial assistance to startups for proteome development, proof of concept, market entry and commercialization, and product trials. The contributions of startups to GDP in India will eventually lead to $5 trillion by 2025.

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