Will Indian innovation evolve in 2022? Amit Chandra asks and answers
Will Indian innovation evolve in 2022? Amit Chandra asks and answers
A surge in capital, digitally connected customers, and talent are converging to boost entrepreneurship and innovation in India. The inherent human force to innovate amid unprecedented challenges, will propel us forward as a nation, chairperson, Bain Capital Advisors India writes
Several factors have converged to boost this surge in entrepreneurship and innovation Image: Shutterstock; Portrait: Sameer Pawar
There has never been a better time to be an entrepreneur in India than today. Just six years ago, we had two unicorns; today we have 79! Nearly half of these have been created in just over a year, signalling a massive momentum in our innovation journey through entrepreneurship. As per Invest India, our ecosystem has seen an exponential growth in these six years, with a nine-fold increase in the number of investors and a seven-fold increase in the number of registered startups, which now stands at over 59,000.
In the past few years, we have witnessed a material disruption of processes, networks, thinking, how capital is provided, and other ways of doing business that would normally take decades to replicate. The pandemic and lockdown brought a slew of entirely new innovations in a matter of months, reframing the way we conduct business and changing the way we live. From promoting hybrid working models to cracking digital tools to deliver what was only possible physically earlier, we have seen remarkable innovations in spheres as diverse as health care, education, supply chain, consumer needs, financial services, be it for profit or to meet societal objectives.
Several factors have converged to boost this surge in entrepreneurship and innovation. Fuelled by a surge of capital, enabled by a digitally connected consumer, and powered by talent, a plethora of startups are serving the always-on economy. They are becoming increasingly sophisticated, with many of them making rapid technological advancements in artificial intelligence (AI), Internet of Things (IoT), location data, often breaking new thresholds of geographic and linguistic barriers.
Underlying this frenetic activity is the inherent human force to innovate when faced with both unique opportunities and unprecedented challenges. It is this spirit that will propel us forward as we look towards the next two-, five-, 10-year horizon of development and progress as a nation.
Innovation in India: Full steam ahead for the next frontier
Over the last few years, we have seen digital adoption accelerate across several sectors—fintech, medtech, telehealth, edtech, cleantech, SaaS (software as a service), micro payments, buy-now-pay-later, neo banks, social commerce, automation across the board, delivery apps (that kept millions fed and stocked at home) and intelligent supply chains are only but a few of the indelible effects born out the digital push the pandemic unleashed; completely reshaping century-old industries.
There is a massive increase in risk appetite to attack new categories of products and services. This is resulting in a huge surge in flow of both funding and talent—the two most critical fuels to further build the ecosystem. Private equity (PE) and venture capital (VC) funding into India is expected to comfortably exceed a massive $50 billion this year, up from $36 billion in 2020—material component of this flowing to early-stage and growth firms. While historically much of this used to be purely overseas investors, we are now increasingly seeing domestic investors interested too, resulting in the build out of Indian firms supporting entrepreneurship and innovation. Additionally, for the first time we are witnessing unicorns tap the capital markets, attracting great interest from all segments of investors.
Consequently, startups are throwing open the Indian business environment, prompting public private partnerships and ecosystem support from many quarters, including corporate, government and investor communities. Right from job creation to seeking billion-dollar valuations, if there was ever a time to be a serious game-changing innovator or person wanting to work with one, it is now!
Specifically, there are a few sectors that will thrive in the wake of innovation as all of this continues to unfold: Manufacturing: The manufacturing sector was among the worst hit during the pandemic, but it also has a great opportunity to benefit from what is happening with and in China, and with government policy. Recovery, growth, and cost inflation require smart manufacturing technologies, so will the desire for more resilient supply chains. Innovative approaches will be needed to address challenges to supply chain, climate sustainability, and security considerations.
Retail: According to IBEF, retail ecommerce sales are set to grow almost 2.5x to $111.4 billion by 2025 over 2020. IBM’s 2020 US Retail Index reports that Covid-19 has accelerated the shift to digital shopping by roughly five years. And innovation that will fuel this surge further shall have augmented reality (AR), machine learning (ML) and AI at their core, delivering an even more immersive shopping experience to consumers. Overlay a far sharper penetration curve for smart devices in India and a younger demographic, and we could see even more dramatic shifts in buying behaviour.
Health care: Early in the pandemic, telehealth usage surged as the need for safe access and delivery of health care gained urgency. A McKinsey report on telehealth reports a 78 times hike in telehealth utilisation between February and April 2020 alone. A Deloitte survey conducted in collaboration with ATA (American Telemedicine Association) reports that 50 percent of executives surveyed thought at least a quarter of all outpatient care, preventive care, long-term care, and well-being services would move to virtual delivery by 2040. Given the realities of a massively underpenetrated health care system, could this be the inflection point for addressing our challenges faced in the sector over decades?
Agriculture:Agriculture is set to be at the helm of disruptive and sustainable innovation; climate resilient farming, precision farming, hydroponic farming, data revolution in online selling of produce, coupled with e-insurance and loans will enable the growth of an ecosystem of accessibility and affordability. Emerging new age startups are attracting investments worth $2 billion and orchestrating cohesive systems of innovation in the sector. We have seen how difficult it is to drive macro reforms in the sector. Whether technology can help power a micro revolution would be an interesting possibility.
Education: The education system in India is witnessing rapid development and is shifting from the traditional pedagogical systems. The New Education Policy of 2020 has scaled up the ability for innovation and experimentation in India. The swift move and rapid adoption towards digital classrooms and online learning have dynamically changed the education sector. For decades we have had pathetic learning outcomes, even though we have managed to improve literacy rates. Can technology help bridge that gap?
Turning Davids into Goliaths
I truly believe that innovations can come from anywhere, so instead of looking at obvious spaces, like organisations that are well established or startups that have networks in place, there is a need to dig deeper into the wealth of ideas that are emerging from the deeper pockets of our country too and across segments to unearth innovations that create societal impact alongside simply economic ones.
For instance, innovations that have worked to solve the problem of plastic waste by creating circular economy solutions around it. Or a startup that has developed a platform that collects real-time data and provides analytics for effective control of mosquito-populations, disease outbreak risk-analysis and pesticide effectiveness. Or one that has developed sewage cleaning robots that clean manholes and bring quality changes in the lives of manual scavengers. These are the kind of innovations that are important to our well-being and we only realise their importance when society is struck with some major challenge like the pandemic. It is important therefore to strike an equilibrium between commercial viability and social impact when encouraging innovation and entrepreneurship.
In 2022, I hope for more intervention from public and private stakeholders and ecosystem players to discover and support these ideas from across India, to help them become formidable organisations that create the desired impact at scale. For this there is the need for a web of ecosystems that support young businesses beyond metros, to tap into the rich talent that India has in plenty. Policy and incentives, along with access to human capital, institutional support, funds, and markets are all essential to create a sustainable ecosystem for self-sustaining startups. Experienced mentors and partners providing guidance and tactical support can give innovators a chance to flourish.
It is important to note that we would not have got here without the support the government has provided. However, to keep building on success, there is a lot we as a nation can keep learning from what is best-in-class around the world. In Japan, for instance, the ministry of international trade and industry provides large-scale funding to select high-priority advanced technologies. India could similarly identify five or six key areas and set up innovation funds that are professionally managed. The EU states support research ventures, both jointly and individually—the Airbus ecosystem being a prominent beneficiary, among other examples in telecom, high-tech, and food, all areas of interest for India.
India could choose to subsidise funds for a few key areas under the Atmanirbhar Bharat initiative, from a longer-term perspective. One of the best examples remains Nasa’s programme of supporting innovation, which benefited thousands of companies and led to US’s technology edge. The US and Canada are great examples of governments that are sponsoring innovation in areas like health care and agriculture, both critical sectors for the Indian economy.
The private sector has to play its part as well. It has to use some of its wealth to fund innovation and entrepreneurship. But it must go beyond just a cheque, and successful entrepreneurs must roll up their sleeves to provide practical guidance and mentorship that can help prop up new businesses and give them a runway for success. This flow of scalable innovation across contexts will continue to impact and transform economies and societies in 2022 and beyond.
We have seen a slew of Indian origin leaders emerge at the helm of global organisations in recent times and while that is a great indicator of the kind of talent we have incubated in India, what would be even more exciting to see is a shift in narrative, over time, to have a crop of Indian innovators that are at the helm of great innovations that are changing both India and the world—commercially and societally.
The writer is the chairperson, Governing Council, Marico Innovation Foundation and chairperson, Bain Capital Advisors India