Unleashing Potential: Reforming India's Startup Ecosystem

The Indian startup ecosystem, despite being the world's third-largest, is facing significant hurdles due to restrictive government regulations and inadequate domestic investments. Industry veteran Mohandas Pai, Chairman of Aarin Capital, emphasized the urgent need for policy reforms and increased R&D investments to sustain and boost innovation.

Pai highlighted a dire comparison: while China and the US invested USD 835 billion and USD 2.32 trillion, respectively, into startups from 2014 to 2024, India's figures stand at a mere USD 160 billion, with 80% originating from overseas. He pointed out the absence of local capital, blaming it on government policies restricting Indian endowments and insurance companies from investing in startups.

Proposing solutions, Pai suggested amendments to insurance regulatory policies to facilitate fund investments and urged an expansion of the government's fund-of-funds initiative from Rs 10,000 crore to Rs 50,000 crore. He also called for liberalizing pension fund investments, enhancing R&D funding for universities, and removing barriers for startups selling to government entities to prevent larger firms from stifling smaller startups.

(With inputs from agencies.)