Over the past decade, the growth of the Indian economy has been driven by three once-in-a-generation events. First, on the government side, the creation and rollout of UPI made digital payments available to millions of citizens. Second, on the industry side, the telecom revolution gave millions of people affordable access to data. Third, the pandemic gave a major boost to e-commerce and start-ups. Sustaining this growth requires solutions that create a long-term roadmap for a robust Indian economy. The integration of certain critical subsystems can play a major role.
Multilateral agencies project India as a “bright spot” on the global economic horizon. India’s nominal GDP in 2024 is estimated at $3.9 trillion. It took India 60 years to reach the $1 trillion GDP mark after independence. It took India seven years to reach $2 trillion and five years to reach $3 trillion in 2019. It is expected to overtake the UK as the world’s fifth largest economy in 2022.
India currently has the third largest startup ecosystem in the world with over 140,000 startups registered with the Department of Industrial Promotion. India has more startups per day than any other country and has seen one unicorn emerge every 20 days for the last 7-8 years. The ecosystem is supported by top higher education institutes like IITs, IIMs and higher education institutions in tier 2 and 3 cities.
The government’s push for capital investment coupled with telco-led internet penetration and data access has played a major role in developing the startup ecosystem. India has one of the cheapest data tariffs in the world, with over 800 million internet users and 1.2 billion mobile phone users. The inclusion of farmers in the digital ecosystem creates opportunities for applying new agro-based solutions, the growing number of students creates affordable e-learning opportunities, and the growing rural population creates opportunities for financial inclusion. For startups, this expansion significantly reduces customer acquisition costs. How can we build on this momentum to achieve exponential growth as India aims to become a ‘Vixith Bharat’ by 2047?
In 2023, India will overtake China as the world’s most populous country. Estimates indicate that India will remain one of the youngest countries till 2070. This has implications for our higher education system. Currently, over 4.3 million students are enrolled in 1,168 universities and 45,473 colleges in India. According to an AISHE report, around 10 million graduates join the workforce every year. This number is projected to increase to 1.75 million by 2035 and 2.4 million by 2050. The growth rate of employment opportunities based on students seeking jobs after graduation may not be sufficient. The emergence of Industry 5.0-based technologies such as AI, machine learning, robotics, and mechatronics may reduce the hiring rate for routine jobs and increase the need for highly skilled employees.
Can innovation and entrepreneurship show the way for India to increase its employment opportunity rate? Indian startup data since 2017 shows a promising picture. DPIIT certified startups have created over 1.55 million direct employment opportunities. In 2023, these startups will generate 390,000 jobs, up 46.6% year-on-year and a 217.3% increase over five years. In the US, around 370,000 new jobs were created by the startup ecosystem in 2022. According to a 2024 CII report, startups and their companies injected a staggering $140 billion into the Indian economy in FY23. This is equivalent to almost 4% of India’s GDP. Compare this to the UK, where startups contribute £196 billion annually. This is equivalent to 8.6% of the UK’s GDP in FY23. India has a lot of room to grow.
A driving force behind the success of the US and UK startup economies is the percentage of students who choose to start their own companies after higher education. A global survey of 2.67 million undergraduate and graduate students across 58 countries conducted in 2021 revealed that around 11% plan to start their own companies. In the US, 16% of students plan to start their own companies, while around 5% in the UK and 4% in China have chosen to pursue entrepreneurial careers.
Benchmarking entrepreneurial trends across major economies is pertinent. Currently, at India’s top tertiary institutions, less than 2% of graduates choose entrepreneurship, as shown in a survey of Indian Institute of Technology Bombay graduates conducted in August 2024. What would be the impact if Indian graduates made similar choices to those of other major economies?
If 5% of Indian students choose to start their own businesses, India would produce 500,000 new entrepreneurs every year. Assuming a 90% failure rate, around 50,000 startups would survive. Assuming current averages, this would create 550,000 direct jobs and around 5.5 million indirect and gig jobs every year. This would mean contributing an additional 1% to the current workforce every year, or adding jobs equivalent to those created annually by five conglomerates the size of the Tata Group. This is a simplified perspective to convey the magnitude of opportunity that can be created by intentionally integrating the three E’s – education, entrepreneurship and employment – ​​to achieve rapid economic growth.
We need to rethink the metrics of success for higher education institutions. The primary metric for higher education institutions is limited to their ability to place students in high-paying jobs. To promote the 3E model, we need to add the creation of student- and researcher-led entrepreneurship as a key metric for measuring and ranking higher education institutions. Moreover, success on this new metric is not possible without a systematic approach that includes industry-academia collaboration to nurture, support, mentor and fund graduate, postgraduate, doctoral and undergraduate level research ideas into successful ventures. The experience of major economies shows the potential of this collaboration. In a 20-year period, academic technology transfer in the United States contributed more than $1 trillion to industrial production and more than $5 trillion to GDP, creating more than 4 million jobs. Closely linked to the success of such industry-academia collaboration is the world leadership of the United States in research and development spending, which accounts for 3.4% of GDP. India’s R&D investment is 0.7%. Of this, only around 10% of R&D is in higher education institutions.
To compete with leading economies, India needs to shift from viewing higher education as a social sector to developing it from a strategic perspective. Integrating higher education and entrepreneurship through a systematic approach in teaching and research and building a strong academia-industry interface can have a remarkable impact on economic growth while creating jobs. India needs to move from a linear approach to growth where education, entrepreneurship and employment each have positive outcomes to a synergistic paradigm where education, entrepreneurship and employment are integrated to achieve exponential economic growth during the Amrit Kaal period.
Vaishnav is Mission Director, Atal Innovation Mission (AIM), Shah is Senior Specialist, NITI Aayog, Ashish Pandey is Young Professional and Rohit Gupta is Programme Lead, AIM. Views expressed are personal.
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