There are two pieces of economic data put side-by-side that should warm your heart if you are interested in the Indian economic story, this week.
First, India has made another big leap on the Ease of Doing Business (EoDB) rankings, jumping 14 places to the 63rd position, out of 190 countries. This, after it jumped 23 ranks last year to be placed at 77. Since 2015, when the country was ranked 142, India has moved up 79 places.
Second, its startups raised $11.3 billion this year, up from $10.5 billion a year ago, according to research firm Tracxn.
It is my argument that these data points should not be considered separately but seen as complementary parts that help us understand what is happening in India. India has the second-largest start-up ecosystem in the world today, depending on different methodologies of calculation. In the last decade, the number of Indian startups has risen from under 10,000 to more than 50,000. India now creates the third-largest number of unicorns (a start-up valued at more than $1 billion) in the world.
This has happened because steadily the means of starting and maintaining a business in India have become simpler. In the last five years more than 1,200 archaic laws have been removed and about 7,000 or more reforms, related to everything from taxation to bankruptcy, have been rolled out which directly impact the EoDB rankings.
There is a host of reasons from the mass delivery of electricity to greater efficiency in the process of paying taxes that have helped push India higher in the rankings, but there are other benefits from this changing environment that are worth considering.
For instance, India has one of the highest numbers of new mobile app installations in the world—around 4.8 billion in the first quarter of 2019. It is also moving towards becoming the world’s biggest app developer base by 2024.
The country also has the world’s highest data usage per smartphone at 9.8 GB a month and is home to the world’s second-largest Internet user base (12% of the globe’s internet users are based in India).
All these things should add up to a boost in innovation, and the numbers validate that too. In the last one year, India rose five places to the 52nd rank in the Global Innovation Index (GII). In 2018, India’s patent filing numbers jumped by 27% and the country is now among the 10 top countries filing patents for innovation. Some of the innovation is coming in what I would call critical-for-the-future areas of 5G and the Internet of Things (IoT).
What is the moral of the story? It is that India is building a virtuous loop of rise in ease of doing business and growth of startups that could pay the economy rich dividends in the future. The more the EoDB rankings rise, the easier it becomes to start, and raise funds for, startups in the country, and as the startup ecosystem spreads, it contributes to evidence for a further rise in the EoDB.
The success of this symbiotic system is crucial to not only fulfil the dream of a $5 trillion dollar economy that Prime Minister Narendra Modi has articulated but also to create the vital jobs that India needs in great volumes.
The next target must naturally be for India to be in the top 50 in the EoDB rankings.