Startups, Hype, And Reality

THE TAKE 

Goyal’s Comment On Delivery Apps Hit A Nerve. Here’s Why It Should

Swami A Parthasarathy, regarded as one of the greatest living exponents of Vedanta, had a sharp reaction to a question I posed to him some years ago.

Fixing me with a stern look, he said, “An industrialist who is a large two-wheeler maker was sitting exactly where you are a few days ago. I told him selling two-wheelers to middle-class Indians is no achievement. The day you can sell a Mercedes to them, I will consider it an innovation.”

Swami Parthasarathy wasn’t being literal—he didn’t expect a two-wheeler consumer to suddenly afford a Mercedes—but I understood the message. It was applicable then, and it is just as relevant now.

Speaking of innovation, India’s trade minister Piyush Goyal last week sparked a firestorm when he remarked that food delivery apps are turning unemployed Indian youth into delivery personnel for the rich.

“What are India’s startups today? We are focused on food delivery apps, turning unemployed youth into cheap labour so the rich can get their meals without moving out of their house,” he said.

He was referencing a viral post contrasting Indian startups with those in China—arguing that while India is building food delivery and instant grocery businesses, China is focused on electric vehicles, battery tech, and next-generation manufacturing.

The comment drew criticism from all corners—including from the food delivery startups themselves, which perhaps suddenly felt orphaned by a system that, until recently, seemed to place them on a higher pedestal each passing day.

Former Infosys CFO Mohandas Pai, who now runs his own venture capital firm, pointed out that the government has done little to help deep tech startups grow in India. The finance ministry, he said, was the very agency that harassed startups for years by imposing the angel tax—making it restrictive, if not impossible, for a wide range of investors to back early-stage companies.

Pai also pointed out that the Reserve Bank of India treats overseas investors poorly, particularly around remittances and Alternative Investment Funds (AIFs), because of outdated foreign exchange rules.

The debate is still raging across India’s startup ecosystem.

Wading into this discussion is, in some ways, beside the point—because it misses a few crucial elements. That’s why I believe we need to think about innovation differently, and perhaps even boringly, to put it plainly.

And we must also separate this conversation from the typical hype cycle—which I’ll come to shortly.

Where India Really Needs Innovation

For starters, if you ask me where India needs the most innovation right now, I’d say it’s in gems and jewellery, pharmaceuticals, and textiles—industries that may sound less glamorous, but hold immense potential.

Last year, India exported around $33 billion worth of gems and jewellery, with close to $10 billion going to the US. Textile and handicrafts exports stood at around $36 billion. Pharmaceutical exports were valued at approximately $26 billion.

India’s textile industry is currently breathing a little easier, largely because tariffs on competing countries like Vietnam and Bangladesh are higher. But as the pharmaceutical sector discovered last week, even small victories can be short-lived.

After initially indicating there would be no tariffs on pharmaceutical imports into the US—as Indian industry had expected—the Trump administration reversed course and said they were now reviewing potential tariffs on pharma products.

At this point, India’s pharmaceutical industry is chewing its nails, unsure of what kind of tariff hit might come—or when. Tariffs on pharma imports would directly raise healthcare costs in the US. Will the current administration really go there? We don’t know yet.

So where, really, does India’s biggest innovation challenge lie?

I would argue that it lies in becoming more productive in the goods we already produce, at the scale at which we produce them.

Is that the kind of challenge Silicon Valley venture capitalists are eager to fund? Not a chance.

India is grappling with hundreds of systemic challenges—from delivering quality education and higher education to affordable healthcare and, of course, infrastructure.

Are today’s startup entrepreneurs solving for these problems? Maybe a nibble here and there, but largely insignificant in the broader scheme of things. These are not issues with quick technology or platform-based solutions that might lead to billion-dollar cash-outs.

What Capital Can’t Buy

One area where India has clearly demonstrated leadership is financial inclusion, particularly through the India Stack which is a set of open digital infrastructure and software, including Aadhaar and UPI, that enables paperless, cashless, and presenceless public service delivery at scale.

But none of that had venture capital behind it—at least not in the critical foundational phase.

It was driven by strong ideas, a unified vision, and consistent government support. That backing continues to this day.

So, the first and most important distinction we should draw is between capital and innovation.

Capital can drive innovation, but it is not a necessary prerequisite in India—as we've seen over the decades.

Take, for instance, the Indian Space Research Organisation (ISRO), which completed its 100th space launch in January this year.

“Today, 90% of foreign satellite launches are being carried out through ISRO,” the government said last year.

In the last nine years, India has launched 393 foreign satellites aboard ISRO's PSLV, LVM3, and SSLV launch vehicles for 34 countries. And guess what? 232 of those satellites were for the United States. We must be doing something right—something innovative—for the western world to depend so heavily on our launch services, especially for cost-effective satellite deployment.

Take oil exploration giant ONGC, for example. Chairman Arun Kumar Singh told me last month that they were excited about how artificial intelligence is transforming the way they operate—particularly in reducing the time and cost of well discovery.

“Recently, we drilled a well purely based on AI predictions about where to locate it, and it turned out to be 98% accurate. That’s a big deal because we believe our investment in AI will significantly improve efficiency in oil exploration and development over the next few years,” he said.

ONGC now has about 100 engineers working round the clock to deepen AI and digital adoption. The challenge, Singh said, is finding more of these bright engineers.

It’s quite likely, of course, that many of these engineers might prefer to work on apps that deliver groceries in under 10 minutes—by manufacturing a need for speed, rather than fulfilling an actual one.

But there will always be others—whether at ISRO, ONGC, or elsewhere—who are quietly innovating within their domains, away from the spotlight.

Which brings us to the real question: Who will solve India’s deep-rooted productivity problem?

It’s clear that both the private sector and the government struggle with it. But it’s also clear that sector-by-sector innovation—not hype—is what’s needed to move the needle. And this kind of innovation doesn’t always need venture capital, nor does it rely on entrepreneurs dreaming of billion-dollar exits or supercar purchases.

There’s nothing wrong with aspiring to build wealth or dreaming of Lamborghinis. But to expect these dreams to solve India’s structural challenges is misguided.

Escaping the Startup Hype Cycle

The reason we talk about startups so much—and expect them to solve all of India’s problems—is because we, including the media, placed them on a pedestal they perhaps never should have been on.

And I’d argue, the media has been the biggest culprit.

It began with a noble enough intent—highlighting fresh entrepreneurial stories that offered a counterpoint to India’s stodgy, family-owned business houses. But in doing so, we lost the plot.

When founders of companies that have never made a profit start judging other businesses by handing out awards for “excellence” of some sort—usually at events hosted by media houses—you know there’s a serious problem.

This is how the hype cycle swells and engulfs more victims. As more people read about entrepreneurs raising millions, the act of raising funds itself becomes the perceived achievement—the end goal. That’s exactly how it has been portrayed. Still is.

At some point, though, the hype boomerangs. It comes back after a long arc and hits those caught in its path.

So when a Union minister like Piyush Goyal compares India’s startup ecosystem to China’s and asks uncomfortable questions, people get upset. But really, he’s just responding to the narrative built by the same hype machine we all fed into.

The good news is that India has space for all of it to co-exist.

The Bengaluru-based entrepreneur building a grocery delivery app with hopes of a quick exit. The young engineer working late nights at a public sector company, figuring out how to drill for oil or launch a rocket into space.

Each has a role to play—meeting some need, fulfilling some aspiration, somewhere, for someone.

And yes, there are now entrepreneurs in India’s space sector too—under the somewhat predictably named "space tech."

Some of them will, like before, go on to solve India’s real, complex problems.

And to return to the original poser of what will drive real innovation, if not just capital. 

Maybe it's also a dose of spirituality, driving the high intensity dedication and intelligence that leads to breakthroughs.

Swamy Parthasarathy would surely have concurred.

CORE NUMBER

18.5 million

This is the total number of Indian migrants living, studying, and working abroad in 2024, making India the world’s largest source of international migrants, per UN data cited by Livemint and How India Lives. These migrants sent home $119.5 billion in 2023, cementing India’s status as the world’s top recipient of remittances. Over half came from five high-income countries — the US, UK, Singapore, Canada, and Australia—reflecting a shift toward a more skilled diaspora. Meanwhile, just 1.4% of remittances were above Rs 5 lakh, but accounted for 28.6% of total value.

— 1️⃣2️⃣3️⃣ Numbers Looking Up! A new report by the The Statistics and Programme Implementation Ministry (MoSPI) shows signs of progress toward gender equality. According to the report, women own 39.2% of the bank accounts in India; in rural areas, that number is even higher, at 42.2%. The report also showed an 11% higher labour force participation rate since 2017-18 and a rising trend of female-owned workplaces across sectors. The report also found a fourfold rise in registrations of DEMAT accounts since 2021, meaning many more Indians are investing in the stock market. 

—🏍️💻 Gig Work Keeps on Gigging! Continuous upskilling and adaptability are essential to succeed in the modern workplace, according to V Suresh, the CEO of job search platform Foundit. The company recently released a report showing a 17% year-on-year increase in gig work for white-collar jobs. 37% of gig workers earn Rs 0-3 lakh, and 41% earn Rs 3-6 lakh, meaning most of them are entry or mid-level positions. Hiring in manufacturing showed the strongest month-over-month growth at 12%, followed by logistics and transportation, non-profit organisations, banking, financial services and insurance. 

—💰 VW’s $1.4 Bn Tax Trouble. India’s customs authorities have blamed Skoda Auto Volkswagen India for delaying a $1.4 billion tax dispute by withholding key documents, according to an affidavit filed with the Bombay High Court, reported by Mint. The dispute centres around how the company classified car components imported since 2012. Customs said Skoda under-declared these as non-dutyable, and failed to disclose key agreements flagged later by the Directorate of Revenue Intelligence. The case adds to a growing list of high-profile tax actions, including those against Samsung, Swiggy, and Indigo, as authorities intensify scrutiny on corporate compliance.

—📉 Trump Tariffs Hit India’s Market Giants. India’s top firms lost nearly Rs 2.94 trillion in market value last week as domestic indices slid following US president Donald Trump’s tariff announcement. The Sensex and Nifty dropped over 2.6%, triggering a broad selloff. Tata Consultancy Services took the heaviest hit, shedding Rs 1.1 trillion in value, followed by Reliance Industries and Infosys. Nine of the top ten most valued companies saw their valuations fall — Bharti Airtel was the lone gainer. With global trade tensions rising, investors appear to be bracing for tougher days.

👥 THE TEAM

✍️ Zinal Dedhia, Salman SH, Kudrat Wadhwa | ✂️ Rohini Chatterji | 🎧 Joshua Thomas