Page 44 - Banking Finance August 2022

ARTICLE

startups availed institutional loans (including from banks) to Issues and Suggestions:
finance their activities, indicating that borrowing from
India is a highly diverse country with a plethora of cultures,
friends and relatives has been the major source of finance.
languages, ethnicities and religions. Due to this, the startups'
The survey concludes that there are numerous emerging
understanding of people at large is often limited to certain
business opportunities due to recent developments which
regions. Hence, comparative advantages are linked to
are worth examining.
specific regions only and not Pan India. Further, as nearly
70 per cent of the Indian population lives in rural areas and,
Emerging Business Opportunities: therefore, customers of the mass market tend to come from
The recent National Education Policy of 2020 envisages to low-income backgrounds in villages. This often discourages
promote student entrepreneurs by offering vocational many startups to come up with high value product/services.
education in partnership with industries and introducing More importantly, the current pandemic-induced lockdowns
coding for school children. This can have a favorable impact and curfews by states have brought along uncertainty,
on the startup ecosystem in India, if entrepreneurial skills struggles and challenges for smaller startups and MSMEs.
are integrated with the education curriculum under the New
Education Policy. According to a recent survey of 2140 startups and SMEs
conducted by the social media platform, only 22 per cent of
In addition, there is a need to fill up infrastructure gaps them have over 3-months runway; while 41 per cent are
especially in rural areas, promote digital literacy and help either out of funds or have less than one month of funds
people become more knowledgeable about the digital world. left. Therefore, they propose to reduce advertisements and
In this regard, the Government initiative of Saksharta new marketing initiatives, and also look at reducing
Abhiyan Digitalization is a step in the right direction. operational costs.
Regarding Agri-startups, since the majority of Indian
workforce is employed in agriculture, there is a need to clear Further, 60 per cent expect to scale down, or shut
roadblocks and promote them in a large number. operations. Thus, startups and SMEs are struggling for
survival, especially since the onset of the covid-19 since
Fortunately, the new Farm Laws are expected to give a 2020. While RBI has introduced several measures including
greater choice to farmers and incentivize start-ups to debt restructuring -1&2 to reduce the burden of loan
transform the agriculture value chain in storage, finance,
repayment during the pandemic, much is expected from
transportation, aggregation, and marketing. Further, in
banks to yet to come forward and offer the need based and
respect of the Startups in High-end Technology, the recently
timely finance. Regarding workers, many job applicants are
released Draft Space Communication Policy states that
not sufficiently skilled.
"Indian entities in private sector shall as well undertake
design, development and realization of satellites and Thus, startups see a gap between the knowledge taught to
associated communication systems. They can establish students in colleges and the knowledge needed for the jobs,
satellite systems through their own or procured satellite". especially in sectors in which technologies change at a fast
pace. At the same time, startups can not afford to attract
When this happens, there are possibilities for startups to highly skilled workers due to their weak financial position.
come up in a big way. Similarly, with the introduction of the Lastly, risk associated with the business of startups is high
Startup India scheme, there has been a change in approach due to higher rate of mortality though the Government is
and mindset from job seekers to job providers. This would supporting them in all possible ways.
create a pool of new entrepreneurs to make Startups to
become the backbone of New India. The present In particular, despite several business opportunities for
Government is also promoting Make in India policy which startups in the coming years, it is observed that most of
would encourage the startups to take up production of them fail and wind up their business right at the initial stage.
import substitutes. Thus, startups are likely to witness In this regard, IBM Institute for Business Value conducted a
brighter days ahead to benefit from emerging business survey of startups to find out reasons for them to fail at the
opportunities to generate more employment and become initial stage itself. Such reasons include:
society friendly. (i) Lack of Initiative - Indian startups are also known for

44 | 2022 | AUGUST | BANKING FINANCE