How India’s gig economy is shaping up, thanks to startups

Apart from ushering in billions of dollars of capital and solving complex problems innovatively, Indian start-ups have another claim to fame—the creation of a new kind of gig economy. In a nation with a nearly 500 million-strong but largely unskilled workforce, the rise of the likes of Ola, zomato-owned-blinkit-to-grow-dark-store-count-by-30-40-in-a-year-369767-2023-02-10?utm_source=topic&utm_medium=topic&utm_campaign=topic">Zomato, BigBasket and other quick-commerce firms have brought forth this new category of formal workers. “Start-ups are creating a workforce that will be India’s competitive edge in the future. How we leverage this workforce and what opportunities they can create for India 10-20 years from now, we don’t have all the answers yet,” says Matrix Partners’ India MD, Rajinder Balaraman.

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While studies show VC-funded start-ups play a huge role in GDP contribution right from day one, their contribution to employment comes a little later, says Ventureast Founder and Managing Partner Sarath Naru: “Beyond the first 5-10 years of their life, start-ups start creating a large number of jobs at a lower level, which is needed.” NITI Aayog estimates India has 7.7 million gig workers, which it expects will swell to 23.5 million by 2029-30. A recent report by consulting firm BCG estimates India’s gig workforce in the non-farm economy will balloon to 90 million over the long term.

Another significant impact they are expected to have is in India’s transition to an organised market. Start-ups have managed the feat even in infrastructure-heavy capital-asset businesses such as buses and budget hotels. Karthik Reddy, Managing Partner of Blume Ventures, says it’s because of their tech-first problem-solving approach: “They are not constrained by capex or legacy ways of thinking about business.”

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Their ripples will be felt across the country as new start-ups come from beyond the metros, such as Bihar’s agritech start-up DeHaat, says Samir Sheth, Partner & Head-Deal Advisory Services, BDO India. “Talent and real estate costs are more competitive in these places and make the ventures cost-effective.” Balaraman looks at this as redistribution of access. “Many of our investments are now focussing on the next 50-100 million digital consumers, too. That access creates opportunity, which creates wealth.”

But before start-ups can take on the starring role being written for them in India’s journey of growing into a $5-trillion economy and beyond, investors say they must learn to turn profitable quickly as early-stage capital is limited. In the decade since the boom kick-started it all, the world’s third-largest start-up ecosystem is home to 100-odd unicorns. A cumulative $180 billion start-up funding will have flown in by 2023. But there are just 20-30 great examples of profitable start-ups. Says Reddy: “The appetite for funding a futuristic dream without any sustainability is limited. The setback in the current market is a signal of that.”