Commerce Minister Piyush Goyal’s comments on the start-up ecosystems in India and China and how Indian companies focus on sectors like online deliveries and betting apps while businesses in China address electric mobility and artificial intelligence (AI) have helped turn the light on a crucial issue that has seldom been debated: how India’s start-up ecosystem is the third largest in the world after the United States and China but is marked by fundamental differences.
Speaking at a start-up event earlier this week, Goyal showed a slide comparing start-ups in India and China, and said that Indian startups are busy making “food delivery apps, fancy ice cream & cookies, instant grocery delivery, betting & fantasy sport apps and reels & influencer economy.” On the other hand, the start-ups in China are working on “EV & battery tech, semiconductors and AI, robotics and automation, global logistics & trade and deep tech & infrastructure.”
“Fancy ice cream and cookies. I know at least three or four billionaires whose children make one brand or the other, very fancy ice cream and cookies, and run a very successful business,” said Goyal in his address. “And I have no complaint against that. But is that the destiny of India? Is the future of India satisfied with that?”
“What are India’s start-ups of today? We are focused on food delivery apps, turning unemployed youths into cheap labour so the rich can get their meals without moving out of their house,” Goyal added.
Goyal’s remarks strike many an echo. In private, government officials have often emphasised the importance of building Indian-owned intellectual property (IP), which is currently severely restricted in terms of making much commercial sense. Very few Indian companies hold important IP in cutting edge sectors, unlike their Chinese counterparts. Some government schemes like the design linked incentives for chips are trying to change that. The gap, though, is widening.
China is considered to be the biggest frontier in electric mobility, with its companies like BYD and Li Auto, having considerable advantage over even some American and European rivals like Tesla and Volkswagen. India lags far behind the Chinese in terms of battery technology, and is largely a consumer of innovation that took place in China. In fact, many believe that India will likely be the final frontier for internal combustion engines.
China & AI
In AI, while American companies — including start-ups like OpenAI and Anthropic — have so far dominated, China has managed to create a global sensation with Deepseek, which showed the world that a good AI model can be created at a fraction of the cost than what the world believed earlier. Meanwhile, in India, there is yet a global standard model to be launched, with the government of India currently evaluating some proposals.
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In e-commerce (including quick commerce and food delivery), India has managed to create giant companies like Flipkart, Zomato, Swiggy, Myntra, Blinkit and Zepto. These companies, some of which are also publicly listed, have capitalised on growing access to the Internet that several Indians enjoy today, with a particular focus on urban areas, where people have some leeway for discretionary spending.
However, these start-ups are predominantly domestic facing, with a majority of their business coming from India. The issue with this is that a vast majority of Indians — nearly 1 billion, or 90 per cent of the population — lack the financial flexibility for discretionary spending, according to a recent study by venture capital firm Blume Ventures. This severely restricts the companies going global, where rivals already exist.
In contrast, China has managed to build global-level businesses in the online services and consumer Internet space, with companies like Bytedance’s TikTok and e-retailers Shein and Alibaba servicing users across the world. In manufacturing, China has cemented itself as the factory of the world, especially in tech manufacturing. India, which started late in the segment, has made some inroads in the space after successfully localising smartphone assembly in the country, even though it remains heavily dependent on Chinese-made parts.
Deep tech start-ups
As far as deep tech start-ups are concerned, that is one particular area where the Chinese have a significant leg up over their Indian counterparts. The deep tech sector in China comprises more than 6,000 companies, which have collectively raised close to $100 billion in venture capital money and private equity. More than 100 of these companies have also gone public. Deep tech start-ups are companies that leverage advanced scientific discoveries or engineering innovations to solve complex problems and create disruptive technologies. They focus on high-impact fields such as artificial intelligence, biotechnology, quantum computing, robotics, aerospace, clean energy, and advanced materials. Indian start-ups in the sector, meanwhile, face a funding crunch with investors unwilling to take a bet on them, considering them as too risky a gamble.
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India & the SaaS sector
One area where India has managed to put itself on the global map is the software-as-a-service (SaaS) sector — where companies like Zoho and Chennai-founded Freshworks, as well as TCS and Infosys, have managed to create a sizable order base. However, the fundamental issue here too is a lack of innovation, with the Indians preferred over others primarily due to a labour cost arbitrage. Some of that is changing with the establishment of global capability centres (GCCs) in India, however, even there, the innovation is largely done for a particular company.
Payments is another area where India has set a template, which has received global recognition, through its unified payments interface (UPI). The innovation, which was initially steered by the government and later made available to private companies, has helped create big domestic businesses in the sector through companies like PhonePe and Paytm. It’s a separate issue that the UPI service remains free for users and merchants, which makes it difficult for service providers to monetise it.
Incidentally, several major companies in China initially also built domestic facing online services businesses, such as Meituan, Pinduoduo (both of which are e-retailers), Didi (ride hailing), and Alipay (financial services), among others. These companies — founded between 2004 and 2015 — served as the first wave of major Chinese start-ups.
Responding to Goyal were from Zepto CEO Aadit Palicha to former BharatPe chief Ashneer Grover and Shaadi.com’s founder Anupam Mittal.
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Palicha said Zepto has created over 1.5 lakh jobs, contributes over Rs 1,000 crore in taxes each year and has brought in over $1 billion of FDI. “If that isn’t a miracle in Indian innovation, I honestly don’t know what is,” Palicha wrote on X (formerly Twitter).
Grover said that the only people in India who need a “reality check” are its politicians. “China also had food delivery first and then evolved to deep tech. It’s great to aspire for what they’ve done — maybe time for politicians to aspire for 10%+ economic growth rate for 20 years flat before chiding today’s job creators. Maybe time to change ‘public discourse’ from history to science,” he added.
Mittal said: “In the last few months I have met a few deep-tech cos that have absolutely blown me away. From AI & space-tech to material science, Indian entrepreneurs are ready to take on the world. But capital & the eco-system for growth & commercialisation are severely lacking. Founders can do most things but not everything.”
