How India’s Green Tech Startups Can Unlock Their Growth Opportunities
The government prioritized green technology in the 2023 Budget, emphasizing the need to build momentum toward India’s Net Zero targets by 2070. Its proposed vehicle for this is the ‘Lifestyle for Environment’ or ‘LiFE’ movement.
It would start with a series of government initiatives, such as a Green Credit program under the Environment Protection Act, a Green Hydrogen Mission, and others. These measures show that green technologies are no longer viewed solely as necessary for environmental protection, but also as economically beneficial.
The government’s emphasis on sustainability could not be more timely. India has an excellent opportunity to become a global leader in green technologies. The government must provide substantial support to foster the growth of green tech startups.
These startups will create technologies to capitalize on the growing potential of India’s manufacturing sector. This trend stands in stark contrast to the recent wave of layoffs at major IT firms such as Amazon, Microsoft, and Accenture.
According to a recent FICCI survey, 70% of manufacturing capacity is being used, indicating continued economic activity in the sector. More importantly, 40% of respondents stated that they intend to increase capacity. This contrasts sharply with the recent layoffs in 2023. The number of tech layoffs in the first three months of 2023 has already surpassed the total for the entire year of 2022.
By making the right strategic decisions, India can leverage the potential of its thriving tech startup ecosystem to establish globally competitive industries in electric vehicles (EVs), alternative energy, carbon capture, energy efficiency, and other critical technologies.
Concentrating on Startups and R&D
In this endeavor, special attention should be paid to tech startups, as well as overall efforts to improve research and development (R&D) capacity. This dual track will assist India in meeting its green targets for net zero, electric vehicle adoption, and renewables.
The need for innovation cannot be overstated. Products must not only be Made in India; they must also be Designed in India. This will ensure that the value created by the sector is entirely captured on Indian soil. More importantly, a strong R&D pipeline will shift Indian manufacturing from being reactive and executing other people’s designs to being proactive and driving the pace of innovation.
The recent budget announcement has boosted existing government schemes aimed at tech companies and startups, such as Production-Linked Incentives (PLIs) and sector-specific schemes for EVs, such as the Faster Adoption and Manufacturing of Electric Vehicles II (FAME-II).
The increased emphasis on assisting startups in logistics, infrastructure, and financial services is a welcome addition to the existing framework. Green credit programs are another step in the right direction, encouraging businesses to adopt sustainable business and construction practices that will increase energy efficiency.
Navigating Funding and Government Program Challenges
However, challenges prevent startups from fully utilizing these schemes. PLIs, for example, are geared towards larger companies and have minimum investment requirements that startups may not be able to meet. To ensure that these programs are accessible to startups while remaining effective, the government must take a more nuanced approach.
Finally, it is a chicken and egg situation. Because traditional lenders are often hesitant to invest in early-stage companies, startups frequently struggle to find funding until they reach scale. The announcement of the budget of an INR 10,000 Cr fund for startups is a step in the right direction, but more needs to be done to ensure that funding is available to all startups, regardless of size.
One major challenge that startups face when it comes to R&D is competing with the resources of established companies. Startups frequently lack the resources necessary to invest in R&D, which is critical to their long-term success.
The government can help startups by funding them and collaborating with academic institutions and research centers. The establishment of three AI research Centers of Excellence is a step in the right direction. Hopefully, more such centers will open with a variety of specializations.
Despite these obstacles, the potential of tech startups to drive economic growth and establish competitive local industries cannot be underestimated. More assistance will be required in critical areas to fully realize the sector’s potential. Making funding available to all startups, regardless of size or stage of development, and supporting R&D will be critical right now. The
government will need to take a careful approach to make existing programs more accessible to startups without jeopardizing their effectiveness. With the right support, India’s tech startups have the potential to be a driving force for economic progress and local industries.
What is Net Zero and why it is important for Indian Economy?