Critically discuss the impact of COVID-19 pandemic on Start-up ecosystem of India.

COVID-19 has adversely impacted the overall investment sector. While businesses across all sectors can sense the repercussions of COVID-19, start-ups have particularly been one of the most vulnerable. During the lockdown around 15% of start-ups have halted operations.

Almost 44% of start-ups have cash runway for less than 6 months, 41% of start-ups have been impacted negatively while 52% are struggling to raise capital.

Most start-ups have witnessed a decline in supply and or demand, except for those start-ups that are engaged in the supply and, or delivery of ‘essential services’, educational technology, gaming or streaming services.

It is suggestive that the value of investments in India have fallen to $0.33 billion in March 2020 from $1.73 billion in March 2019, which indicates a fall of nearly 81%. There has been a total fall of 50% in the number of companies funded presently, 69 firms in March 2020, in contrast to 136 firms in March, 2019.

One of the major challenges faced by the start-ups has now become sourcing funds, which has resulted in cash flow issues, for many. The lock-down has not only impacted the daily business operations, but it has also forced a good-many start-ups into preparing for contingency plans to limit workforce and to cut down employee salaries.

However, the start-up ecosystem has been continuously striving to adapt to the present situation as flexibly as possible, by focussing on the need to innovate and diversify their business techniques and its operations and the same time, as per expert reports, Indian start-up ecosystem will grow from strength to strength and eight unicorns are expected for the calendar year 2020.

Topics: GS-III: Changes in Industrial Policy and Their Effects On Industrial Growth