Goyal’s dukaandari jibe draws startups ire

Trump has launched an insane tariff war, which Industries and Commerce Minister Piyush Goyal is trying to fend off. In its midst, Goyal has launched his own mini-war with Indian startups, taking potshots at the latter’s obsession with dukaandari instead of competing with China on deep-tech.

In what is unusual for Indian businesses, many startups retorted, defending their record and questioning the government’s policy and contribution in supporting the country’s fledgling startup ecosystem. Was Goyal justified in questioning the startups’ contribution? Are Indian startups doing a bad job? Is the government startup policy also responsible?

Holding a meme/ chart titled ‘India vs. China, The Startup Reality Check’, the origins of which are not clear, Goyal launched a broadside against Indian startups on April 3. Questioning their fascination with retail ecommerce, competing with shopkeepers in delivering groceries instead of focussing on high-tech products, Goyal said: “Are we looking at dukaandari or are we looking to compete globally with our innovations…. Are we going to make ice-creams or (semiconductor) chips?"

Goyal further questioned the startups for turning Indian youth into low-paid workers: “What are Indian startups doing today? Turning unemployed youth into cheap labour; serving the rich to get their meals without moving out of their houses."

The lack of domestic investment in startups also upset him: “I only wish that they had more India investors rather than foreigners buying all of our startups."

These barbs came during Goyal’s address at the ‘Startup Mahakumbh’, where captains of the startup industry were expecting to be lauded for creating the third largest startup ecosystem in the world and being the poster boys of the Modi government’s claim of building Digital India.

Indian businessmen rarely question the government, ministers and bureaucrats. The unfair criticism, triggered by a meme, probably of foreign origin, egged the young pioneers, who have worked hard to build their startups to respond with sarcasm and plain-speak. An e-commerce startup honcho said all global successful startups, including Amazon, started as consumer internet companies and scaled the technology curve later, building cloud computing networks and other high-tech products.

Another startup idealogue bemoaned the lack of long-term patient capital in India for deep-tech startups to thrive and the struggles high-tech startups undergo to find takers for their products.

A startup founder designing semiconductor chips called out Indian clients (private sector, government, defence) for their attitude. He said that when approached for orders, they rebuff: “You build it then we will decide" or “we won’t buy, you go and find if there is a market for this." He asserted that no startup would waste two years and burn Rs 10-20 crore on products if there was no committed buyer.

Some founders shared heart-rending stories of corruption, delays, excessive paperwork and harassment. Goyal had certainly not bargained for this pushback.

India has about 30-40 million offline wholesalers and retailers (dukaandaars) whom Goyal has to protect for various reasons. The e-commerce industry has made deep inroads in their domain by making purchases and delivery more efficient, convenient and cheaper using digital technologies and entrepreneurial innovations, including 10-15 minute deliveries. While it has made the life of the consumers better, it has put the dukaandaars’ roji-roti at risk.

To protect the dukaandaars, the government has restricted FDI to e-commerce platforms (cannot sell their own goods). FDI in manufacturing of branded high-tech consumer products is subject to the impractical domestic value-addition condition. Such conditions contained threats from foreign companies, but not domestic startups, from taking businesses away from the dukaandaars. The age of digital commerce is here. Goyal’s lambasting of the startups will not alter its course.

Goyal’s criticism on the labour front was quite disingenuous. The startups have created millions of jobs, which the government has also lauded. Their delivery agents earn about Rs 1.8 lakh per annum, which is higher than the average per capita private consumption of Rs 1.45 lakh.

On the other hand, the jobs which the government claims to have created are mostly wage-less ones. As per the Periodic Labour Force Survey (PLFS) 2023-24, between 2017-18 and 2023-24, India created 8.4 crore jobs in agriculture and 5.9 crore jobs of ‘unpaid labour in household enterprises’. These jobs comprise almost 88 per cent of all the new jobs created. They only increased disguised unemployment or created no-wage jobs.

Goyal also laid the blame for the drought of domestic investment at the wrong door. The government had been taxing only domestic capital investment in startups (known as angel tax), not foreign investment. It was only in the July 2024 Budget that this tax was removed, albeit with prospective effect, leaving all legacy cases pending.

The domestic investors, including government-owned public sector banks, LIC, etc, are, unfortunately, quite risk-averse. The angel tax played on their nerves, making them stay away from the startups as their failure rate is more than 25 per cent and profits come after a long lag and burn of capital.

Thus, the criticism made by Goyal, flustered by the mirror shown by the meme, is not only wrong but also inappropriate and misdirected.

Goyal later tried to justify his remarks as an “appeal" and an effort to “shake up the ecosystem." He promised to make a substantial allocation from the government’s Rs 10,000-crore fund of fund (FoF) for early-stage and deep-tech startups. He also promised to launch a helpline for startups to register complaints and provide feedback on policies.

The startup community has also toned down its criticism, having made its point elaborately. It is hard to believe that the FoF, which has been in operation for six years and has hardly created any successful startup, will be of any great help in building startups producing high-tech products and that the new helpline, if and when set up, will make any difference.

The unusual but frank startup response seems to have made the minister contrite. For the present, an uneasy peace rules.

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