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Behind the excitement

Can start-ups ensure sustainable job growth?

Business Standard Editorial Comment  |  New Delhi 

Few places outside Silicon Valley and Beijing seem as exciting for an entrepreneur founding a start-up as India today. Angel investor events happen seemingly every week where youngsters connect with investors, sometimes raising crores of rupees on the strength of a five-minute presentation. The big question: Will all this excitement and hype lead to a comparable spurt in jobs? Companies like Flipkart have already created 33,000 jobs, Snapdeal some 7,000 and counting. Taxi aggregators such as Ola and Uber have not only taken India a world away from black and yellow taxis with a dirty dustcloth over the meter, but created tens of thousands of jobs for drivers who have the happy experience of being their own bosses and are able to obtain the financing required to own the cars they drive.

Only time will tell how many new jobs are being created, after deducting how many are substitutions from the old economy. Bigbasket's online grocery store may seem extraordinary with their punctual delivery to your front door but it is impossible to guess whether the helpers at the local grocery store are being dismissed as a result of a dip in sales. So many me-too online grocery stores have come into existence - 25 or so - that rumours are already swirling about some entrants exiting the business, with consequent job losses.

Nonetheless, these are asset-light models, which is a boon for a capital-scarce country like India. By getting the attention of international titans in e-commerce such as Amazon, Softbank and Uber, the startup universe constitutes the purest transfer of wealth from the developed world to the developing world. Unlike loans from the World Bank, seed money invested does not need to be paid back if a venture fails. If the bubble bursts, the price will be paid by very wealthy, very savvy investors rather than middle-class shareholders. The apparent transformation of business processes is another unalloyed good, but the transformation of sections of India's economy in the manner that information technology giants like TCS and Infosys accomplished both in terms of generating jobs and exports seems far in the future, if not impossible. The information technology sector is estimated to account for three million middle-class jobs today. Each such job is estimated to support an additional four in other sectors. Without IT exports, services trade would look quite gloomy. Few of these start-ups have presented radically new ideas in their rush to an impressive valuation, and are Indian variations on the theme of e-retailing or transport rather than a whole new opportunity in the way that business process outsourcing by General Electric, say, to Bengaluru or Gurgaon was. India will likely need to see much more innovation in the old and new economy before it sees millions of new jobs.

First Published: Tue, October 27 2015. 21:41 IST
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