Why Indian startups are stuck in delivery while China races ahead in deep tech

India's startups excel in food delivery and e-commerce, but lag behind China's in deep tech, AI, and EVs. As global rivals scale up, India faces key innovation hurdles

India’s startup ambitions faced intense scrutiny this week—not from foreign analysts but from within the country. Speaking at the Startup Mahakumbh 2025, Union Commerce Minister Piyush Goyal questioned the direction of India’s booming entrepreneurial sector. His remarks — “Are we going to be happy being delivery boys and girls?” — highlighted concerns that while India’s startups celebrate unicorn valuations, they may not be focusing on deep-tech and critical sectors like their global counterparts.

 

The contrast is stark. While India produces food delivery and fantasy sports apps, China is investing aggressively in semiconductors, AI, electric vehicles (EVs), and robotics. Other nations, including the United States, Germany, South Korea, and Japan, are also prioritising long-term innovation in high-tech industries. The question arises: Is India’s startup ecosystem built for the future, or is it stuck in the cycle of short-term digital convenience?

 

 

In the past two decades, China and India were seen as twin engines of global startup growth, backed by large populations, rapid digitisation, and venture capital inflows. But by 2024, China had decisively pulled ahead. Companies like Alibaba, Tencent, and ByteDance became global leaders, while many Indian startups, despite early promise, struggled with scale and profitability.

 

How did China’s startup scene explode?

 

China’s startup dominance was not an accident—it was the result of deliberate government policies, aggressive funding, and a domestic market structured for scale.

 

Unlike India, where startups face regulatory hurdles, China’s government actively fostered innovation. As a result, by 2023, China accounted for 40 per cent of global venture capital funding, dwarfing India’s 5 per cent. Beijing’s $1.4 trillion tech investment plan (2015–2025) far outstripped India’s $150 billion allocation. In 2024 alone, China slashed $361 billion in taxes and fees for high-tech firms, including $80.7 billion in R&D deductions.

 

Both India and China, with their approximately 1.4 billion-strong populations, offered startups a vast testing ground before expanding internationally. In 2024, Alibaba’s Singles’ Day sales hit $203.6 billion—surpassing the value of India’s entire e-commerce market, which stood at $147.3 billion. Meanwhile, TikTok, developed by ByteDance, reached one billion users before entering Western markets, while India’s ShareChat still struggles to cross 400 million.

 

Where did India’s startups falter?

 

Despite an initial surge, Indian startups began to struggle with funding shortages, profitability concerns, and a lack of focus on high-tech industries. While Chinese startups benefited from state-backed funding and predictable policies, Indian startups faced tighter capital access and regulatory unpredictability.

 

In 2023, Chinese startups raised $45.4 billion in venture capital funding. In the first half of 2024 alone, that figure stood at $26 billion, according to a report by the South China Morning Post. In comparison, Indian startups raised $13.7 billion in all of 2024, and a meagre $9.6 billion in 2023.

 

Indian startups overwhelmingly focused on digital services, while China prioritised industrial technology and manufacturing. In 2024, Indian deep-tech startups received $1.6 billion in funding. China’s VC deal value in AI and semiconductors alone stood at $12.3 billion in 2024—a decline from previous years, but still far ahead of India’s total deep-tech inflow. In 2023, just 5 per cent of Indian startup funding went into deep-tech sectors, compared to 35 per cent in China. Meanwhile, India’s semiconductor industry remained in its infancy, relying heavily on imports.

 

Indian startups remain focused on consumer service

 

India’s startup ecosystem has flourished in sectors such as food delivery, digital payments, and online services. Companies like Zomato and Swiggy have strengthened last-mile logistics, while wellness platforms like Cure.fit and HealthifyMe have gained traction. The fintech sector continues to expand, driving digital financial services, and e-commerce aggregators have reshaped consumer convenience. However, unlike global hubs, India’s startup landscape lacks a strong deep-tech foundation.

 

In contrast, China and other nations have heavily invested in foundational technologies. Companies like BYD and NIO are leading advancements in EV and battery technology. DJI has revolutionised drone technology, while ByteDance leverages AI for content platforms. National strategies such as ‘Made in China 2025’ and China’s AI development plans highlight long-term commitment to innovation.

 

One exception for India is SaaS (Software-as-a-Service), where companies like Zoho and Freshworks have built global reputations.

 

Where did Chinese startups outpace Indian tech innovators?

 

China has taken the lead in deep-tech sectors, while India is still developing its ecosystem. Companies like BYD and CATL are at the forefront of the EV revolution, whereas India is still in the early stages of setting up EV infrastructure. In semiconductors and AI, China has aggressively funded research, while India remains in the nascent phase despite introducing incentives.

 

China’s AI-driven factories have transformed manufacturing through robotics and automation, while India continues to rely on labour-intensive methods. In global trade and e-commerce, companies like Shein, DJI, and Alibaba dominate international markets—India lacks comparable global players. Additionally, China’s long-term investments in space technology, high-speed rail, and renewable energy stand in contrast to India’s startup sector, which remains focused on digital convenience over deep-tech infrastructure.

 

Lack of skills for core innovation sectors in India

 

China built a vast talent pipeline for deep-tech industries, while India has continued to grapple with a shortage of high-skilled researchers. In 2024, China’s total R&D spending reached $496 billion, while India allocated ₹20,000 crore ($23.45 billion) to the Department of Science and Technology (DST) to initiate a private-sector-driven R&D fund in the FY25 Budget.

 

China had 2.2 million R&D workers in 2022—2.5 times more than India’s 900,000 professionals working across over 1,140 R&D centres (according to 2022 data).

 

Can India catch up?

 

Despite the current gap, India’s startup ecosystem is not out of the race. Recent policy changes and shifting industry trends point to potential for a turnaround.

 

While China dominates hardware, India is making inroads in software and enterprise tech. With 65 per cent of its population under the age of 35, India has a demographic advantage—but it can only leverage this if it builds a skilled workforce.

 

China surged ahead by combining government support, deep-tech investment, and a massive domestic market. India, meanwhile, has struggled with capital shortages, regulatory friction, and a strong tilt towards consumer-facing apps.

 

That said, no startup ecosystem follows a fixed path. India still has the opportunity to rewrite its story. But for now, China remains in a different orbit — and India faces a steep climb ahead.