India’s Innovation Crossroads: Minister’s Criticism Sparks debate on Startup Priorities
A government official’s critique of India’s startup scene has ignited a fierce debate about the country’s innovation priorities, raising questions about the balance between consumer-focused ventures and deep-tech advancement.
Published: April 4, 2025
The Minister’s Challenge
On April 3, 2025, at Startup Mahakumbh, Indian Commerce Minister Piyush Goyal delivered pointed remarks challenging the value proposition of many of india’s startups. Goyal suggested that too many ventures focus on services like food delivery and rapid logistics and have a limited long-term impact on the Indian economy. He argued that rather of fostering innovation in sectors like semiconductors, robotics, electric vehicles (EVs), and battery technology, many companies were simply turning unemployed youth into low-wage labor. He pointed to China’s advancements in these critical deep-tech areas. This perspective resonates with concerns in the U.S. about maintaining a competitive edge in advanced technologies amid global competition.
Startup Leaders Push back
Goyal’s critique, particularly his dismissive comments about “fancy ice creams” and rapid grocery apps, drew sharp responses from startup leaders. Aadit Palicha, co-founder of the swift commerce company Zepto, mounted a strong defense of consumer internet companies via a post on X (formerly twitter), emphasizing their role in innovation and employment.
It is easy to criticise consumer internet startups in India, especially when you compare them to the deep technical excellence being built in US/China. Using our example, the reality is this: there are almost 1.5 Lakh real people who are earning livelihoods on Zepto today – a…
— Aadit Palicha (@aadit_palicha)
April 3, 2025
Palicha emphasized Zepto’s economic contributions,stating,”There are almost 1.5 lakh real people who are earning a livelihood on Zepto today — a company that did not exist 3.5 years ago. ₹1,000+ crores of tax contribution to the government per year,over a billion dollars of FDI brought into the country,and hundreds of crores invested in organising India’s backend supply chains (especially for fresh fruits and vegetables). If that isn’t a miracle in Indian innovation, I honestly don’t know what is.”
This defense mirrors the arguments often made by U.S. tech companies, such as DoorDash and Instacart, which highlight the jobs and economic activity they generate, even as they face scrutiny over labor practices and their long-term business models.
Deep-Tech Investment Gap
Mohandas Pai, former CFO of Infosys, also criticized goyal, urging the minister not to “belittle our startups” and questioning the Commerce Ministry’s efforts to promote deep-tech ventures. Pai highlighted a critical challenge, stating, “India has many deep-tech startups but no capital to grow fast,” and suggested that the Ministry’s startup division had lost momentum. This concern echoes sentiments in the U.S.,where venture capital funding is increasingly concentrated in established tech hubs,leaving deep-tech startups in other regions struggling to access capital.
Palicha further elaborated on the reasons behind India’s lack of a homegrown foundational AI model, arguing, “It’s because we still haven’t built great internet companies… Consumer internet companies drive this innovation because they have the best data, talent, and capital to put behind it.” he appealed to the ecosystem, government, and investors to support local internet champions rather than undermining them, emphasizing that, “We need to build great local champions in internet… if we ever want to get a piece of great technology revolutions,” and pledged to reinvest Zepto’s profits into long-term innovation.
The Broader Context: India’s Economic Ambitions
The debate unfolds against the backdrop of India’s ambitious economic goals. Commerce Minister Goyal has stated that India is on track to becoming the world’s fourth-largest economy by the end of 2025 and the third-largest by 2027, overtaking japan and Germany. He attributes this projected growth to India’s burgeoning startup ecosystem. However, the question remains: what kind of startups will drive this growth?
Goyal’s comments directly address criticisms of the recent tech boom, particularly the concern that the overemphasis on certain consumer-facing startup models is a detriment to more impactful research and development across other sectors.
This ties into the current discussion in the U.S. regarding industrial policy and strategic investments in sectors like semiconductors and renewable energy to ensure long-term economic competitiveness and national security.
Comparing and Contrasting with the U.S.Startup Landscape
The Indian debate mirrors some of the ongoing discussions in the U.S. regarding the role and impact of startups.While the U.S. boasts a mature and diverse startup ecosystem, there are similar concerns about the concentration of investment in specific sectors and the need to foster innovation in emerging technologies.
| Issue | India | U.S. |
|---|---|---|
| Investment Focus | Predominantly consumer internet, concerns about deep-tech underfunding. | Concentration in software, AI, and biotech; growing interest in climate tech and advanced manufacturing. |
| Government Role | Government seeking to steer investment towards strategic sectors. | Increasing government intervention through initiatives like the CHIPS Act and Inflation Reduction Act. |
| Talent Pool | Large pool of engineering talent, but skills gap in emerging technologies. | Highly skilled workforce, but concerns about STEM education and talent shortages in specific areas. |
| Market Access | Large and rapidly growing domestic market. | Mature and competitive domestic market, with strong global reach. |
The Path Forward: A Balanced Approach
The exchange between Minister Goyal and startup leaders highlights the need for a balanced approach to fostering innovation in India. While consumer-focused startups have undoubtedly contributed to economic growth and job creation, there is a growing recognition of the importance of investing in deep-tech ventures that can drive long-term competitiveness and address critical societal challenges.
Palicha makes a direct appeal and argues that current consumer models are critical to driving innovation by stating:
“It’s because we still haven’t built great internet companies…Consumer internet companies drive this innovation as they have the best data, talent, and capital to put behind it.”
For India to achieve its ambitious economic goals and truly become a global innovation leader, it needs to create an environment that supports both consumer-facing and deep-tech startups, ensuring that capital, talent, and government support are strategically allocated to maximize long-term impact. This also requires a dialog that remains rooted in the current contributions of startups.
What policies, beyond funding, could contribute to a thriving startup ecosystem that balances consumer-focused innovation with the advancement of crucial deep-tech sectors in India?
India’s Innovation Crossroads: An Interview with Dr.Anya sharma on Startup Priorities
Archyde News: Dr. Sharma, thank you for joining us today. The recent debate sparked by Commerce Minister Goyal’s comments on India’s startup scene has certainly got everyone talking. As a leading economist specializing in technology and innovation policy, what’s your initial reaction to the Minister’s critique?
Dr.Anya Sharma: Thank you for having me. minister Goyal’s comments, while perhaps blunt, highlight a very real tension. On one hand, the growth of consumer-focused startups is undeniable and has generated meaningful economic activity. however,his concern about the lack of emphasis on deep-tech and long-term strategic industries is valid. India needs to cultivate innovation across the board, not just in areas that offer rapid market returns.
Archyde News: Many startup leaders, like Aadit Palicha, have pushed back, emphasizing the job creation and economic contributions of consumer internet companies. How do you balance their arguments with the Minister’s strategic vision?
Dr.Anya Sharma: It’s not an either/or situation. The consumer internet space is crucial. These companies create jobs, attract investment, and, as Palicha argues, can drive innovation in areas like supply chain management and data analytics. However, the long-term prosperity of India relies on building a robust deep-tech ecosystem. This includes investments in semiconductors, AI, and other cutting-edge technologies where China and the U.S. are making significant strides. We need both.
Archyde News: Mohandas Pai pointed out a critical lack of capital for deep-tech ventures. Do you agree that funding is the major roadblock, and if so, what policy changes could help?
Dr. Anya Sharma: Absolutely. Access to capital is a major challenge. Deep-tech startups ofen require significant upfront investment with a longer time horizon to profitability.This can be a risky proposition for traditional venture capitalists. The government could consider several initiatives: targeted tax incentives for deep-tech investment, venture capital funds specifically dedicated to these sectors, and streamlining regulatory processes to attract foreign investment in critical areas like semiconductors.
Archyde News: Palicha also believes consumer internet companies are critical to driving innovation, providing the essential data, talent, and capital needed for future breakthroughs.What are your thoughts on this perspective?
Dr. Anya Sharma: Palicha raises a crucial point. Consumer internet companies accumulate valuable data and attract top talent, which can eventually feed into deep-tech innovation. It’s a cyclical relationship. But it’s also essential to ensure that the learnings from consumer internet don’t overshadow the need for specialized skills and resources in deep-tech fields. A balance needs to be struck between fostering these consumer internet successes and actively promoting growth in deep-tech sectors.
Archyde News: The article mentions the ongoing discussions in the U.S.regarding industrial policy. considering India’s economic ambitions,what lessons can India learn from how the US is handling the same challenges,notably in fostering deep-tech sectors?
Dr. Anya Sharma: The U.S. is experimenting with various policies to boost deep-tech. The CHIPS Act and the Inflation Reduction Act are prime examples. India can consider similar approaches, like strategic subsidies, public-private partnerships, and investments in research and development. However, context matters. India must tailor its policies to its specific economic and social realities, including addressing the skills gap and ensuring equitable access to these opportunities.
Archyde News: Looking ahead,what kind of balance should India strive for to nurture both consumer-facing startups and deep-tech ventures,ensuring it meets its economic goals?
Dr. Anya Sharma: the key lies in a balanced, multi-pronged approach. Frist, fostering a more favorable investment climate for deep-tech. Second, recognizing the symbiotic relationship between both types of startups—consumer internet can provide the foundation for future advances and deep-tech innovation but shouldn’t come at the expense of investment in the deep-tech sectors. Third, the government, alongside the private sector, needs to focus on improving the skills development of our workforce, particularly in science, technology, engineering, and mathematics (STEM) fields. promoting a collaborative ecosystem that encourages knowlege sharing and cross-sector partnerships as innovation has been shown to prosper within environments that promote that. By strategically combining the strengths of both sectors, India can pave the path to becoming a true global innovation leader.
Archyde News: This has been a truly insightful discussion, Dr. Sharma. Thank you for sharing your expertise with us.
Dr. Anya Sharma: My pleasure. It’s a critical conversation for India’s future.
Archyde News: What do you think will be the most crucial factor in helping India achieve a thriving startup ecosystem that balances consumer-focused innovation with the development of crucial deep-tech sectors? Share your thoughts in the comments below.
