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Start-up investments in India fell by 81% in March 2020 compared to 2019, UNDP survey says

Report prepared by UNDP in India in collaboration with Niti Aayog says 85% young entrepreneurs saw negative impact on their business in 2020 thanks to Covid.

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New Delhi: The Covid pandemic affected young entrepreneurs in India severely, with 85 per cent of them reporting a negative impact on their business in 2020, a new survey report said.

Titled Impact of Covid-19 on Youth-led Social Entrepreneurship, the report has been prepared by United Nations Development Programme (UNDP) in India in collaboration with government think-tank Niti Aayog.

Over 1,000 entrepreneurs from across India were surveyed for it, and discussions were held with various stakeholders from the industry and government.

The report noted that 60 per cent of the respondents said Covid had a substantial (high/very high) impact on their operations and 25 per cent said it had a moderate effect. The most impacted were the ones that started offering their products from the onset of the pandemic.

“Sectors requiring physical customer engagement like hospitality, retail, travel-tourism and non-essential services were severely impacted by the pandemic and resultant lockdowns that affected supply chain and cash flow. To cope with the impact, the entrepreneurs pivoted their business models and started offering their service online,” the report said.

“A silver lining in the pandemic was the positive outlook among the entrepreneurial community, with nearly 60 percent of the young entrepreneurs surveyed being hopeful that their business will recover in the aftermath of the pandemic,” the report added.

However, the report said start-up investments in India fell to $0.33 billion in March 2020, when the pandemic struck — an 81.1 per cent drop as compared to March 2019. The number of start-ups that raised funding also fell by half to just 69 in the same period.

However, the investor sentiment picked up later in the year. Between January and mid-November 2020, the overall percentage decline in investments was reduced to 30 per cent.

While industries like travel and tourism were hit the most, health, tech, fintech, ed-tech and OTT platforms saw a huge uptick as everything went online, the report said.

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On revenue

Only 16 per cent of those interviewed said they reported growth in their revenues in 2020. The entrepreneurs also said that the fundraising environment became a challenge because investors were looking for signs of recovery.

However, nearly 56 per cent of them said they expect stable revenues over the next three years.

The report also highlighted that stress is palpable among the community as “only 47 percent of the respondents are confident of sustaining beyond six months if the situation persists, while another 25 percent hope to sustain for only one to six months”.

Start-up environment in India

Education and skill development, poverty alleviation, economic growth, industry innovation and infrastructure, health care, and climate action are the top six areas in which social entrepreneurs are working in India.

Talking about the overall start-up ecosystem in India, the report said as of 2020, there were 41,317 start-ups in India registered with the Department for Promotion of Industry and Internal Trade.

“The onset of Covid-19 pandemic in 2020 brought about widespread disruption to jobs, businesses and economies around the world. Entrepreneurs have faced numerous challenges and continuing uncertainty because of the pandemic, including disruption of business models, shrinking customer base and depletion of human resources. These challenges are accentuated for young businesses and entrepreneurs,” said Nadia Rashid, Deputy Resident Representative, UNDP India.

She added that the report was commissioned to understand the impact of Covid on young entrepreneurs and hoped that it helps in “rebuilding operation”, and “accelerating economic recovery from the impact of the pandemic”.

(Edited by Amit Upadhyaya)

Also read: India’s economy picking up pace, industry needs to enhance risk-taking appetite: PM Modi


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