Bengaluru/New Delhi: After the start-up boom of 2021, and then the ‘funding winter’ that is still casting a chill in the air, 2023 promises to be the year India’s gig economy really takes off. This will likely be powered by start-ups, especially those related to delivery, ride, health, and other apps.
By 2024, the gig sector is expected to account for about 4 per cent of India’s total workforce, according to a report released this month by financial services platform StrideOne.
This means that the gig economy, which refers to a labour market characterised by contractual, part-time, and freelance work, rather than ‘permanent’ employment, is expected to employ as many as 2.35 crore workers by 2024 — about a three-fold increase from only 80 lakh, or 1.5 per cent of the workforce, in 2020-21.
In the “long term”, says the report, the sector has the “potential to add over 90 million jobs (9 crore) jobs in the non-farm sectors of India.”
With rising smartphone ownership, cheap data, and a soaring appetite for internet-based services, the penetration of online retail is expected to increase from about 5 per cent in 2019 to 11 per cent by 2024, the report adds.
These projections come at a time where there is some anxiety about the start-up sector in India. The year 2022 saw several mass layoffs, a sharp drop in the number of unicorns, or companies valued at $1 billion or above, and start-up funding hitting a two-year low in the September quarter. Venture capital (VC) funds reportedly reduced deals with start-ups by a fifth this year.
Nevertheless, the outlook is still positive, experts believe, especially in up-and-coming verticals like health, education, climate, and energy. And while more regular jobs with incumbent benefits and perks may be in short supply, start-ups will continue to generate opportunities for short-term contractual labour.
“India is one of the few countries where the working-age population will grow in the next few years. China, the US, Europe, and even Thailand will see a decline in the coming years. So, we must welcome every type of job, including gig jobs,” said Sharad Sharma, co-founder of iSPIRT Foundation, a non-profit technology think tank.
“This meteoric rise of start-ups has made India the third-largest start-up ecosystem in the world. This has significantly impacted the Indian economy and showcases the ability to contribute approximately 4-5 per cent to the GDP of India,” said Ishpreet Singh Gandhi, founder of StrideOne, in the report.
Rutvik Doshi from Athera Venture Partners also struck a buoyant note while speaking to ThePrint: “We continue to see [the start-up sector] grow year-on-year and I don’t see any reason why it will slow down at any point in time. It continues to keep growing and we will continue to see that in 2023 also.”
However, there continue to be concerns about the unstable working conditions of gig workers as well as the funding slowdown in the start-up sector.
Also read: Why India’s Unicorn population hit a peak & dropped off in 2022
‘Should not just be land of Uber drivers’
Much of India’s VC funding inflows are from overseas, mostly going into the few big e-commerce players in ed-tech, grocery and food delivery, retail, and mobility.
Experts call this “tourist capital”, pointing out that a shortfall of domestic funding has left many start-ups starved of capital. They emphasise the need to draw in local high net-worth individuals (HNIs), insurance firms, private companies, and others to fund the early-stage start-up ecosystem.
“The important thing is that we shouldn’t become just a land of Uber drivers. We also need to produce our own Ubers. Only then will accrued wealth stay in India,” Sharma said.
Gig work also comes with challenges for workers, including instability and a lack of benefits and protections.
Mohammed Sajjad Hussain, a doctoral student researching the conditions of gig workers at the Delhi School of Economics, said that it is an “everyday phenomenon” for gig workers to worry about whether their contracts will be renewed. Further, there are few opportunities for them to “unionise”.
The StrideOne report also states that around 47 per cent of gig workers do not have any insurance, with about 41 per cent of these citing ‘affordability’ as the main reason.
According to Sharma, the introduction of “techno-legal regulations” could prove to be a win-win for workers as well as start-ups.
“Techno-legal regulations will ensure that the compliance burden is low for companies while providing adequate protection for gig workers,” he said.
Techno-legal regulations are those that are adapted to the startup and e-commerce ecosystem and facilitate growth by removing constraints.
The Union government is considering introducing fresh legislation to replace the Information Technology Act. The new law is expected to include social media, e-commerce entities, and fact-checking portals, among others, under its ambit.
Spring after ‘funding winter’?
The total number of start-ups grew at a cumulative annual growth rate (CAGR) of 72 per cent from 2017-22, and are projected to grow at a CAGR of 25 per cent from 2022-27.
Amid global headwinds, like the impending recession looming large over North America and Europe, funding is expected to pose a challenge in the coming months, but experts feel that there are still big opportunities for growth.
Ashish Bhatia, founder of India Accelerator, a business accelerator firm, sees increased opportunities with growing 5G penetration and that a large focus going forward will be on sectors like climate, education, and health.
“Start-ups profited from 2021’s boom, but they also had to deal with a funding crisis and a slowing global economy. However, the year also witnessed a large number of new start-ups emerging — 2022 marked the year with the most mergers and acquisitions in the Indian start-up sector, 9 per cent higher than 2021,” he said.
“Despite the threat of uncertainty still looming, we look forward to 2023 with full optimism. Positive development, innovation, and investment prospects for the Indian start-up sector appear to be abundant in the future,” he added.
However, experts say it is necessary for early-stage start-ups to contain cash burn and optimise resources under prevailing uncertainty as new capital may be hard to find.
According to Neeraj Tyagi, CEO & co-founder of investment platform We Founder Circle, start-ups have been making “course corrections in terms of team restructuring, bridge fundraising, founders cutting their own salary, removing perks, and focusing on core business rather than trying multiple side products”. This trend, he added, will continue in 2023 too.
Nevertheless, he too is optimistic. “There’s no denying that funding has been slowing down for start-ups, especially at the growth stage, but funding as a whole is not going to stop. In fact, those start-ups that were prioritising profitability are coming to the centrestage and are hot favourites among investors,” he said.
Tyagi believes that the funding winter is likely to extend for the first half of 2023, as the global market corrects itself further in the rising interest rate environment.
“Start-up funding is not likely to see any imminent pause, especially for early-stage ventures. From tier 2/3/4, a huge inflow of new angel investors is on the rise and so seed to angel stage funding will see a lot of investments and the contribution of angel investors will be the most significant in overall funding in 2023,” he added.
(Edited by Asavari Singh)
Also read: Everyone loves an Indian start-up success story. Not too many know that 2,000 failed last year