Three years after the , there’s a totally different mood in the air.

Back in early 2022, we had just emerged from the peak of startup funding in 2021, which created 42 new unicorns in India. Naturally, startups grabbed the attention of everyone after that boom. The first National Startup Day then was a time to celebrate.

This period of optimism led to towering valuations but was followed by two years of correction, and many of those very startups that flourished in the easy money environment have since failed to live up to the investor faith.

So and , the National Startup Day was more about reflecting than celebrating.

But these difficult years have led to the startup ecosystem shedding many of its bad habits. In fact, today, there’s an acknowledgement that building profitable businesses is the only way to go and backed by positive momentum on the IPO side, startups have truly turned a corner.

Policy has played a significant role in this — measures such as allowing confidential pre-IPO filings, easing rules for promoters and investors for shareholding periods and lock-ins, and more recently discussing the possibility of easing promoter shareholding limits to allow diluted founders to also make the most of the IPO momentum.

Having said that, we must also acknowledge that this momentum has not only come because of policy. Startup founders and investors have had to change their mindset in the past two years to make the most of this opportunity.

So this National Startup Day — the fourth edition of the marquee day on the national calendar — government and policy action must recalibrate and realign with the needs of the startup ecosystem for 2025.

As in the past, Inc42 is once again playing the role of moderator, forming the bridge between startups and policymakers. The Indian startup ecosystem stands at a critical juncture where the right push can be the tailwind needed for India to become a bigger force in the global tech scene.

To do this, six major focus areas need to be addressed this National Startup Day:

BYJU’S and Dunzo — two of India’s most prominent startups for very different reasons, but both caught in an insolvency crisis that is a sign of how badly India needs to fix the laws around the bankruptcy and insolvency process.

If the Jet Airways case which had dragged on for years is any indication, insolvency and liquidation of assets is not as simple as following the letter of the law, but involves many moving parts and can take several months if not years to be resolved.

Even months after investors have written off assets, startups and their employees continue to be in limbo, with no clarity on any possible solutions. Dunzo and BYJU’S are just two examples of startups where thousands of employees have gone unpaid and where vendors have been left holding dues.

While the government makes it a point to celebrate the job creation by startups, perhaps it needs to address the more severe situation around employees not being paid salaries.

Startups have always had a high rate of failure. This is true even for Silicon Valley, but jobless talent in the West gets absorbed back into the ecosystem at a much faster pace than in India. While government policy cannot hope to accelerate this, re-employment programmes can be put in place to prevent talent drain out of India.

Zomato made it to the BSE Sensex 30 in 2024, but the wave of new-age tech companies — with over 30 listed in the share markets today — calls for a dedicated index on the BSE or perhaps even the NSE for tech stocks.

After India’s IT services industry boom in the late 90s and early 2000s, the BSE IT Index became an analogue for the tech sector in the country. But now’s the time for the product economy to be represented as an index that spotlights the progress of Indian startups.

Overall, the market cap of listed new-age tech companies touched $84 Bn or roughly INR 7 Lakh Cr at the end of 2024. This groundswell needs a dedicated index which would add a huge measure of maturity to Indian tech and truly signal the dawn of the post-services era.

The DPIIT’s Startup India platform has been a real revelation in terms of highlighting the various startup-specific funds, grants, policies and exemptions. This was what the first decade of Startup India needed.

But the times have changed. Now, startups are on the cusp of maturity and need more support on softer but more critical aspects such as diligence and governance, financial responsibility, social responsibility, and other areas that publicly listed companies need to focus on.

This has thus far not been a big concern for Startup India — naturally, given that startups have only now reached this maturity stage. But going forward, DPIIT’s enablement needs to have a strong view on accelerating the maturity of startups to meet the expectations of the industry.

Snapdeal cofounder Kunal Bahl believes that India will have 2,500 listed startups by 2050. That’s a long way away, but it’s not a point India can reach without the right stimuli. The first stimulus needs to come today.

Regulatory hoops and taxes are the bane of startups looking to reverse flip to India, and we know that scores of unicorns would readily redomicile to India if some of these hurdles were cleared.

An increasing number of new-age tech companies domiciled abroad are now queuing up to return home as they look to capitalise on the boom in India’s economy, access to a bigger pool of investors, better initial public offering (IPO) prospects, and favourable government policies.

It is pertinent to mention that Walmart-backed PhonePe became the first major new-age tech company to shift its domicile back to India in 2022. However, the reverse flip cost a fortune as PhonePe’s investors had to pay INR 8,000 Cr to the Indian government.

Similarly, investors of Groww suffered a tax hit of INR 1,340 Cr in the US when the fintech unicorn returned home last year.

Amid the IPO boom, ecommerce giant Flipkart, fintech unicorn Razorpay, quick commerce unicorn Zepto and fintech company Pine Labs are eyeing redomiciling in 2025, ahead of their eventual public listings. Besides this, the list of hopefuls includes Mensa Brands, Udaan, Eruditus, CleverTap, and Freo, but many of these are considering all their options given the high tax implications and other compliance burdens.

To its credit, the Indian government removed some hurdles in the way, which has allowed companies to fast-track reverse flipping processes. But more can be done to ease the journey.

According to Inc42’s for 2024 “The Pulse Of Tech”, 78% of the over 75 surveyed investors said that access to the Indian public markets is the primary reason behind the ‘reverse flipping’ trend in the startup ecosystem.

Up to 33% of surveyed investors believe that lower operational costs are motivating startups to join the reverse flipping parade. While investors credited improvements in ease of doing business as a driving force, many believe that tax exemptions or deferrals could be brought in place to improve this further.

Nvidia, TSMC, OpenAI, Google, Microsoft — the engines of the AI age are eerily similar to those that drove the age of the internet before that.

In the Indian context, stakeholders have called for a bigger spotlight on homegrown startups and innovation in AI — particularly on the infrastructure side — and semiconductor design and development. Many believe that India cannot let slip the opportunity to shape its own future in these critical areas that form the pillars of deeptech and frontier tech.

EaseMyTrip cofounder and CEO Rikant Pittie believes that while will change the game, additional government push is a must to build India-first, AI-first infrastructure.

He also called for “grants, tax breaks, and procurement incentives” for startups to stay competitive at a global level. Promoting local manufacturing by incentivising design and research within the country, could reduce reliance on foreign tech, Pittie added in a recent interaction with Inc42.

Earlier, union minister for electronics & IT Ashwini Vaishnaw had said that a in India would be the best way forward. “For AI, we are taking the digital public infrastructure approach and will be investing in creating a public platform. Through this everyone will have access to high quality data sets, protocols, legal frameworks and compute power,” Vaishnaw said in July 2024, revealing plans to invest in AI computing infrastructure with 10,000 or more GPUs through a public-private partnership.

But this still does not answer the question of how India can play a more significant role in the global AI dynamics, where a lot more clarity is needed in terms of the planning and the execution. The IndiaAI Mission has a huge task ahead of it when it comes to answering these questions in the years to come, and no better time to start than now.

It’s hard to talk about policy without bringing in what’s been pending for years. Gig workers run some of the most prominent new-age tech giants, but the Social Security Code has been in cold storage ever since it was announced.

A similar fate has befallen the much-delayed ecommerce policy. Both these individual pieces of legislation will have deep implications on platform companies and the aggregator economy. The rise of quick commerce has complicated the situation further and muddled the lines between ecommerce marketplaces and retail businesses.

The first contours of the government’s policies for ecommerce and quick commerce in particular will likely be seen in 2025.

Then we have the much-awaited AI regulations, which will have deep ramifications for all companies in the near future. While the DPDP Act came into effect in 2023, everyone acknowledges that it will be a work in progress. The same can be said for AI regulations, and at the moment, the industry has sought a self-regulation environment to protect AI innovation.

The criticality of data in AI means that we have not even begun to scratch the surface of how AI regulations will intersect with the DPDP Act.

But before we get to these more complicated areas of policymaking, it’s pertinent to create the right framework for digital commerce and platform economy to cover the more fundamental aspects of businesses in this space.

Ecommerce policy has always been a bit of a chaos in India with Press Notes and disparate acts governing how businesses are run. For the past half a decade, stakeholders have asked for a unified policy governing the entire digital commerce value chain. Bringing this into play in 2025 will definitely be a gamechanger for ecommerce, which underpins several other sectors.

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