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Editorials/Opinions Analysis For UPSC 02 September 2023

CONTENTS

  1. Start ups 2.0
  2. Time to build a more inclusive society for women

Start Ups 2.0


Context

  • The Indian start-up landscape, which experienced a thrilling phase in 2021 when private equity and venture capital investors injected substantial funds into these emerging ventures, still faces challenges. However, there are potential rewards for start-ups that are willing to learn from their mistakes and aim for sustainable growth.
  • (Private equity (PE) encompasses financial firms investing in private companies not traded on public stock markets, with these investments referred to as private equity. Venture capital funds comprise investments from wealthy individuals or companies, managed by VC firms, directed toward high-risk start-ups in exchange for equity.)

Relevance:

GS3- Indian economy

Mains Question:

Analyze the Indian startup landscape post covid19 pandemic. What can be done to strengthen the startup ecosystem in India? (15 marks, 250 words).

Analyzing the Struggles of Indian Start-ups:

  • The ongoing “funding winter” persists, with the cost of financing increasing (due to aggressive central bank policies) and significant losses recorded in technology stock portfolios, reducing the investable surplus of investors.
  • (“Funding winter” refers to an extended period of reduced capital inflows into start-ups, which has been a global trend throughout 2022 and is expected to continue into 2023. According to a recent PwC report, Indian start-up funding in 2022 dropped by 33% compared to 2021.)
  • Between April and June 2023, PE-VC investments in Indian start-ups totaled less than $12 billion, marking a 15% decline from the same quarter in 2022 and a 50% decrease from the record-high investments in the September 2021 quarter.

Signs of Growth:

  • A report in The Hindu revealed that foreign portfolio investors (FPIs) increased their holdings in listed start-ups like Zomato, Paytm, and PolicyBazar threefold in the June 2023 quarter compared to the same period in 2022.
  • These companies also reported strong revenue growth ranging from 37% to 64% and significantly reduced operating losses in the first quarter of FY24.
  • For instance, Zomato’s operating loss narrowed from ₹307 crore in the first quarter of FY23 to ₹48 crore in FY24’s first quarter. Paytm reduced its operating loss from ₹234 crore to ₹77 crore during the same period. In contrast to the past focus on achieving high growth to attract high valuations, investors now seek more than mere business expansion. Many start-ups have downsized their workforce, closed unprofitable verticals or subsidiaries, and cut selling expenses to mitigate losses.
  • Zepto, the first start-up to join the unicorn club in 2023, announced its focus on achieving positive EBITDA in the next 12-15 months, reflecting a shifting mindset among start-up founders. (EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternative profitability measure that excludes non-cash expenses, taxes, and debt costs to represent cash profit generated by a company’s operations.)

Conclusion:

The growing interest of FPIs in select start-ups suggests that companies demonstrating sound financial metrics and stable growth may find it easier to secure funding. However, other start-ups must learn from their past mistakes. Overly optimistic projections of user base and market size need adjustments, and governance must improve with timely compliance with regulatory requirements and disclosures. Instances of misgovernance in some larger start-ups have setback fundraising efforts across the sector. Besides SEBI’s regulation of listed start-ups, the Ministry of Corporate Affairs must enhance supervision of unlisted start-ups to rebuild investor trust in these companies.


Time to Build a More Inclusive Society for Women


Context:

The opportunity presented by India’s presidency of the G20 in 2022 underscores the nation’s commitment to fostering a more inclusive society. This is evident in the chosen theme for India’s G-20 Presidency: ‘Inclusive, Ambitious, Decisive, and Action-Oriented.’

Relevance:

GS1,GS2-Issues related to women, Government Policies and Intervention

Mains Question:

India’s G20 presidency presents an opportunity towards the creation of an  inclusive society. Highlight the efficacy of government initiatives in this regard. (10 marks, 150 words).

W20 Mission:

Under India’s leadership, the W20 mission aims to “eliminate all obstacles hindering women’s development.” W20 India has identified five key areas to advance its goal of achieving gender equity:

  • women entrepreneurship,
  • grassroots women leadership,
  • narrowing the gender digital divide,
  • promoting education and skill development, and
  • addressing climate change.

India has outlined strategies involving collective action, collaboration, cooperation, communication, and consensus-building to pursue these objectives.

Actions Taken by India in This Regard:

  1. Women Entrepreneurship:
    • India has initiated programs like the Startup India Scheme, Mudra Yojna, and Mahila Samriddhi Yojna, focusing on holistic development and empowerment of women entrepreneurs by creating a supportive network and a robust ecosystem.
    • The government also provides training and platforms, such as the Women Entrepreneurship Platform and National Startup Awards, which have significantly increased women’s participation in entrepreneurship, as indicated by a 2019 Bain and Company report.
    • Recent data from a report by the National Association for Software and Services Companies (NASSCOM) in collaboration with Zinnov reveals that 18% of startups have women as founders or co-founders. These numbers are pivotal in advancing India toward a gender-inclusive economy.
  1. Grassroots Women Leadership: India has made substantial progress by reserving one-third of seats for women in both rural and urban local bodies through the 73rd and 74th Amendment bills in 1993. A subsequent Amendment in 2009 increased this reservation to 50%, leading to an increase in female voter participation, even surpassing male participation in some states.
  2. Bridging the Gender Digital Divide: Studies conducted by various organizations highlight the significant technology access gap between men and women. Illiteracy and a lack of digital skills contribute to this disparity.
  3. Education and Skill Development: Despite a steady rise in female literacy rates, their effective participation in the workforce remains low. Data from the Periodic Labour Force Survey (PLFS) (2019-20) indicates that female labor force participation stands at 22.8%, compared to 56.8% for males.
  4. Climate Change: Recognizing the importance of women’s participation in sustainable development goals, India launched the National Skill Development Mission (NSDM) with a focus on integrating women as skilled workers. As a result, 41% of women are part of the Campaign for Skilling in the Current Scenario and the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) boasts nearly 50% female participation.

Conclusion:

To bridge the digital divide, collaboration and cooperation with enterprises can help provide women with access to devices and impart digital literacy. Gender and climate change issues demand comprehensive attention, and prioritizing gender-responsive strategies is an urgent necessity


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