Kishore Poreddy Column : Talkup Telangana misses Startup success

The year that has just gone by – 2022 – was a watershed moment for the Startup ecosystem in India. Last year, India became the third largest Startup ecosystem in the world – after USA and China – with more than 100 Unicorns. Together, these Indian Unicorns – Startups with more than a billion US dollars or 8,200 crore Indian rupees in valuation each – received around 100 billion dollars in investments and are today valued at more than 300 billion dollars.

Although the pace of minting Unicorns slowed down globally and in India in 2022, with the US Federal Reserve ending ‘quantitative easing’ and increasing interest rates to fight inflation, the future of Startups in India looks bright with more than 100 Soonicorns (soon to be Unicorns) waiting in the wings. Industry analysts predict India will have more than 250 Unicorns by 2025.

India’s transformation from the world’s ‘back office’ to the fastest-growing and third-largest Startup Hub was not random. On the contrary, it resulted from some bold reforms launched by Prime Minister Narendra Modi.

Making India a single market through GST (Goods and Services Tax), pushing universal financial inclusion through JAM trinity (Jan Dhan bank accounts, Aadhaar identity, and Mobile phones), significantly improving ease of doing business through statutory and regulatory reforms, providing impetus to digital transactions through demonetisation and UPI (Universal Payment Interface) were some of the bold steps Modi implemented in his very first term, triggering the Startup boom. The final accelerant, of course, was Modi’s ‘Startup India’ program, which helped early-stage Startups with funding, access to technology, and regulatory changes.

While India’s Startup success story makes every Indian’s chest swell with pride, the minimal contribution Telangana, especially Hyderabad, had in this saga is cause for disappointment for every Telanganite. Telangana had a great beginning and all the essential ingredients for becoming a Startup success. It had a vast technical talent pool. It was already a giant in IT and had a vast diaspora in US and Europe, working with the latest technologies. It had the advantage of many Central government R&D institutions. Moreover, Hyderabad was one of the most livable cities even then – it had good infrastructure and a low cost of living. Yet, after nine years of the state’s formation and BRS’ governance, the results leave much to be desired.

In 2004, Hyderabad ranked second in IT (Information Technology) exports, only behind Bengaluru, according to news reports quoting our IT Minister KT Rama Rao. Today, Bengaluru ranks first in IT exports and Unicorn Startups in India; it hosts more than 40% of Indian Startups. In comparison, only two startups from Hyderabad reached Unicorn status. Unfortunately, even those two moved their headquarters out of Hyderabad. The disappointment grows even more prominent when we learn that even cities like Jaipur, Pune, and Thane, and states like Rajasthan and Uttar Pradesh have more Startup Unicorns than Hyderabad and Telangana, respectively. Even in the number of Startups registered, Telangana does not figure anywhere in the top five states.

It is not just the Startup ecosystem. Compared to Karnataka, Telangana has been performing poorly in almost every parameter related to even broader industry. For example, take the FDI – Foreign Direct Investment. While Karnataka received one lakh sixty-four thousand crores (Rs 1,64,000 crore), Telangana received less than twelve thousand crores (Rs 12,000 crore) – a paltry 8 per cent of Karnataka’s haul in the financial year 2021-22.

Another example is the value of investment MoUs (Memorandums of Understanding) signed by Telangana and Karnataka in Davos last year. While our IT Minister could secure MoUs worth only Rs 4,200 crore, Karnataka signed whopping Rs 60,000 crore worth of MoUs at the same venue.

Not just investments, Karnataka has better leveraged its technology base than Telangana. As a result, it is fast becoming a hub for electronics manufacturing, apart from Startups and IT services. For example, Foxconn and Wistron – the world’s largest phone manufacturers, started their factories in Karnataka. No wonder, according to a recent RBI report, Karnataka has the second fastest-growing GSDP (Gross State Domestic Product), and Telangana does not even figure in the top five.

A political economy that is centred around real estate and the government’s indifference towards education, notably higher education, are the most significant causes for Telangana falling behind in the industrial sector in general and the Startup space in particular.

One parameter in which Telangana (and erstwhile Andhra Pradesh) excels is in having “visionary”, “dynamic”, “cosmopolitan”, and “world-trotting” ministers who claim to have done wonders with industry and IT in Hyderabad. It is pertinent to note that all other states, including Karnataka or, for that matter, Rajasthan – which has more Unicorns than Telangana, ever needed such ministers for their states to out-rank Telangana. One wonders if this focus on their branding, rather than the performance of the sectors, is the real cause for our state lagging.

(The author is BJP TS spokesperson)