India is projected to host a million start-ups by 2035 according to Infosys co-founder Nandan Nilekani. Speaking at the Arkam Annual Meet 2025, the IT honcho said that four factors that can fuel the growth of India’s GDP from $6 trillion to $8 trillion by 2035 are technology, capital, entrepreneurship, and formalization.
“If you go back 10 years, to 2016, we may have had a few thousand start-ups, of which about a thousand were funded. Today we have 150,000 start-ups. We expect the start-up ecosystem will grow at a 20 per cent compounded annual growth rate. In other words, when the economy is growing at 8 per cent , start-ups will grow at 20 per cent , reaching a billion start-ups by 2035,” he shared.
As of June 30 2024, the DPIIT recognized 140,803 entities as start-ups in India.
However, Nilekani pointed out several challenges hindering this growth, including income disparity, lack of organization, low productivity, and limited market access, among others.
“It’s shocking that only 13 out of 788 districts contribute to half of India’s GDP. Then you come to income disparity, where the top 10 per cent earn 60 per cent of India’s national income and another 40 per cent earn ₹1.65 lakhs per annum. But the bottom 15 per cent earn only ₹71,000 per annum,” he said.
In addition, real estate remains the largest asset class for Indians, and yet cannot be effectively monetized. Landowners in India face challenges when attempting to use their land as collateral for credit. With 50 per cent of India’s wealth tied to land, this issue is even more pronounced in rural areas.
India is also among the smallest formal economies, with only 15 per cent of Indians in the formal economy. “Informality is not only about individuals, but businesses. We are supposed to have 63 million small and micro businesses, but only 8 million file GST, a symbol of formalization. Only 1 million pay Employee’s State Insurance and private fund, which is a defined benefits system. Only about 29,000 have a made-up capital of over ₹10 crore, so it’s a small set of people. There is a lack of formalization in the business sector,” Nilekani said.
An RBI report observed a gap of $530 billion between the demand and supply of capital for small businesses. The combination of lack of access to capital and markets leads to stunted growth, he shared.
Power of AI
Harnessing the power of AI can drive enhanced productivity, foster innovation, and boost global competitiveness across industries. AI offers vast potential for transforming sectors and helping businesses remain competitive in an increasingly digital world, he said.
Alognside, the tokenization of illiquid assets, combined with the Account Aggregator framework, is set to improve capital efficiency. This approach aims to enhance financial inclusion by broadening access to investment opportunities and making capital more accessible to diverse sectors of the economy.
The focus on empowering the creation of one million startups and ten million modern MSMEs, will contribute to a vibrant entrepreneurial ecosystem. This growth will not only foster innovation but also generate employment opportunities, driving economic growth across various sectors.
Implementing Digital Public Infrastructure (DPI) for worker credentials and benefits, along with simplifying regulatory processes, is key to improving the ease of doing business. These steps will encourage more companies to transition into the formal economy, promoting growth and sustainability.
