The startup mahakumbh provided a platform for networking, pitching and collaboration for entrepreneurs, investors and ecosystem-enablers. The three day mega extravaganza showcased India’s thriving and buzzing startup ecosystem to the world. Union Minister for Commerce, Piyush Goyal, literally set the cat among the pigeons when he compared India’s startups with those in China. He criticised Indian companies for focusing on food delivery, fantasy sports apps and lifestyle, while China was focusing on semiconductors, artificial intelligence, electric vehicles and robotics. He pointedly said, “Indian startups need a reality check in terms of what they are doing. It is essential that we focus on industries that truly add value to our economy. We shouldn’t shy away from competition, but rather strive for innovation and long-term sustainability.” His remark, hit a raw nerve among the founders.
Unfair comparisson
There was a furore over what many saw as unjustified and harsh observation. Chinese startups receive state-backed funding and benefit from predictable policies and soft regulation. On the other hand, Indian startups face tighter capital access, government policy unpredictability as also regulatory excesses and tax harassment. Apart from this startups have to suffer higher costs owing to lack of infrastructure often leading to additional costs to ensure business continuity. There is also pressure to turn a return on capital. With all these additional investments and costs, the temptation to reduce risk and look at reward-yielding sectors and businesses talent in such advanced sectors is low. This is due to lack of investment in education and skilling. Minimal spending by either the government or large private sector in R&D means that startups have to do a lot of the heavy lifting to compensate for these inadequacies. Given their limited resources, it is a task they are ill-equipped to do to the required extent.
Entrepreneurs like Zepto co-founder Aadit Palicha jumped in to defend India’s consumer internet startups, stating that they are not just vital for innovation, but also provide much needed jobs. He said, “there are almost 1.5 lakh real people who are earning livelihoods on Zepto today – a company that did not exist 3.5 years ago. Just consider these: Rs 1,000+ crore of tax contribution per year, over a billion dollars of FDI brought into the country, and hundreds of crores invested in organising India’s back-end supply chains (especially for fresh fruits and vegetables). If that isn’t a miracle in Indian innovation, I honestly don’t know what it is.”
Course-correction
There are those who defended Goyal too, saying that such touchiness or defensiveness is not necessary. What is required is introspection and course correction in the ecosystem. According to this line of argument, Deep tech is still significantly under represented and the funding pattern too under scores it. While there is nothing wrong with quick commerce, fintech, or consumer service or goods startups, India also needs to invest in areas such as semiconductor manufacturing, AI, robotics and next-generation automation, which are paving the future of economies globally. Founders such as Bhavish Aggarwal, CEO of Ola, concurred with the minister, saying, “Our startup community needs to introspect as to why we’re just building consumer tech companies. Entrepreneurs need to reflect and instead of building lifestyle apps, build innovation and future tech.” Overall, the debate showed that while India boasts of the third-largest startup ecosystem, there are fundamental inadequacies which it has to overcome.
The BluSmart debacle
The shenanigans at BluSmart, a prominent electric vehicle (EV) ride hailing startup in India, once again ignited debates about the functioning and the lack of adequate oversight and corporate governance lapses, plus promoter fraud, all of which dent the credibility of Indian startups. BluSmart abruptly suspended its services in April 2025 following a major regulatory crackdown. The Securities and Exchange Board of India (SEBI) issued an interim order on 15 April, 2025, exposing serious financial irregularities involving BluSmart’s parent company, Gensol Engineering Ltd., and its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, also the co-founders of BluSmart. At the core was the diversion of Rs 262 crore, sanctioned as loans specifically for procuring 6,400 electric vehicles. This was diverted by the Jaggi brothers for personal use. They allegedly blew it on luxuries such as an Rs 43 crore apartment in Gurugram’s DLF Camellias project, expensive golf equipment, as well as credit card payments, and transfers to close relatives. Only 4,704 EVs were reportedly acquired, leaving a sizable amount of funds unaccounted for. Consequently, BluSmart had to shut down its services. Over 10,000 driver-partners were asked to return their vehicles, leaving them without income or clarity on their future. SEBI also barred the Jaggi brothers from taking part in the securities markets and holding managerial positions in Gensol until further notice. On 25 April, 2025, the Enforcement Directorate (ED) reportedly detained Puneet Singh Jaggi. Questions are also being asked about how highly storied investors, board and senior management didn’t do adequate diligence. Overall, this fiasco is a cautionary tale of how weak corporate governance, financial mismanagement and reckless related party transactions can bring down even well-funded, high potential startups. The consequence is debilitating. It has not only disrupted the lives of drivers and customers but also cast a dark shadow over the credibility of startup ecosystem and founders.
Chandu Nair is a startup advisor and investor.