As a long-standing and active venture capital (VC) investor in India, I have had the benefit of seeing multiple cycles in India's VC ecosystem, as well as globally, over the past decade and a half.
Every frothy surge has been followed by a painful correction forcing hard lessons on investors, founders, and the startups they built. But even through these ups and downs, India's entrepreneurial ecosystem has emerged stronger and more mature each time.
There is an increased focus on building lasting, high-quality businesses, with strong fundamentals. There is also an increasing aspiration to build solutions for the world and an unprecedented ability, more now than ever before, to deliver on that objective.
Tech Needs Beyond Just the Shift to Renewable Energy
Within that context, climate tech presents some unique opportunities. India ranks third in the list of countries with the highest greenhouse gas (GHG) emissions.
However, its GHG emissions per capita continue to be quite low as India's energy consumption at 7,143 KWH per capita is less than a tenth of that of the United States at 78,754 KWH per capita and less than a fourth of the per capita energy consumption of China at 31,051 KWH per capita.
But India's sustained strong economic growth, rapid urbanisation, and the increasing spending power of its largely young and hyper connected population, will drive towards higher energy consumption.
As the country looks to electrify transportation, electrify large parts of its growing manufacturing sector, power its expanding data centers and exploding cities, the load on its electricity grid will intensify rapidly.
Recognising the need to decouple the GDP growth with energy needs and GHG emissions, the Indian government has set clear Nationally Determined Contributions (NDCs) focused on getting to net zero by 2070.
Given the sheer size of the country and its growth trajectory, achieving these objectives is important not just for India, but for the world, as saving our planet will be impossible without saving a country that is the home to over 17 percent of the global population.
Delivering on these objectives will require solutions that go beyond large renewable energy project deployment.
We need technologies that prepare the grid for the shift to renewable energy at scale, including, but not limited to, batteries for short term and long term storage, demand management as well as real-time monitoring and rating of transmission lines, active load rebalancing based on algorithms built on data from smart meters.
The Indian government's push for consumer adoption of rooftop solar presents the promise of greening homes and driving a shift in mindset as these energy consumers become prosumers.
There is also the need for technologies that enable management of distributed and/or shared assets, greening manufacturing, climate smart agriculture, sustainable living, and low-carbon transportation.
As a fund focused on STEM-led innovation for climate action, Synapses is working closely with India's innovation ecosystems to identify these solutions and create commercialisation pathways both within and outside India.
The New Global Standard: India’s Exemplary DPI
The fact that India is building world-leading solutions in these spaces is no surprise.
India has long been known for its technology talent with 1.5 million engineers graduating every year from its 2,500 engineering colleges. India's talent leadership is expected to continue strengthening as the country adds 100 million people of working age over the next decade.
This enviable talent resource, both in numbers and quality, and the spirit to innovate has been fostered and strengthened over the last three decades with the rise and growth of new digital economy businesses funded by domestic capital pools as well global private capital supporting India's venture ecosystem.
According to a report by Preqin, the assets under management (AUM) for India-focused PE/VC funds soared to a combined total of $68 billion by the close of December 2022.
The Indian government's recent announcement of a corpus of $12bn to support private sector participation in research on emerging sectors such as new energy and electronics, gives a further boost to India's innovation prowess.
The technologies and solutions built in India are being embraced by customers, both corporates and consumers, not just within India but also outside its domestic market - this creates strong feedback loops and customer validation drives further customer adoption.
And this is not a new phenomenon. The establishment of global capability centers (GCCs) in India by large multinational corporates was driven by India's capabilities in new technologies such as big data, cloud computing, and AI, in addition to the benefits of scale at low cost.
The success of GCCs, currently 1,600 in India, has endorsed India’s role in driving global innovation and has helped create several generations of seasoned, globally connected, engineering, and product leaders of international caliber, several of whom have branched out to set up highly innovative startups.
India’s exemplary digital public infrastructure (DPI) is seen as a new global standard and the model is being replicated by several countries, particularly in the global south.
India’s DPI has provided a unique combination of digital identity, information and payments, serving as the digital rails that have accelerated business growth for several digital economy startups.
The adoption of India’s DPI by other countries could make it easier for innovations from India to proliferate outside the country.
India’s Many Resources Can Help Deal With the Climate Crisis
Adding to the enabling forces of skilled talent, availability of capital, proven technology leadership, and the digital rails of DPI, is the more recent wave of manufacturing moving to India.
India is being seen as the emerging low-cost manufacturing base for a wide breadth of products. The Indian government’s production linked incentive (PLI) scheme provides over $24bn in support to over 14 sectors aiming to build manufacturing champions.
Both domestic and global corporate leaders are building large manufacturing capabilities in India. The Indian government aims to make India a $1 trillion electronics hub in five years, and the Tata Group is at the forefront of this mission.
The group is investing a whopping $11 billion to build India's first semiconductor fabrication plant. Semiconductors are the brains of modern devices, from toasters to phones to electric vehicles.
Such scale is attracting global majors to manufacture in India and Apple now makes 14 percent of its devices in India. The growth of manufacturing will push advancements in ancillary sectors such as product testing, logistics and warehousing. The addition of manufacturing to India’s already well-established software leadership, allows complete product solutions to be built and sold from India.
Finally, and most importantly, the mindset of innovating with limited means has had deep-seated roots in India.
Having operated in a resource-constrained environment for generations, the culture of innovating frugally remains deeply ingrained despite the better resources and capital the country enjoys today. This proclivity to be fiscally conservative brings a new level of creativity which, combined with the inherently lower cost of people and infrastructure, implies that India can be the hub of frugal innovation.
The climate crisis looms large and will require innovation and ingenuity. No nation can solve it alone and no nation can be left behind. India’s intrinsic advantages and earned credibility position it well to build solutions not just for India but for the world.
(Ruchira Shukla is the co-founder and managing partner of Synapses, a VC Fund focused on STEM innovations in ClimateTech and HealthTech. She was one of the panellists at the 21st India Conference at Harvard held earlier this year. The Quint was an India Digital Media Partner for the conference. This is an opinion piece and the views expressed are the author's own. The Quint neither endorses nor is responsible for them.)
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