Skip to main content

How India's Startups Are Feeding The Country's Unemployment Crisis

India is a country that is inhabited by more than 1.21 billion people, and by 2022 it is projected to replace China as the most populated nation in the world. This enormous size of its population has resulted in the difficulty of providing ample jobs to its citizens; the severity of the problem can be understood from the International Labor Organization’s (ILO) report titled world employment social outlook, which states that the number of job seeking Indians is projected to reach 17.6 million people in 2017.
Last year, the Chattisgarh Government’s Directorate of Economics and Statistics was barraged by 75,000 applicants for 30 peon jobs – a 14,000 Rupee position that involved basic tasks such as fetching tea. Amongst these queries many included requisitions from qualified engineers and management graduates. In 2011 around ten million Indians with graduate, post-graduate and technical degrees were looking for work. Unemployment rates were higher among the better qualified, and highest of all among the 7.2 million people with a technical diploma or certificate. According to a monthly unemployment index, which was established by BSE in collaboration with Centre for Monitoring Indian Economy (CMIE), the overall rate of unemployment, including literates, has increased from 7.97% in April 2016 to 9.84% in August this year.
In these dire times, when other sectors, especially manufacturing, have not proven very effective in the creation of jobs, citizens have pinned their hopes on the foremost promising sector of the economy – the Indian startup ecosystem. A poll by Inshorts and Ipsos has highlighted that over 50% of the young Indians (below the age 35) prefer working with startups over large corporations. Most of the people in this age group also aspire to become part of this revolution; out of the 53,089 users in this poll, more than 45% users are looking at establishing a startup in the next 5 years.
Startups have emerged as the growth engine of this country, backed by the venture capitalists who have poured resources into India over the past few years, and founders who have spent money – hiring employees in hordes. However, in 2015 this trend of excessive hiring and capital input came to an abrupt halt when the venture capitalists closed the tap leading to drying up of funding for startups. Rishabh Lawania, founder of Xeler8, a market intelligence platform for VCs and corporates says, “The party is over and all of us will have a severe hangover.”
Facing pressure to cut the flab, startup entrepreneurs have responded with a slash in monthly expenditures, which have impacted the following factors:
Hiring of new employees: According to Ayush Lakhotia, placement coordinator at Indian Institute of Technology (IIT) Mumbai: “While one startup withdrew offers given to six students, a few others are saying they will come up with later joining dates.” Along with IIT’s in Delhi, Roorkee and Guwahati, Indian Institute of Management Ahmadabad (IIM-A) witnessed Flipkart deferring joining dates of students by six months and at Indian School of Business (ISB), a clutch of e-commerce firms including Stayzilla, Hopscotch, Ivis International, Babajob and Nearbuy (formerly, Groupon) delayed the induction of at least 50 students. This has impacted the reputation of startups as sought-after employers as IIT’s have threatened to add the incumbent startups in a black list. In a much publicized email the IIM-A chairman has also categorically stated that such actions will lead to students regretting their decision to join the e-commerce market leader.
Failures of startups: According to Xeler8, while last year 15 startups closed shops, this number have almost doubled to 29 in the first six months of 2016. Out of the 2,281 ventures that started up since July 2014, 997 have shut down, resulting in a failure rate of 43.7%. While a little over a fifth (20.90%) of the failed startups are from the logistics segment, e-commerce flameouts aren’t far behind, at 19.64%, followed by food tech (18.74%) and analytics (11.36%). Most of their founders went on to take jobs in corporates or startups, with 22-24% opting to stay the course of entrepreneurship.
Layoff of employees: “Entrepreneurs can celebrate failure. But it’s the employees who have to endure it,” says Divyadeep Jadhav, who got layed-off by one of the startup unicorns in India. Since October last year, Foodpanda and Zomato India have laid off more than 300 employees. This year has been worst hit as Snapdeal has let go of 200 employees, common floor has shown the door to 100, and Flipkart and Ola Cabs each has given pink slips to 700 individuals. Along with this the shutting down of e-commerce firm AskMe is projected to affect livelihood of more than 4000 employees.
As a result employees have become skeptical of joining this ecosystem. This situation is turning out to be a blot on Indian startups, which employed 500,000 people at an average of 125 per enterprise in 2014, according to Premjith Alampilly of MeritTrac Services, an assessment company that monitors the start-up ecosystem. The following year roughly 3,100 tech start-ups employed 65,000 people, at an average of 21 per enterprise, according to Zinnov, a consultancy, and Nasscom, a software industry association. This is projected to reach 250,000 people by 2020.
As one can comprehend from the above stated facts, the brunt of the fall in funding has been borne by the employment industry in this ecosystem. Unemployed personnel are taking precautions by randomly gauging out enterprises based on the credentials of the startup, its financial position, funding and business model. The government must amend the “Start-up India, Stand up India” policy by removing startups’ exemption from labor inspection for the first three years of its existence. To solve the problem more jobs need to be created and laws strengthened to protect employees from being fired. Also there is an urgent requirement for labor reforms, which will give a sense of protection and lead to more of a degree of faith in a sector with a high failure rate of more than 70%.
I cover startup ecosystems and policy in South Asia.  


Readers Choice

Lead Your Team Into a Post-Pandemic World

During the Covid-19 crisis, I’ve spoken with many CEOs who have shared that a key priority for them, naturally, has been the safety and well-being of their employees. And there are many examples of inspiring actions taken by CEOs and companies in support of their employees. But as we’ve come to recognize that this crisis will last more than a few short weeks, companies are now defining their approach for the long haul. I’ve seen two crucial ideas take hold with corporate leaders. One: Given the magnitude of the shock and the challenges that this crisis represents, companies must consider the full breadth of their employees’ needs as people. Safety is essential, of course, but it’s also important to address higher-level needs such as the want for truth, stability, authentic connections, self-esteem, growth, and meaning in the context of the crisis. Two: Many CEOs have begun thinking about this crisis in three phases. They may assign different names or specific lengths to t

4 Ways Google Search Can Help You Achieve Your Marketing Goals

Google Ads Google Ad extensions are a great way to add key descriptive text without taking up space in your actual ad and improve your quality score for even better results. It’s a win-win right? Google Maps Is your business discoverable on Google Maps? For small businesses, adding detailed information and the use of strategic keywords can be helpful for a better location optimization. Google Ranks SEO is vital for moving up in Google rankings. To climb up the ladder, incorporate top keywords in page titles, meta tags and focus on consistently delivering relevant content. Backlinking If SEO is the the only strategy you have, it is the right time to change that. Start adding backlinks to your content. Quality backlinks can further increase your brand authority. 

Twenty Smart Business Buzzwords

Some words may grate on your nerves, but business leaders are still using "disrupt," "synergy" and "ideate." You should too. Spend any amount of time in a corporate environment and you'll likely notice there are some words that seem to come up on a daily basis. Certain verbiage becomes part of the  corporate culture  and soon, you may feel as if you need to use it to fit in. While they can change from one day to the next, most corporate buzzwords have a positive meaning. They're used to boost morale and motivate everyone involved in the conversation. Here are 20 of the top business buzzwords that you should make an effort to work into your vocabulary. 1. Impact Impact is a powerful word that has become a favorite of business professionals.  Grammarians argue  that the word is being used improperly, urging you to use "affect" instead, but businesses love it. 2. Corporate Synergy Half of the people who use this term likely