The Future of India’s Economic Revival: Navigating Quick Commerce, Tech Innovation, and Governance Challenges

In urban India, city dwellers don't measure distance in kilometres anymore. They would rather measure it in minutes. The gridlocked streets of metropolises like Mumbai, Bangalore, and Delhi have created a demand for immediacy, sparking a boom in “quick commerce.”

The desire to minimise time spent in traffic, combined with the ease of digital shopping, means everything from groceries to gadgets is delivered straight to consumers’ doors, often in under ten minutes.

With companies like Zomato and Swiggy leading the charge, quick commerce has become one of India’s most promising sectors. Zomato, the largest player, is valued at $26 billion, with a stock surge over the past year. Swiggy, too, is gearing up for a landmark IPO at a valuation of $11 billion, while Zepto—a newcomer founded in 2021—is already valued at $5 billion.

Alvaro Santos Pereira, the Chief Economist at the Organisation for Economic Co-operation and Development (OECD), expressed a similar viewpoint in a recent interview. He stated, “India has everything it needs to experience strong growth over the next few decades. There have been significant reforms in the past ten years, along with a dynamism, an entrepreneurial spirit, and a reformist attitude that I do not see in many other countries.”

Let's understand this underbelly of growth and how the new story of India will unfold in the coming decades.

Reviving the Indian Startup Scene: A Look at the Numbers

India’s startup ecosystem has had a volatile ride. In 2021, venture capital firms invested a record $35 billion in Indian startups, with over 40 unicorns emerging within a year. However, as interest rates rose globally, that capital inflow dwindled; in 2023, startup investments fell below $8 billion, leading to mass layoffs and over 35,000 closures.

Despite these setbacks, a revival is on the horizon. Investments are tracking toward levels similar to last year, and e-commerce offers huge potential. Online shopping currently accounts for just 7% of India’s retail sales.

However, a recent report by Redseer Strategy Consultants predicts that Indian e-commerce sales could grow from $65 billion in 2023 to $230 billion by 2030. Such projections showcase the enduring appeal of digital commerce in India’s cities, where dense populations facilitate rapid delivery at low cost.

High-Tech Horizons: Deep Tech and Artificial Intelligence

Quick commerce is not the only sector sparking investor interest; India’s burgeoning deep-tech landscape is also capturing attention.

While the country is known for its tech service exports, a growing number of startups are exploring fields such as space technology, robotics, and artificial intelligence (AI). One notable player, Sarvam AI, is developing AI models tailored to India’s multilingual population, a distinctive advantage given the country’s linguistic diversity.

The big opportunity, however, may lie in integrating AI into business software. Leveraging India’s established experience in IT services, companies are crafting products that blend AI with existing software solutions, enhancing productivity for clients around the globe.

The Role of R&D: A Key to Long-Term Growth

For India to sustain momentum in quick commerce, tech innovation, and beyond, increased investment in research and development (R&D) is essential.

Currently, India spends just 0.7% of its GDP on R&D, a stark contrast to China’s 2.4% and the OECD average of 2.7%. Indian companies, especially, lag in R&D spending—a gap that might close for the country to become a true leader in tech innovation.

Experts argue that more R&D spending would not only drive homegrown innovations but also prevent the nation’s top talent from seeking opportunities abroad. However, bureaucratic red tape continues to hamper international collaboration, and reforms to streamline these processes could provide a much-needed boost to India’s R&D sector.

The Government’s Role: Budget Reforms and Bureaucratic Overhaul

India’s government could take steps to improve its budget efficiency, beginning with divestment from state-owned enterprises and scaling back agricultural subsidies, which currently account for nearly 10% of the national budget. These subsidies remain a politically sensitive area, yet reforms could free up resources for other vital investments.

India’s federal structure, however, complicates reform efforts. Many policies, such as those affecting labour, education, and energy, fall under the jurisdiction of individual states, creating a complex web of regulations. Achieving meaningful change requires consensus between the central government and state governments, an often challenging task.

Strengthening Local Governance for National Gains

The 1992 constitutional amendment aimed at empowering local governance broadly remains an unrealised vision, with only 15% of India’s public employees working at the local level.

Yet, as N.K. Singh, Chairman of the 15th Finance Commission, observes, that the “three F’s”—funds, functionaries, and functions—did not follow, rendering the amendment largely symbolic. Unlike China or the United States, where 60% of government employees work at the local level, only 15% of India’s government workforce is deployed locally. This lack of resources and labourpower at the grassroots level is a formidable obstacle to effective governance.

The limitations of India’s local governance are especially pronounced in urban centres, where local officials often lack authority. Without elected mayors empowered to make decisions, many cities struggle to meet residents’ needs. Improving urban governance could unlock potential in cities, which are increasingly hubs of growth and innovation.

Education & Human Capital: The Need for Skilled Talent

Economic growth demands more than policy reform; it also requires an investment in human capital. While India has achieved near-universal primary school enrollment, learning outcomes remain concerning.

Since 2021, India has been the fastest-growing large economy, with a projected 6.5% growth that could account for over 15% of the global economy if the average stays around 3%. However, this rate may seem disappointing compared to East Asian countries like South Korea and China, which grew above 10% in their prime.

In 2022, only 40% of rural primary school graduates could read a text intended for younger students. Teacher absenteeism, regional disparities, and curriculum inconsistencies further compound these issues.

India’s rapid urbanisation and growing demand for skilled labour make educational reforms more urgent than ever. The need for skilled workers extends beyond manufacturing to include roles in design, marketing, and management. Building a robust education system that emphasises not only foundational skills but also advanced training in high-demand fields is crucial for sustaining growth.

Building Consensus: A Prerequisite for Progress

India’s diversity and federal structure present unique challenges—and opportunities—for reform. Establishing broad-based consensus is essential to the country’s future.

The passage of the Goods and Services Tax (GST) in 2017 demonstrated the power of collaborative reform, with state governments sacrificing some autonomy to create a unified national market.

The Confederation of Indian Industry (CII) has put forward a comprehensive proposal to support low-income citizens by introducing consumption vouchers. These vouchers are intended to stimulate economic demand. In addition to this initiative, CII advocates for a significant wage increase under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), proposing a 40% rise. Furthermore, they suggest a 33% wage hike for beneficiaries of the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) scheme.

To further enhance economic growth, the CII emphasises the need for tax reforms and an increase in capital expenditure (capex). Their recommendations also include the establishment of a three-tier Goods and Services Tax (GST) structure to simplify tax compliance.

As India pushes toward its goals, a similar spirit of consensus is needed to address long-standing challenges, from labour law reform to land-use policy. Bridging gaps across political lines and levels of government would be key to fostering a business environment that would support rapid growth.

ViTWO’s Thoughts Forward

India’s economic future holds promise, but achieving sustained growth would require bold reforms and strategic investments in technology, education, and governance.

With the right mix of innovation and collaboration, the country can continue to serve as a driver of global economic progress, turning its vast population and diverse economy into a potent engine for growth.

For India, the challenge is to maintain momentum and build an inclusive, resilient economy capable of navigating the complexities of the 21st century. By fostering local governance, investing in education, and embracing technology, India has the potential not only to lift millions out of poverty but also to inspire and influence economies worldwide.