In today’s Finshots, we explore why India’s Commerce Minister, Piyush Goyal, is nudging Indian startups to move beyond hyperfast grocery and food delivery and build deep tech startups.

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The Story

Last week, at the Startup Mahakumbh, India’s Commerce Minister Piyush Goyal ruffled a few feathers when he questioned the country’s startup ecosystem. He was particularly dismayed that too many founders are busy building things like fancy ice cream brands, 10-minute grocery apps or fantasy sports platforms. He did acknowledge that many of these startups have done well in terms of funding, user acquisition, job creation and even revenue and profitability. But in Goyal’s view, these consumer businesses were not exactly pushing the boundaries of innovation.

He even drew a contrast with China, where several new-age companies had successfully forayed into deep tech sectors like semiconductors, robotics, AI, 3D manufacturing and machine learning.

Sidebar: Deep tech refers to innovations founded on scientific or engineering advancements, often aiming to create a significant impact for society and, thereby, the economy.

Getting back, Goyal wants Indians to not just focus on tech for convenience, but tech that solves complex problems and creates a long-term global economy through cutting-edge industries. So yeah, he believes that for India to become a true global tech powerhouse, its startups need to think bigger and deeper and ditch that low-hanging fruit.

So well, we thought, let’s analyse why he said so, and if the Indian startup ecosystem is truly lagging when it comes to new age technology and innovation.

See, over the past decade, China has quietly built a startup ecosystem that chases breakthroughs.

Take AI, for instance. Chinese startup DeepSeek recently grabbed global attention with an open-source AI model that’s reportedly on par with ChatGPT’s GPT-4. Then there’s SenseTime, Megvii and Yitu, AI unicorns powering everything from facial recognition at airports to surveillance. And mind you, these aren’t pet projects. These are deeply integrated into real-life use cases.

In semiconductors, despite intense US sanctions, China hasn’t slowed down. Startups like Biren Technology and Moore Threads are working on GPUs and AI chips to reduce dependency on Nvidia. Horizon Robotics is building AI chips specifically for self-driving vehicles. And Chinese firms reportedly spent over billions buying Nvidia’s advanced chips not just to use but to learn and build.

Even in 3D manufacturing, companies like XtalPi, founded by Chinese MIT grads, are fusing quantum physics and AI to reduce the timeline for drug development from 4 years to just 2.

In EVs and battery tech, Chinese companies aren’t just churning out electric cars. They’re building software-first, autonomous-ready vehicles. Behind the scenes, battery innovators are thriving, thanks to support from giants like CATL and BYD. Numerous countries in the world import electric cars and even EV batteries from China.

On the consumer side, Chinese startups have reimagined entire categories. WeChat became the blueprint for super apps. And TikTok rewrote how the world discovers content, with its algorithm-first design now copied globally. You might or might not remember Tiktok trolling Instagram when it launched ubiquitous ‘Reels’ in 2020: “Well... this looks familiar”.

So, if you look at China, it’s hard to argue with Goyal’s point.

But how did they manage to achieve so much, you might wonder?

Well, it wasn’t overnight. Of course, with government support.

In 2015, the government picked key industries through its ‘Made in China 2025’ and then flooded these tech-startups with the support they needed. Its ‘14th Five-Year Plan’ starting in 2021, focused on sustainable development and tech advancements.

We’re talking about massive funding via government-led venture capital arms, dedicated tech parks with subsidised office space and shared R&D labs. And in many cases, the government itself acts as the first customer, buying deep tech products to kickstart adoption.

It wasn’t just support. It was state-led ecosystem building.

Take semiconductors. In 2014, China launched its National Integrated Circuit Plan, pledging over $150 billion to reduce dependence on foreign chipmakers. But it wasn’t just about funding big-ticket players. The state stitched together the entire stack — from chip design institutes and fabs to talent pools and tax breaks for firms that used local chips.

Or look at Zhongguancun, a suburb of Beijing that got a full makeover. With rent subsidies, patent support and easy access to public grants, it transformed into China’s Silicon Valley, now home to the likes of Baidu, Xiaomi, Lenovo and a wave of AI and biotech startups.

Even in electric vehicles, China didn’t just subsidise carmakers. It built charging infrastructure, offered license plate perks to EV owners, handed out cashback for R&D, and looped in battery majors like CATL and BYD, building a full-stack EV economy from scratch.

Also, the slashing of taxes and money spent by the Chinese government on R&D is worth praising. For instance, in 2024 alone, China slashed $361 billion in taxes and fees for high-tech firms, including $80.7 billion in R&D deductions. That same year, China’s total R&D spending hit $496 billion, compared to India’s $23.45 billion (₹20,000 crores) allocation to kickstart a private sector-led R&D fund under the FY25 Budget.

In fact, China’s 2024 tax revenues totalled a whopping 17.5 trillion yuan (around ₹200 lakh crores). Just for context, that’s over 5 times what India earned in tax revenues that year. Now imagine funding massive deep tech innovation with a revenue that’s a fraction of China’s. If India truly wants to play in this league, it either has to drastically overhaul its taxation system, something Indian taxpayers might not be ready for, or find a way to expand its tax base. And that’s where things get tricky.

You see, barely 5% of India’s population pays income tax. That’s a very small chunk carrying a very large burden. To increase this base, we need more jobs. But ironically, new tech is killing them. Akhil Gupta, former head of Blackstone India, recently told CNBC that AI is displacing jobs in India’s tech sector. And with unemployment already high, more productivity tools could end up worsening the situation. So it’s a bit of a vicious circle. Technology improves productivity, but that productivity ends up displacing jobs. And unless we create more labour and manufacturing jobs to balance it out, this loop could keep tightening.

The talent gap is also just as wide. China had 2.2 million R&D workers in 2022. That’s 2.5 times more than India’s.

And while we often talk about becoming self-reliant or “Atmanirbhar”, it’s easier said than done. For years, we’ve been comfortable using products built by US tech giants. Shifting from that comfort zone and building our own alternatives will take not just willpower but deep capability. And frankly, we aren’t quite there yet.

Take high-performance chips, for example — the kind used to train deep tech AI models. India doesn’t produce them. We rely on the US. And with recent export restrictions, even that reliance is now under pressure. The same story repeats in other sectors, such as electronic components and active ingredients for pharmaceuticals.  We source a lot of it from China. So yes, wanting to be Atmanirbhar is great in spirit, but practically, we’re still caught in a web of external dependencies. Another vicious cycle.

Sure, the Indian government has announced a dedicated Fund of Funds for deeptech startups and a ₹10,000 crore “India AI Mission”, which it will spend over the next five years to step up the country’s AI capabilities apart from the ₹20,000 crores we mentioned earlier.

But that alone cannot ensure that we will truly be able to follow China’s path.

For that, we need innovative minds to take risks, and the government must offer strong support for these ventures to flourish and, hopefully, create a global footprint.

Until then…

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