All These E-commerce Companies Have Not Come Up with Help from the Govt: Mohandas Pai on Start-ups

Former Infosys CFO Mohandas Pai has vehemently criticised a recent statement by India’s Commerce Minster Piyush Goyal on start-ups in India. Speaking at the second edition of Startup Mahakumbh, Goyal compared China's start-ups' growth with that of India and called on entrepreneurs to focus towards deeper technological innovation, suggesting that businesses related to delivery and groceries may no longer suffice to drive the country’s broader economic ambitions. However, Pai has slammed the government for not being able to offer a conducive environment for the deep-tech start-ups.  

In an exclusive interview with Outlook Business, Mohandas Pai highlighted how initiatives like funds of funds, production linked incentives (PLIs) are not enough to boost the deep-tech start-up in India.  

Edited excerpts from the interview:  

The Government of India has introduced several initiatives and schemes like PLI, Funds of Funds, etc., to boost start-ups. Why do you think, despite that, there has not been massive success in the start-up sector, particularly in the domain of tech and AI?  

Funds of funds have catalyzed investment of Rs 90,000 crores or so over the last 9 years. But that's too small to make an impact. Every year, startups invest 10 to 12 billion dollars. So, 160 billion dollars has been invested, out of which nearly 80% is overseas money. The startup fund is over; it is a small amount; it has made some impact. It has grown the industry, but it is not enough. So, the excuse that we (government) have a startup fund and so we (govt) have taken care of everything is rubbish because this is a big country. There are 22,000 funded startups. So, the funding is not adequate. In the last 10 years, China invested 845 billion dollars into startups and venture. America, 2.32 trillion dollars, and India is only 160 billion dollars. So, it is inadequate to grow big companies. So, to say that we (government) just invest in start-ups, does not show anything. 

India spends 9 lakh crores a year in subsidies— both from state government and central government. The central government spends around 4 lakh crores. Now, how much money did they put into innovation for creating high-quality jobs? How much money did they put into R&D? It's very small and peanuts. They did it, yes. It had a positive impact, yes. But it's not enough.  

What do you think are the main bureaucratic hurdles that often start-up founders have to face? 

In India, to get the formalities done from the MCA (Ministry of Corporate Affairs), many people say that brokers call up and ask for a bribe. Getting PAN details often becomes a nightmare. To get a GST registration, there has to be a physical inspection. And they reject you, make you run around, and ask for a bribe. Why can't all this be automated and done properly?  

Raising capital in India is often burdened. Even if funds come through legal banking channels, entrepreneurs face unnecessary scrutiny—like demands for angel investors’ tax records or excessive documentation from banks. Meanwhile, overseas investors struggle just to get a PAN, often queuing for hours at embassies. Unlike public markets, which are streamlined via depositories, private markets face outdated processes. The RBI operates with a control mindset under FERA (Foreign Exchange Regulation Act) era, treating every entrepreneur with suspicion. This urgently needs simplification and reform. 

But till date, when we think of successful Indian start-ups, it is mostly groceries or food delivery businesses. Why hasn’t any deep tech start up been able to achieve that? 

All these e-commerce companies have not come up with any help from the government. See, deep tech companies are by nature long-term. They have to do a lot of R&D (research and development) and come out with new versions with deep documentation and technology. They require public R&D. They require unison in R&D. They require a very different kind of environment, which is not there. Only now it is building up. So, we have a large number of deep tech startups, but they're not getting enough money. They're not able to do enough R&D, and it's very slow. It takes some time for them to grow up. 

See, the important thing is the ease of doing business has to improve for all industries, especially small industry, which is not there.   

You once mentioned that Indian tech start-ups are not comfortable catering to the Indian clients. Why do you think so? 

It's a big challenge because companies abroad use technology much better than Indian companies. They are faster to adopt because they live in a very competitive environment. Indian companies are lagging. 

The market is very small (in India). The market is very big there. But it requires a lot of capital to market and to sell there.