Over the last 15 years, India’s economy has grown significantly. Once viewed as a developing country that shipped its skilled labor and talent abroad, India increasingly retains young entrepreneurs within its borders. Due to this emerging sense of entrepreneurial activity, India now has the third-largest tech ecosystem in the world, behind only China and the U.S..

According to the most recent estimates from the World Bank, 12.92% of India’s citizens lived in extreme poverty (under $2.15 a day) in 2021. That number jumps to about 44% when poverty is defined as living on less than $3.15 per day. Yet at the same time, India’s startup ecosystem has skyrocketed, led by its “Unicorn” companies. A Unicorn company is a startup with a total valuation of more than $1 billion. India now has more than 100 Unicorn companies across the tech sector, ranging from EV startups to online financial services.

A Rising Tide

The startup ecosystem has undoubtedly created many positive benefits for Indian society. For instance, the emerging companies create new job opportunities for Indian citizens with varied skills and backgrounds. Estimates show that job growth in India will continue its upward momentum and expand at a rate of 9% in 2025. As new startups continue to pop up, new employees will be necessary to fill various roles. Increasing employment is a direct way to create new economic opportunities and stable environments for Indian citizens, as research suggests that job growth helps to reduce poverty.

The logic here is that a rise in the general wealth of the state could benefit all its citizens. Besides directly creating jobs, India’s rising wealth also means that funds could go into philanthropic opportunities. Public affairs expert Nicole Manetti notes the charitable impact of the Azim Premji Foundation. Once the chairman of the Indian tech startup Wipro, Premji now uses the money he made as a business leader to invest in educating India’s poor. Premji’s case demonstrates that the increased levels of wealth in India’s top classes can still benefit its poorest citizens.

Moreover, the new businesses increasingly create job and leadership opportunities for women in India, helping to close the gender gap in business. Female entrepreneurial activity is almost equal to that of males, at a rate of .73 to 1. While a clear funding gap for women-led businesses still exists, the gender divide has been closed in other ways. Thanks to government initiatives centered around the drive toward entrepreneurship, males and females in India now own bank accounts at equal rates.

Companies That Care

Leaving aside the net benefits generated by the new tech ecosystem as a whole, individual businesses alone can create products and systems that benefit India’s poor. For example, Indian fintech startup Refyne is helping India’s poorest citizens avoid the crippling debt cycle and predatory lending practices that often prevent poverty-stricken individuals from climbing the socioeconomic ladder. Refyne offers a cheaper line of credit than its competitors to workers living paycheck to paycheck. By giving workers a money advance they have already earned, the company provides a safer lending alternative to those struggling to make ends meet.

Karya, a startup that collects large-scale data to feed AI machines, is another business working to alleviate poverty in India. Karya pays competitive wages to its part-time workers, who help train the AI systems in their native dialects. Because AI is largely trained on widely spoken languages like English, there is a need for data on smaller, regional dialects.

Karya works with organizations to find people most in need of work, and gives its employees ownership of the data that they create. However, generating economic activity among poverty-stricken citizens is not Karya’s only benefit to Indian society. The hope is that the language data collected from workers in remote regions will make AI more accessible to those same workers, making it easier for those who speak rare dialects to get health and financial advice.

Do Unicorns Help the Poor?

For all the good these tech startups create, some question whether the businesses effectively alleviate poverty in India. Researcher John Hoffmire points to India’s high poverty rates and large wealth gap as evidence of an unequal distribution of the tech boom’s benefits. He highlights the problem of informal workers whose “low wages and minimal protections” result in “an unbalanced labor market.” Adding to this inequality and imbalance is the fact that a large portion of India’s population is still at risk of poverty, especially when using the $3.15 benchmark.

However, using the Gini Index, it is clear that India’s inequality has declined in recent years, moving from 35.9 in 2017 to 32.8 in 2021. This can be compared to the global average Gini Coefficient of 38.2.

Moreover, Bhalla and Bhasin note that India has nearly eliminated poverty below the severe $1.9 line. This leads them to suggest that India should set new standards for measuring poverty within its borders. This trend follows the other poverty-reducing improvements, such as decreased inequality and increased job growth, discussed in this article.

The Future of Poverty Rates in India

While it is not certain that declining poverty and inequality in India can be directly tied to its startup boom, it is clear that many of India’s new businesses are creating positive social and economic change. From increased job growth to a greater level of female entrepreneurship to projects specifically focusing on helping India’s poor, much of the tech ecosystem activity focuses on eliminating poverty in India. Although India’s continuously decreasing poverty rates may be due to a confluence of factors, the country continues to trend in the right direction. Led by its ambitious new startups in the tech sector, India’s economy continues to grow as its citizens move to a more sustainable economic outlook.

– Charles Citron

Charles is based in Boston, MA, USA and focuses on Business and Politics for The Borgen Project.

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